How To Avoid Hidden Charges

Many of us are unaware that services we assume are free actually have a fee attached. Most of the time we don't even think to ask about the charges. And that can be expensive. Any business that provides a service can tack on fees that may be tough to discover without a magnifying glass. But the most costly by far are hidden charges we pay over and over again for credit cards and bank accounts.

To help you avoid them, we have put together a collection of the most common and surprising charges. We also advise how best to fight them.

Credit Cards

Issuers of bank credit cards aggressively seek to increase income by raising fees and adding more stringent terms and conditions. A significant number have reduced the grace period (period you have to pay your bill before interest is added) to 20 days. Also if your payment arrives one day late, you could be billed an extra $30. Late fees have risen 46% in the last two years and now average over $20.00.

Once you reach your credit limit, you can continue to make purchases, but you'll be charged a stiff penalty for exceeding the maximum. These fees— which average $18.66 and often go up to $30—are charged in addition to interest on the unpaid balance. What's more, penalty fees sometimes put consumers over their credit limit, thus triggering new fees.

Charges to Watch for:

  • Monthly service fees of $1 to $5, in addition to the annual fee.
  • A cancellation fee of $25 for transferring your balance to another card within the first year or two.
  • Cash-advance fees of 2% to 4% or $30 per transaction, plus interest that's often higher than the rate for purchases.
  • An annual fee of $25 for paying all bills in full by the due date. As a rule, "convenience users" (those who never pay interest) must charge at least $3,000 a year - $10,000 on a rebate card - to be profitable for the creditor. Unprofitable cardholders risk new fees or cancellation.
  • Dormant account fees. Some creditors charge $15 if you haven't used your card in six months.
  • An increased interest rate on your unpaid balance for failing to pay the minimum on time. The punitive rate for "high-risk customers" is generally 22% to 26%, but it can go as high as 32.6%.

How to Fight Back:

  • Keep only two credit cards—at least one with no annual fee, the other with a low interest rate. Use the latter for charges you don't pay in full and pay at least the minimum before the due date. Use the no annual fee card if you plan to pay the balance every month.
  • Examine all statements carefully for fees and rates (which may change monthly).
  • Complain about high fees and request a better deal. If that fails, transfer your balance to another card. (Some of them offer a bonus and/or lower rates on transferred balances.)


You should be able to avoid monthly maintenance fees by keeping a minimum balance in your checking account ($500 is often enough—Seniors often have a lower amount or none). More than 200 different fees are on the books and new fees appear to be introduced daily. The trend seems to be a separate charge for every service.

Charges to Watch for:

  • The average fee for overdrawn accounts is $17.39, but $30 is common.
  • Stop-payment fees average $15, but go up to $30.
  • Return charges (when a check you deposited bounces) are often $5 to $10.
  • ATM surcharges of $1 to $2.50 may be levied twice—by your bank and by the ATM's owner, if it's different.
  • Replacing a lost ATM card can cost $15, but most banks charge $5 - and many will waive that.
  • Getting your account balance statements from an ATM could cost an extra $1.
  • Debit-card fees, charged by 30% of all banks, range from 25 to 50 cents per transaction.
  • Closing an account within the first year costs an average of $12.56, some banks charge $50.
  • Inactive accounts (commonly those that haven't been used for six months or a year) may be charged $1 to $5 a month, even though a $1 transaction makes them "active" again.
  • Fees of $10 may be levied if you make too many withdrawals from a savings account.
  • Automatic transfers from savings to checking can eliminate bounced check charges, but often result in a fee—typically $3 per transaction.
  • Using a counter check or deposit slip instead of prepared forms can cost 50 cents to $1.50.
  • Visit a safe deposit box too often and it may cost you $1 per visit.
  • Depositing bags of coins could mean a loss of a nickel or dime for each roll the bank sorts.
  • Teller assistance can cost $1 to $9.50 per transaction for consumers with an electronic or "self-service" account. Some banks also charge for calls to a computer phone center.
  • Getting a check certified usually costs $10 to $15.
  • A duplicate copy of your monthly statement could set you back $5.

How to Fight Back:

  • Switch to a small community bank or credit union. Small banks consistently charge less than multi-branch giants. If switching is inconvenient, talk to a bank officer about cutting costs.
  • Cash held in certificates of deposit and even mortgage accounts may count toward the minimum required for a no-fee checking account. Be sure to ask.
  • Use direct deposit for your paycheck or government benefits check. The money is sent to your account electronically. Direct deposit is faster, safer, and more convenient and may make you eligible for a free account.
  • Review your bank statements to make sure all the charges and fees are warranted. Complain if you find an error.
  • If you're unhappy with fees or services, don't hesitate to complain. Banks may waive charges to keep good customers happy.
  • Use your bank's ATMs to avoid the fees charged by other banks as well as the fee your bank charges when you use another bank's machine.
  • Buy checks from a mail order company instead of your bank.



If you have a choice in electric suppliers, ask:

  • How much will it cost? How long can I depend on this rate?
  • Who do I call if I have a problem with service?
  • What is your experience in providing reliable service?
  • Can I have a sample of a bill I might receive if I purchase electricity from your company?
  • What are the terms and conditions of service?
  • Do you have a local customer service office?
  • Do you have a privacy protection policy?

Natural Gas

Ask companies:

  • Does your price include distribution and sales tax, and are there any other fees I will be charged that are not included in this price?
  • What are the terms and conditions of the agreement?
  • What information do I have to provide you to enroll me? Do you have a privacy policy?
  • Are there fees if I cancel my agreement before it is up? What are they?
  • What are the cancellation terms?
  • What is the length of the agreement, and what happens when it is over?
  • Do you have a local customer service office?


The majority of consumers rely on local utilities to produce a safe and ample supply of water. Your local water agency is responsible for sending you an annual Consumer Confidence Report that should list the source of your water, what contaminants may be in the water, and information on the safety levels of contaminants and their effects on health.

For more information call the Environmental Protection Agency's Safe Drinking Water Hotline at 1-800-426-4791 or visit EPA's web site at

Telephone Services

Now you can choose your long-distance carrier as well as your local toll and/or local phone service if there is competition in your area. An increasing number of companies sell optional services such as voice mail, call waiting, caller ID, paging, and wireless service.

The National Consumers League maintains a web page to help you understand all of the charges on your phone bills and help you recognize fraud:

Calling Plans and Other Services

Think first about how you use the telephone.

  • Where do you call most often?
  • What time of day or day of the week?
  • Do you want to get messages and if so, do you need voice mail or will an answering machine do?
  • Is it worth the cost for extra services like call waiting and caller ID?
  • Do you need a wireless phone or pager?

With these answers, you can compare services and prices. You may want a package deal from one company or services from different companies.

Find out how companies' services work, including whether there are minimum use, time-of-day or distance requirements, flat monthly fees, or special plans. For example, wireless service may be cheaper than regular local service if you don't make many calls.

Get the information in writing and don't be pressured into an immediate decision.

Make sure you're comparing similar plans and features to determine the best rates. The Telecommunications Research and Action Center, a nonprofit group, offers information about residential and small business long-distance rates, and wireless service. Contact TRAC at P.O. Box 27279, Washington, DC 20005 or visit its web site at .

Pre-paid Calling Cards

Many drug and grocery stores sell pre-paid calling cards, and they are sold online, too. Before buying one, know the:

  • per-minute rate;
  • connection fee;
  • maintenance fee; and
  • expiration date.

Don't be Slammed or Crammed

Slamming is the illegal act of switching your long distance, local toll or local telephone company without your permission. On your phone bill, you may find:

  • a different company name or
  • phone charges that are much higher than normal.

Cramming is when companies add charges to your telephone bill for optional services you never agreed to such as voice mail or club memberships. You may not notice these monthly charges because they're relatively small — $5 to $30 dollars — and look like your regular phone charges.

To avoid being slammed or crammed:

Read fine print on contest entry forms and coupons. You could be agreeing to switch your phone service or buy optional services.

Watch out for impostors. Companies may falsely claim to be your regular phone company and offer some type of discount plan or bill consolidation. They may also say they're taking a survey or pretend to be a government agency!

Warn family members and employees. Be sure that only those authorized talks to a company about telephone service.

Beware of "negative option notices." You'll be switched or signed up for optional services unless you say no.

Look at your telephone bill carefully every month — especially the pages that show the details.

Fraudulent companies may switch your phone service or add new services to your bill as a result of your calling a pay-per-call service (see page 13).

Resolving Slamming or Cramming Problems

Under Federal Communications Commission rules, no telecommunications carrier can arrange to switch your service to its own without verifying that you agreed. If you've been slammed:

  • ask your local phone company to switch you back to your original company at no charge;
  • tell the original company you're switching back, and ask to be enrolled in your previous calling plan; and
  • contact the company that slammed you, whose name and number is on the bill, to exercise your rights regarding those charges.

Generally, consumers can't be held liable for services they never agreed to buy. If you've been crammed:

  • call the number that appears on the page where the charges are detailed;
  • tell your local phone company, which provides the billing service, that you are disputing the charges and that you plan to deduct them from your bill payment; and
  • if the service provider insists that the charges are valid, contact your local or state consumer protection agency (see page 70) or state public utilities department (see page 99).

Your phone service cannot be shut off for refusal to pay for unauthorized services. For more information about FCC rules, call 1-888-225-5322 or go to its web site at and click on Consumer Info.

Pay-Per Call Services

You can get everything from recorded sports scores to live psychic readings by calling 900 numbers that provide information or entertainment services.

These numbers are sometimes also used to conduct surveys or contests, or for charitable fundraising. The "information provider," the company or organization you're calling, sets its own price for the service, and usually bills you through your local telephone company.

Consumer Rights

The federal Telephone Disclosure and Dispute Resolution Act requires advertisements for pay-per-call services to tell you:

  • the cost of the call. It may be a flat rate, a per-minute charge, or calculated on some other basis. The ad must also state the most you can be charged, if that can be determined, and any minimum or additional charges that you might have to pay;
  • the odds of winning or the factors that determine your chance of winning any sweepstakes, prizes or awards, and how you can enter any contest without calling the 900 number;
  • if it's a private company offering information about Federal programs and that the company is not endorsed, approved or authorized by the government; and
  • for services directed primarily to children under the age of 18, that they need their parents' consent to call the number.

The rules bar advertising pay-per-call services directed to children under age 12 unless they are for legitimate educational services.

If the charge for pay-per-call services will be more than $2, you should hear the following information when you dial the number:

  • The company or organization name and a description of services;
  • the cost of the call;
  • a notice that you can hang up without any charge within a certain time after a signal. You can't be charged for listening to the preamble; and
  • a warning to kids under 18 that they need their parents' consent to stay on the line.

Toll-Free Numbers and Pay-Per-Call

Generally, 800, 888, or 877 numbers are toll-free. However, charges for pay-per-call services through 800, 888, and 877 numbers are allowed if you:

  • sign a written contract that describes the service and how much it will cost, or;
  • agree verbally providing your credit card, charge account, debit or calling card number to pay for the charges.

It's illegal to be connected to a 900 number pay-per-call service through a toll-free number, or for a pay-per-call service to call you back collect after you dialed a number that you thought was toll-free. Both the FCC (Toll-free, 1-888-225-5322 or and the FTC (Toll-free, 1-877-382-4357 or have rules concerning pay-per-call numbers.

You have the right to dispute pay-per-call charges if:

  • you didn't make the call;
  • the amount you're billed is incorrect;
  • the services were misrepresented;
  • you are charged for calling a toll-free number without an agreement; or
  • a credit you're owed doesn't show up on the bill.

Pay-Per-Call Charges: Protect Yourself

  • Don't make the call if you don't know the cost.
  • Be wary of promises for free gifts or prizes.
  • Find out how free minutes really work.
  • Watch out for phony offers of financial assistance.
  • Don't stay on hold, you'll be charged for that time.
  • Don't respond to messages to call pay-per-call numbers. Fraudulent pay-per-call services may leave messages pretending to be calling about a family emergency, a prize or a debt.
  • If you use a pay-per-call service, look for new unauthorized monthly charges on your phone bill. (See cramming.)

Your local and long-distance telephone service cannot be disconnected if you refuse to pay for disputed pay-per-call charges.

Act promptly — you generally have 60 days to dispute the charges. If they appear on your phone bill, call the local or toll-free number that is listed on that page.

Note who you spoke to and what was said.

Follow up with a letter, keeping a copy that explains the problem and confirms your conversation.

Deduct the charges you are disputing and pay the rest of your bill by the due date. You should hear back from the company within 40 days and the problem should be resolved within 90 days.

If the charges appear on your credit card bill, follow the instructions on the bill for disputes. The information provider can pursue the matter through a collection agency or other legal means, including reporting the debt to a credit bureau. If you're contacted by a collection agency, explain in writing why you dispute the charges. You can also put a written explanation in your credit report.

You may have other rights according to state law. Check with your state or local consumer protection agency or state utilities department.

If the dispute concerns information services provided through a number that may not be covered by the pay-per-call rules, such as foreign phone numbers, find out if you have any protection under state law. You may have to work out a payment agreement with your long-distance company to avoid losing your service. To prevent 900 number calls or foreign calls from being made, you can request "blocking" from your local phone company for free or for a reasonable charge.

Foreign Phone Numbers

Information and entertainment services can get around pay-per-call rules by using foreign phone numbers. Most foreign phone numbers require dialing 011 first, but some are dialed just like long-distance numbers in this country, beginning with 1 and then a three-digit area code such as 809 (the Dominican Republic) or 758 (St. Lucia). If you don't know if a number is domestic or foreign, call the operator and ask.

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