Drip Pricing: What It Is, and 5 Ways to Fight It

Few things are as annoying as a business that advertises one price but increases it at the purchase point by adding on fees. While we might simply call the practice deceptive, the Federal Trade Commission has an official term for it: “drip pricing.” And apparently, it’s become so prevalent that the FTC even held a one-day conference in May to discuss it.

Drip pricing: Who’s doing it

Industries well-known for drip pricing include airlines, car dealers, car rental agencies, and telecommunications companies. Often, mandatory fees are described in a way that makes it appear as if they’re government-mandated when they’re not.

Hotels are also known for drip pricing, with some advertising low prices, then hitting travelers with “resort fees” and other mandatory surcharges to significantly increase their take. In 7 Tips to Beat Hotel Fees, Money Talks News founder Stacy Johnson lists a bunch, saying, “The list is as long as it is sneaky.”

Last month, USA Today reported that this year hotels expect to collect “a record $1.95 billion in add-on fees from guests.” Helping them are travel sites like Hotwire and Priceline, which often disclose that hotels may charge some fees – but you don’t find out until you check in.

Why drip pricing is bad

Obviously, these fees make it difficult or even impossible to determine actual prices, and once one merchant engages in drip pricing, there’s an incentive for all of its competitors to do the same. But drip pricing can hurt entire communities: With hotels, for example, USA Today says, “Local taxing authorities miss out on potential tax revenue because they collect taxes only on the room rate vs. overall rate.”

At the same time, any business that’s unfair to its customers is bound to lose some of them, and the actions of a few companies can reflect poorly on an entire industry.

What you can do about drip pricing

Here’s how you can stop the fee drip…

  1. Be an informed consumer. At the FTC meeting mentioned above, Amelia Fletcher, chief economist of the UK Office of Fair Trading, pointed out “Sophisticated consumers spot [companies] using hidden charges, naive consumers don’t.” Be the sophisticated consumer by always reading the fine print or asking before you commit.
  2. Boycott drip pricing. Vote with your feet and avoid companies playing this game – and tell them why you’re taking your business elsewhere.
  3. Contest the additional fees. If you’re being charged fees you weren’t properly informed of, ask a manager to remove them. Your chances of success are best if you have something in writing – like a reservation confirmation – that doesn’t include the fees.
  4. Use the power of your credit card. When you offer your credit card as a form of payment, you should only be charged the price you agreed to. If you have a reservation in writing that doesn’t include fees, request a chargeback if you’re hit with a different amount.
  5. Report them to the FTC. If you have a problem with a specific merchant, you can file an official complaint with the FTC. In addition, you may wish to inform merchants in advance that you’ll be filing a complaint – giving them the opportunity to reconsider.

Sign up for our free newsletter

Like this article? Sign up for our newsletter and we'll send you a regular digest of our newest stories, full of money saving tips and advice, free! We'll also email you a PDF of Stacy Johnson's '205 Ways to Save Money' as soon as you've subscribed. It's full of great tips that'll help you save a ton of extra cash. It doesn't cost a dime, so why wait? Click here to sign up now.

The fast, free way to stay on top of your money.

If you’re not using online money management, it’s time to start.

Click here to find out more.

Money Talks News has teamed with PowerWallet for a free, confidential way to track your expenses, set budgets and goals, get bill reminders and earn free customized coupons.

Take a minute right now and check out PowerWallet. It's the simple way to get a handle on your money.

Comments & discussion

We welcome your opinions, but let’s keep it civil. Like many businesses, we reserve the right to refuse service to anyone. In our case, that means those who communicate by name-calling, racism, using words designed to hurt others or generally acting like an uninformed bully. Also, comments that include links to email addresses or commercial websites typically aren't posted. This isn't a place to advertise your business.