Why We Pay for Convenience

ADVERTISEMENT

I was en-route to work the other day when I noticed a brochure from the New Jersey Transit Association had been left on one of the nearby seats. Apparently, I could have my monthly transit pass mailed to my house directly. This sounded great since you have to wait until the first of the month to buy them at the station, which means you get to wait in line for 20 minutes and, consequently, end up late for work.

Of course, this convenience had a price: $3 to be exact, in the form of a processing fee, which I suppose involves an envelope and stamp. Needless to say, despite one persistent memory that involved all of the electronic ticket terminals shutting down on June 1, I decided to pass. I’ll just have to wait in line.

While I could plead the frugal fifth in this instance, I have, however, paid my fair share of convenience charges. In fact, we all have: fees to use ATMs, charges for printing tickets on the Web, $5 extra to cut the line at a buffet. The list, it seems, goes on and on. However, as University of Kansas marketing professor Dennis Rosen points out, convenience fees are hardly new.

“Consumers have always paid for convenience,” Rosen, who also runs consulting website WinfluenceSolutions.com, says, citing a person’s inclination to hire someone to trim their lawn or pick up packaged, pre-made foods at a grocery store. “The question now is ‘why are people continuing to pay these fees while the economy is bad?’”

The answer, while complicated, ultimately comes down to this: Consumers aren’t only pressed for cash, they’re also pressed for time. As such, there’s an inherent value associated with anything that saves a few minutes. Adrian Ott, author of The 24-Hour Customer, calls this correlation a time-value trade-off. She points out that some existing companies have built very profitable businesses around this concept. Take FedEx, for example, who essentially sells overnight delivery.

“Economists would argue that [the existence of convenience fees] is an issue of supply and demand,” Ott says. “We constantly assess the value of what we receive. People will pay if you provide a service that expedites something they really need.”

Of course, the value placed on these types of services is largely individualized. It’s likely to vary from person to person and, beyond that, even service to service. New Jersey resident Gary Frisch, for example, is quick to extol the virtues of his EZPass account, which allows him to bypass toll lines for a nominal monthly fee.

“I really don't mind paying $1 a month for my EZPass, because I know I will save a lot of time at every toll plaza I go through,” he told MainStreet, only to add, “That said, I do go out of my way to avoid paying most convenience fees, especially those that are excessive or arbitrary. For example, I never, ever use an ATM outside of my bank's network.”

Frisch also shies away from paying for online ticketing services, whose fees, he says, “are among the most outrageous.” His system of measurement is indicative of how most consumers determine a convenience cost’s worth. It’s not simply about what a retailer is charging for; it also involves how reasonable the price is. Frisch might be willing to pay to print out $35 concert tickets via e-mail if the provider wasn’t charging $10.50, almost a third of the cost of the ticket, for the privilege.

Of course, the other side to this is that people rarely take the time to look at how the small fees add up. Kathleen Burns Kingsbury, who owns consulting company KBK Wealth Connection, points out that many convenience charges, such as a $2 ATM fee that saves you a seven-block walk to the nearest bank branch, are priced to take advantage of that psychology.

“We don’t really think about what we are actually paying,” she says, so our decision over whether or not a particular service is worth it can be fairly skewed. As such, she says, Americans, who tend to want things “quick and fast,” have almost conditioned themselves to pay for convenience. Consider, for example, the fact that we automatically know and, consequently, accept that there will be a baggage fee when show up to board an airplane.

The argument here is that there is a marked difference between a convenience fee and a hidden cost, which is a charge that cannot be avoided. The $35 concert tickets, Rosen explains, are actually $45 concert tickets if the provider requires you pay the $10 processing fee, no matter how you elect to get the tickets.

“People complain when they have no options,” Rosen says. “Marketers have to be very careful not to cross the fairness line.” He goes on to say that “the nature of marketing is to push as far as you can.” However, he adds that retailers will change tactics if consumers are reluctant to buy. US Airways, for example, instituted a beverage fee in 2008. The airline’s “Buy on Board” policy, which charged $2 for soda or bottled water and $1 for coffee or tea, was rescinded seven months later after the airline was inundated with customer complaints.

Kingsbury suggests contacting consumer advocacy groups about fees that you find particularly unreasonable. However, barring a global mutiny or at the very least a severe public outcry, there are some things you can do on a personal level to avoid paying unnecessary convenience charges. Rosen suggests reading through the terms and conditions provided by retailers so you are aware of hidden fees before you make a mental commitment. People who get their heart set on the $90 field ticket to a baseball game, he points out, are likely to buy that ticket even if they’re slapped with a $10 convenience fee in the last stages of billing. Knowing that the fee exists beforehand will prevent you from going over your budget. You might, say, buy the $50 bleacher seats, instead.

The second option is to simply opt not pay the fees. Unless, of course, you really don’t feel like waiting in line for that monthly transit pass.

“If it’s worth it to you,” Rosen says, “then spend the money.”

—For the best rates on loans, bank accounts and credit cards, enter your ZIP code at BankingMyWay.com.

Show Comments

Back to Top