Personal Finance

What You Need to Know About ‘Drip’ Pricing

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Drip PricingBy Christopher Elliott

The Federal Trade Commission made a splash late last year when it took a stand on something called “drip” pricing.

The feds describe “drip” pricing as a pricing technique in which firms advertise only part of a product’s price and reveal other charges as the customer goes through the buying process. But it isn’t entirely clear what kind of a stand the government took.

The FTC held a conference on drip pricing last summer and it sent warning letters to several unnamed hotel companies, stating that their mandatory resort fees might be illegal. But it took no further action, and has been quiet on the issue since then.

What’s so wrong with drip pricing?

If drip pricing doesn’t seem like a big deal to you, ask yourself: When was the last time you made a purchase decision based on a published price, but then discovered at the checkout that it would cost more? It happens a lot more than you think.

Restaurants love drip pricing. Try ordering a taco or sandwich and then ask for a “premium” ingredient. Oops, your meal just got a little more expensive.

When you’re buying a car, you may see a low “sticker” price but then be asked to pay undisclosed add-ons and fees that can’t be negotiated. This can drive up the total cost of your vehicle.

Travel companies, particularly airlines and hotels, are notorious “drip” practitioners. By the time you’re done paying for that $99 ticket, you’ll be out $150 between luggage charges and seat reservation fees and other add-ons.

Businesses argue that many of these fees are disclosed and that they are not mandatory. But how well disclosed are they? And how much of a choice do you really have?

Check Your Credit For FreeHow you can fight back.

This form of pricing is deceptive, no question about it. But what happens next if the war on drip pricing isn’t up to the government? It’s actually up to you. Here are a few things you can do to stop this consumer-unfriendly practice.

Be aware that it could happen anywhere. Some industries have built their business model around deceiving customers. Others just dabble in it. You should know that no business is exempt.

When it happens, back out. Drip pricing continues because consumers let it. If you find yourself trapped in a situation where a business is adding a lot of undisclosed, mandatory fees, simply walk away. That sends a powerful message: I won’t tolerate lying.

Let the company know you’re unhappy. And not just the salesperson you’re dealing with — tell someone in charge, so they know they’ve lost your business. Be clear that you won’t work with a company that engages in drip pricing, ever.

Tell the BBB. The Better Business Bureau will set up a file on the drip-pricing business, and give it the opportunity to respond. Complaints can affect its BBB rating, which may prompt it to change the way it markets its products.

Talk to the FTC. The government needs to know when businesses try to deceive their customers. If you don’t say something, who will? Here’s how to file a complaint.

What if it’s too late?

What if you’re hit with a drip price and it’s too late to turn back? Paying by credit card will protect you, but be prepared to file a dispute. You have 60 days after your statement is mailed to file a dispute under the Fair Credit Billing Act.

Meanwhile, read the fine print on your purchase very carefully. It might be a little “leaky”.

Instead of paying someone else for skills you possess, do the task yourself and put the savingstoward paying down debt, building your emergency savings accounts and funding your retirement.

What You Need to Know About ‘Drip’ Financing” was provided by Mint.com. Mint is a free personal finance tool that brings all your financial accounts together online or on your mobile device, automatically categorizes your transactions, and helps you set budgets so you can achieve your financial goals.

Image: iStockphoto

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