Any time we buy something these days, it seems like there's a hidden fee added to the bill. At restaurants, it might help cover a credit card company’s processing fee or employee pay and benefits. But one thing is certain: it’s often not clear what the fees are really for, and you might not know about them before you get the bill.
Hidden costs are known as “junk fees,” and they’ve been under scrutiny by the White House, Federal Trade Commission, and several lawmakers. Junk fees can also include charges added to an airline ticket, which has been the subject of a major debate. In April, the Biden-Harris administration announced a rule that requires all airlines and ticket agents to be upfront with consumers about any fees for first or second checked bags, carry-on bags, and canceling or changing a reservation. Experts predict that consumers could save over $500 million annually because of the rule.
“Airlines should compete with one another to secure passengers’ business—not to see who can charge the most in surprise fees,” said Pete Buttigieg, U.S. Transportation Secretary, in a press release. The airlines aren’t pleased, naturally, and many are now suing the U.S. Transportation Department.
On a more local level, junk fees are becoming illegal in some states; California will enforce a ban on them starting July 1. Written by Senators Nancy Skinner and Bill Dodd, the bill will give consumers transparency by making it illegal for businesses to advertise prices that don’t include all the required fees.
So what does this mean for restaurants? You’ve probably seen some menus warning you that a service fee will be added to your bill. While it’s not always clear what this service fee covers, many restaurants use it to tip employees, provide benefits, or cover high food prices. Unlike tips, which are regulated, service charges can be used however the owner wants, according to the New York Times.
“Junk fees are becoming illegal in some states; California will enforce a ban on them starting July 1.”
While there was some confusion about how this law would apply to restaurants, a new set of guidelines say that the restaurants won’t be allowed to charge any service fees or surcharges on top of the list price of menu items. Any fees or mandatory gratuities must be included in the price on the menu.
But the restaurant industry doesn’t seem to agree to the changes.
According to a press release from the California Restaurant Association, which represents more than 22,000 restaurants across the state, they’re “considering all available options to block implementation.”
Another group called the Golden Gate Restaurant Association also opposes the bill. “Diners will not pay less, instead they will see significant menu price increases, which we believe will further cause them to pull back on dining out,” said the association in a statement in the LA Times.
These fees might also help cover credit card processing fees, which the business pays any time a customer makes a transaction with a credit card. According to Forbes, average processing fees can range from 1.5% to 3.5% per transaction. For small businesses, this can be a large price to pay. Some businesses might only accept cash to avoid these costs. Others might enforce a minimum purchase in order to use a credit card, such as at a corner store where fees can add up for a lot of small purchases like a pack of gum or can of soda.
New York recently enforced a law addressing the way businesses pass on these credit card processing fees to customers. Under the law, customers can’t be charged more than the amount of the actual processing fee. The fees also have to be included in all menu items, or each item must have two separate prices—one for paying with a card and the other for cash. This legislation only applies to credit card processing fees, but rules about service fees are in the works, according to Restaurant Business.
In New Jersey, businesses that don’t disclose any credit card fees that they charge customers have been getting fines from the state's Division of Consumer Affairs. And the Minnesota State Senate earlier this month passed a bill that would ban junk fees.
So what does this all mean for the consumer? With rules varying state to state, you’ll want to make sure you’re reading the fine print. Because of regulations banning fees, consumers might see price increases on menus, or more cash-only signs. And if you really want to avoid paying credit card fees altogether, you can always carry cash.
Allison Arnold
Associate Editor
As the Associate Editor at Delish, Allie is a writer, reporter, and producer of features at the intersection of food and culture. Before Delish, Allie worked for publications including Apartment Therapy and Insider. She even spent time working in restaurants and breweries. Allie has dumpster-dived in NYC to expose food waste, reported on the invasive lionfish you can eat, and wrote about the growing trend of weed weddings. Her health and nutrition stories on hydration culture, bananas, and coffee have generated nearly 2M combined views. She loves traveling, running, and eating her way through new places and even has a thorough Google Maps ranking system for her favorite restaurants and bars! When not writing about food, she's planning her next trip, lifting weights, or training for a race.
Expertise: food & culture (Sustainability, Health, Travel)
Education: M.S. in Journalism from Columbia University, B.S. in Information Science (User Experience Design) from the University of Michigan
