MONEY Ask the Expert

How To Find Out What You’re Paying For Your Retirement Account

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Robert A. Di Ieso, Jr.

Q: How can I find out how much I am paying in fees in my 401(k) retirement plan?

A: It’s an important question to ask, and finding an answer should be a lot easier than it is right now. Studies show that high costs lead to worse performance for investors. So minimizing your expenses is one of the best ways to improve returns and reach your retirement goals.

Yet most people don’t pay attention to fees in their retirement plans—in fact, many don’t even realize they’re paying them. Nearly half of full-time employed Baby Boomers believe they pay zero investment costs in their retirement accounts, while 19% think their fees are less than 0.5%, according to a new survey by investment firm Rebalance IRA.

Truth is, everyone who has a 401(k), or an IRA, pays fees. The average 401(k) investor has 1.5% each year deducted from his or her account for various fees. But those expenses vary widely. If you work for a large company, which can spread costs over thousands of employees, you’ll likely pay just 1% or less. Smaller 401(k) plans, those with only a few hundred employees, tend to cost more—2.5% on average and as much as 3.86%.

A percentage point or two in fees may appear trivial, but the impact is huge. “Over time, these seemingly small fees will compound and can easily consume one-third of investment returns,” says Mitch Tuchman, managing director of Rebalance IRA.

Translated into dollars, the numbers can be eye-opening. Consider this analysis by the Center for American Progress: a 401(k) investor earning a median $30,000 income, and who paid fund fees of just 0.25%, would accumulate $476,745 over a 40-year career. (That’s assuming a 10% savings rate and 6.8% average annual return.) But if that worker who paid 1.3% in fees, the nest egg would grow to only $380,649. To reach the same $476,745 nest egg, that worker would have to stay on the job four more years.

To help investors understand 401(k) costs, a U.S. Labor Department ruling in 2012 required 401(k) plan providers to disclose fees annually to participants—you should see that information in your statements. Still, even with these new rules, understanding the different categories of expenses can be difficult. You will typically be charged for fund management, record-keeping, as well as administrative and brokerage services. You can find more information on 401(k) fees here and here.

By contrast, if you’ve got an IRA invested directly with a no-load fund company, deciphering fees is fairly straightforward—you will pay a management expense and possibly an administrative charge. But if your IRA is invested with a broker or financial planner, you may be paying additional layers of costs for their services. “The disclosures can be made in fine print,” says Tuchman. “It’s not like you get an email clearly spelling it all out.”

To find out exactly what you’re paying, your first step is to check your fund or 401(k) plan’s website—the best-run companies will post clear fee information. But if you can’t find those disclosures, or if they don’t tell you what you want to know, you’ll have to ask. Those investing in a 401(k) can check with the human resources department. If you have an IRA, call the fund company or talk to your advisor. At Rebalance IRA, you can download templates that cover the specific questions to ask about your retirement account costs.

If your 401(k) charges more than you would like, you can minimize fees by opting for the lowest-cost funds available—typically index funds, which tend to be less expensive than actively managed funds. And if your IRA is too pricey, move it elsewhere. “You may not be able to control the markets but you do have some control over what you pay to invest,” says Tuchman. “That can make a big difference over time.”

Do you have a personal finance question for our experts? Write toAskTheExpert@moneymail.com.

More from Money’s Ultimate Retirement Guide:

How should I invest my 401(k)?

Are my IRA contributions tax-deductible?

Why is rolling over my 401(k) to an IRA such a big deal?

MONEY College

This “Smart” Way to Pay for College Could End Up Costing You an Extra 3%

A senior at Western Kentucky University walks past flowering cherry trees on WKU's campus on his way home from class.
Western Kentucky University has one of the highest credit card surcharges. Alex Slitz—AP

A new study from CreditCards.com finds that colleges are increasingly adding surcharges for charging tuition. And these fees typically exceed any potential miles or cash back earned from your card.

It’s getting harder to turn junior’s college tuition bills into free vacations for Mom and Dad.

Wealthy parents have long tried to lessen the pain of paying their kids’ tuition bills by charging the costs to a credit card that pays rewards, with the hope of getting a bit of cash back or a roundtrip flight to Rome out of the deal.

But colleges are now making this strategy less profitable by adding fees for charging tuition, according to a study released Tuesday by Creditcards.com.

The survey of the largest public, private, and community colleges found that 90% of the 100 biggest public universities that accept credit cards charge convenience fees, and almost 70% of the 100 biggest private colleges. (Only 12% of the largest community colleges add credit card surcharges, but community colleges tuition tends to be quite low.)

In most cases, the fees now exceed the value of frequent flier miles or cash back that the parents can earn on a rewards card.

The average reward mile or point is worth less than 2¢, says Matt Schulz, senior industry analyst for CreditCards.com. Meanwhile, the average big college now charges 2.62% for processing tuition through a credit card, according to the survey.

And some schools charge much more. According to the CreditCards.com survey, the big colleges charging the highest fees are:

School State Type Convenience fee rate
Western Kentucky University KY Public 2.99%
Saint Joseph’s University PA Private 2.99%
Roger Williams University RI Private 2.99%
Kansas State University KS Public 2.90%
Ohio University-Main Campus OH Public 2.90%
Kent State University at Kent OH Public 2.90%
University of Akron Main Campus OH Public 2.90%
Bowling Green State University-Main Campus OH Public 2.90%

The Impetus for the Fees

Such fees have become increasingly common in the last decade. A separate survey last year by the National Association of College and University Business Officers had found that 44% of colleges charged a fee for using a credit card, up from 14% in 2003.

Colleges have been adding surcharges in part because they have come under pressure to pare expenses. And credit card companies charge all vendors—including colleges—for processing payments. In 2013, for example, MasterCard’s fees ran from 1.05% to 3.16%.

In addition, schools that do charge fees appear to be encouraging their competitors to follow suit.

“I get a lot of complaints from other schools” that charge fees, says Michael Reynolds, executive director of student financial services at Auburn University, which doesn’t add a surcharge. Reynolds says Auburn absorbs the surcharge—which he estimates at between 1% and 2% of the amount charged—as a cost of doing business.

He estimates that about half Auburn’s tuition bills are put on credit cards. In most cases, he says, it’s just a matter of convenience for the parent or student. But he added that some families do seem to be trying to build up rewards.

The Better Alternative for Most

The fees are just one of many reasons financial experts warn parents away from charging tuition.

Credit card interest rates are usually so high that parents who don’t have enough ready cash to pay off the bill immediately could end up paying thousands of dollars in extra interest, says Kevin Yuann, director of credit cards for NerdWallet.

Anyone who can’t pay cash up front for tuition would really be better off with federal student or parent loans.

Compared to the 15.66% average annual percentage rate on credit cards, federal student loans charge just 4.9% this year, after fees are added in. Parent PLUS loans have a total APR, including fees, of 8.1%.

The federal loans also have much more flexible repayment options, allowing borrowers to stretch out payments for up to 25 years or adjust the payments downwards if their incomes fall. Students working in public service jobs can also get some of their federal loans forgiven.

The Best Reward for the Rest

Absolutely sure you can pay off the big credit card balance quickly? Contact your school to find out whether there’s a fee for swiping.

While the majority have one, there are still several schools that do not charge students or parents extra. For example:

School State Type
Auburn University AL Public
DePaul University IL Private
St John’s University-New York NY Private
The University of Alabama AL Public
University of Nevada-Las Vegas NV Public

And then, assuming there is no charge, make sure you’re getting the most back you can.

Nick Ewen, a frequent business traveler who writes often on rewards at ThePointsGuy.com, says parents with lots of ready cash can turn tuition into valuable goodies.

One British Airways card, for example, offers a free companion ticket to those who spend at least $30,000 a year. And Southwest Airlines offers a year’s worth of free companion tickets to those who earn at least 110,000 points each calendar year.

Or, consider the winners of MONEY’s Best Credit Cards of 2014. The Barclaycard Arrival Plus World Elite offers two points per $1 spent and miles can be applied to your credit card bill to offset the costs of any kind of travel. Or if you prefer cash back, Citi Double Cash and Fidelity Investment Rewards American Express each give you 2% on every purchase.

With the latter, you can direct your earnings to a 529 college savings account—thereby reducing the amount you have to charge next semester.

MONEY Food & Drink

Free Guac! The Spirit Airlines of Burritos Stops Nickel and Diming Customers

chip and guacamole
Christian Draghici—Alamy

Chipotle rival Qdoba has started offering guacamole, vegetables, and other extras free of charge with entrees.

It must be difficult to compete with Chipotle. The Mexican restaurant chain is widely credited as the godfather of the ultra-hot fast-casual restaurant, the only category flourishing in recent years, and the model blamed for stealing business away from casual-dining and fast food chains alike. The Chipotle concept—customizable orders, high-quality ingredients, literal and figurative transparency about what goes on in the kitchen—has been applied to pizza, “better” burgers, and even grilled cheese, and there’s no sign of the business slowing down. Even after instituting a price hike earlier this year, Chipotle was able to post a 12% increase in store traffic and a 17% rise in same-store sales during the second quarter of 2014.

Among the many Chipotle copycats is one that chose the unfortunate tactic of competing directly with it in terms of style of cuisine. Qdoba Mexican Grill was founded two years after Chipotle, in the same city where Chipotle was born (Denver). Both being “Mexican Grills,” their menus are similar. But Chipotle holds a sizeable lead in terms of number of locations, by a count of roughly 1,600 to 600, and most importantly, Chipotle has the consensus edge in terms of quality and value. In fact, a compelling argument can be made that Chipotle makes America’s best burrito bar none.

Another thing keeping Qdoba’s reputation as that of little more than a Chipotle knockoff was the way it nickel-and-dimed customers, a la Spirit Airlines, if they wanted to personalize orders. Like Chipotle, Qdoba charged extra for guacamole. But it also made fajita veggies and queso an add-on—which struck many customers as, well, pretty cheesy. But all of that changed as of Friday, when Qdoba announced a simplified pricing structure in which guac, queso, fajita vegetables, chile BBQ sauce, and other extras could be added at no extra charge.

“We heard complaints from guests and from team members,” Tim Casey, brand president of Qdoba, told USA Today. “They view (the extra charges) as nickel-and-diming them.”

Yes, customers are funny that way: When they’re getting nickel-and-dimed with upsells, they view it like they’re being nickel-and-dimed with upsells. Earlier this year, the executives in charge of pricing at sister ice cream chains Maggie Moo’s and Marble Slab likewise instituted a flat pricing structure with unlimited “mix-ins” after “discovering” that customers hated getting charged extra for every little extra ingredient.

What makes Qdoba’s move especially interesting is that free extras—guacamole especially—represent a point of separation and perhaps superior value when compared with top dog Chipotle. In recent months, a strange “I Know That Guacamole Is Extra” meme made the rounds, referring to Chipotle’s relentless reminding of customers that, well, guacamole costs extra. Around $2 extra, in fact. At Qdoba now, however, guacamole is free, and Qdoba surely hopes that some other meme takes root and spreads the word.

MONEY Customer Service

3 Industries That Desperately Need Customer Service Makeovers

Chimpanzee on a telephone
Brad Wilson—Getty Images

Comcast is hardly the only company that should be doing some soul searching and commit—not only with words but actions—to making customer service genuinely better.

Because the state of customer service has been bad for so long, and because we’ve heard many times over that some or another big initiative would improve customer service dramatically only to have little or no impact, we’re skeptical about the effectiveness of any broad campaign supposedly crafted to address age-old customer grievances. Nonetheless, it was good to see Comcast’s recent announcement that a long-serving executive named Charlie Herrin had been named as the company’s new senior vice president of customer experience. “Charlie will listen to feedback from customers as well as our employees to make sure we are putting our customers at the center of every decision we make,” a message from Comcast president and CEO Neil Smit explained on Friday.

Read between the lines and it sure looks like Comcast is acknowledging that in the past, customers haven’t exactly been top of mind when it comes to company decisions. That’s no revelation to consumers, of course, who have routinely dinged Comcast for terrible customer service. In 2014, Comcast “won” the annual Worst Company in America competition as voted by Consumerist readers, the second time in recent years it has nabbed that dubious honor.

While it’s unclear what Herrin and Comcast will do to improve customer service, the first step in solving a problem is acknowledging that you have one, which Smit did more squarely when he said, “It may take a few years before we can honestly say that a great customer experience is something we’re known for. But that is our goal and our number one priority … and that’s what we are going to do.” To which the consensus reaction among consumers is … it’s about damn time. Followed by, we’ll believe it when we actually see real,meaningful change.

To be fair, it’s not just Comcast that’s sorely in need of a customer service makeover. Here are three entire business categories that are regularly bashed for not putting customers’ needs first on the agenda.

Pay TV & Internet Providers
Current Comcast competitor and likely merger partner Time Warner Cable is also a regular contender for the worst service title, as are other pay TV-Internet providers including DirecTV and Verizon.

Among the complaints are that there is a lack of true competition in the category, because roughly three-quarters of Americans have exactly one local choice for a high-speed Internet provider. A survey published this summer indicated that more than half of Americans would leave their cable company if they could, and nearly three-quarters said that pay TV providers are predatory and take advantage of the lack of competition. Among the most hated pay TV practices that consumers would love to see changed are promotional rates that are replaced by skyrocketing monthly charges, frustrating and time-consuming run-ins with customer service reps, and bundled packages overloaded with channels and options the customer doesn’t want (let’s add smaller packages and a la carte channel selection, please).

Wireless Providers
The good news for cell phone users is that customer satisfaction is on the rise, increasing 2.6% according to the 2014 American Customer Satisfaction Index (ACSI). The bad news, however, is that while we’re happier with the actual gadgets (from Samsung in particular), satisfaction with the companies providing our cell phone service—including AT&T, Verizon, T-Mobile, and Sprint—remains stagnant and below average.

Plenty of other studies also show just how frustrated and dissatisfied consumers are with wireless providers nowadays. A vote-off at Ranker.com, for example, placed AT&T at the top of the list of “Companies with the Worst Customer Service.” Among the many problems consumers have with wireless providers is that choosing a handset and data-minutes-texting package is absurdly complicated, with countless permutations, obfuscations, and mysterious add-on charges. This past weekend, a New York Times columnist presented a painstaking step-by-step analysis of why the $199 price advertised for the new iPhone 6 is a joke—because by the time fees and monthly upcharges are tacked on, upgrading to the new phone will easily run more than $600.

“Wireless service has always been one of the most complex purchases a human can possibly make,” Eddie Hold, a wireless industry analyst with market research firm NPD Group, summed up in a Consumer Reports story last year. “It’s always been horrific.”

Banks
Number 3 on the Ranker list of companies with the worst customer service, just below AT&T and Time Warner Cable, is Bank of America. Another study, from 24/7 Wall Street, used customer service surveys to put Bank of America in the #1 spot for its Customer Service Hall of Shame, and two other banking institutions, Citigroup and Wells Fargo, are in the top (bottom?) 10. (The study factored in ratings for these institutions’ banking and credit card services.)

What may come as a surprise—a sad and ironic one, at that—is that customer satisfaction with banks is apparently at a record high. The 2014 J.D. Power study on U.S. Retail Banking Satisfaction indicates that big banks and regional banks have made some strides in terms of making customers happier (or less disgusted) with their service, and that overall bank scores are higher than they’ve ever been since the study has been conducted. Yet the J.D. Power study shows there’s a long way to go: The most common reason given for switching banks is poor customer service, and millennials, minorities, and affluent consumers stand out as being particularly dissatisfied with today’s banks.

“Even with record high satisfaction, there are some banks that fall far short in meeting customer needs,” J.D. Power’s Jim Miller said via statement. “It is easy for banks to become complacent. To stay at the top of their game, banks should focus on those customers who are not satisfied. And consumers should keep in mind they have the opportunity to shop banks to find the right combination of services, products and fees to meet their needs.”

What’s your pick for the company with the worst customer service? Tweet us at @MONEY with the hashtag #unhappycustomer. Here’s what readers have already said. Add your nomination, and we may publish your feedback in a future post.

Related:
5 Packages That Could Replace Pay TV As We Know It
How to Pick a Bank

MONEY

3 Stupidly Simple Ways to Make Sure You Never Ever Pay ATM Fees

Bankrate ATM fees
Image Source—Getty Images

A new Bankrate report shows that the cost of using an out-of-network ATM is growing. Here's how to avoid those charges completely.

Using an ATM that’s not run by your bank will now cost you about as much as a latte at Starbucks.

Consumers now fork over, on average, $4.35 per transaction on out-of-network ATMs, according to Bankrate.com’s just-released 17th annual checking survey. That’s a 5% jump over last year and a 23% increase over the past five years.

“ATM fees have been going up for a long time,” says Bankrate’s chief financial analyst Greg McBride. “It’s low hanging fruit for the banks.”

The fee you pay for these types of transactions comes from two sources: The ATM owner charges you a surcharge for using the machine, and your bank charges you for going out of network. The former fee advanced 7% to $2.77, while the latter climbed 3% to $1.58.

Together these costs add up to a decent chunk of change: One trip to a non-sanctioned ATM a month costs more than $50 a year.

For consumers, this is a completely unnecessary outlay, however.

“There are steps people can take to avoid ATM fees, regardless of how long they keep rising,” says McBride. “Plenty of people out there not paying fees at all.”

1. Have a Treasure Map in Hand

Download your bank’s mobile app, if you haven’t already. Chances are it contains a feature that lets you see nearby branch or ATMs that won’t charge a fee.

Make a habit of checking before you stick your card into somebody else’s ATM—there may be a cheaper option closer than you think.

2. Get Cash Where You Buy Your Groceries

Many stores—including pharmacies and supermarkets—allow you get cash back at the point of sale. If you’re getting something, why not also make a habit of getting cash on these trips, since this basically functions as a free ATM withdrawal.

3. Go with a Bank that Won’t Punish You

Not the type to remember to use your bank’s ATM? You might want to trade in your brick-and-mortar bank for an online one. Ally and Schwab do not charge you to use another bank’s ATM (since these institutions don’t have their own) and they will reimburse you for any ATM fees.

And since digital financial institutions don’t service branches, fees tend to be lower and you can even receive interest on your checking account. Ally currently offers 0.10% on balances under $15,000. In a way, you could say they’re paying you to use another bank’s ATM.

MONEY Airlines

Holiday Travel Just Got More Annoying Thanks to New Airline Fee

A ground crew member loads baggage onto a Spirit Airlines Inc. plane at the San Diego International Airport in San Diego, California, U.S.
Sam Hodgson—Bloomberg via Getty Images

Spirit Airlines already charges more fees than any other domestic carrier. Now it's adding a surcharge for checked bags on flights around the holidays.

In an industry enraptured with airline fees, Spirit Airlines stands out as the most fee-crazed carrier of all in the U.S., with fees for things others still provides at no additional charge, including carryon luggage, water, and the printing of a boarding pass at the airport. (If you don’t print yours at home, you’re asked to cough up $10 at check-in.) Spirit is also known for being highly profitable, and for being outrageous to get attention—the latest example being the gimmick of giving away free miles to customers who send a message to the airline explaining why they hate it so much.

This past spring, Spirit relaunched its brand to better explain how exactly it does business—low upfront fares combined with a la carte fees for almost anything beyond basic transportation, dubbed the “bare fare”—in order to quell the hate. CEO Ben Baldanza has also gone on record saying that his company may stop adding fees because it’s become difficult to think up any more new ones.

Apparently, however, the creative folks at Spirit have put their heads together and come up yet another fee—or, rather, a fee on top of a fee it already charges. The Los Angeles Times reports that Spirit has quietly tacked on a $2 surcharge on top of its usual checked baggage fees for passengers traveling during the peak winter holiday period, December 18 to January 5. The standard price to check a bag during online check-in is $40 for the first piece of luggage, so if you’re flying during the holiday period, it’ll run $42.

“Winter is coming … and that means holidays. Which means more people than ever will be traveling with Spirit to visit their loved ones,” states a message from Spirit attempting to explain the holiday surcharge. “To make sure we have room for everyone’s bags, we’re encouraging customers to pack a bit lighter.”

It almost sounds as if without such a fee, and without customers packing less, Spirit might have difficulty finding space for all the luggage people want to bring. Which is preposterous. Clearly, the fee is intended to milk passengers for a couple more bucks here and there, at a time when they’re more likely to have to pay up because they’re flying with gifts and bulky winter clothing.

No matter how Spirit tries to spin this, the airline is yet again demonstrating that it’s in love with fees, that it can’t help but push the envelope with the annoying, outrageous, nickel-and-diming of its customers—and that, in all likelihood, it’ll maintain its status as a highly profitable operation regardless.

MONEY Travel

15 Things You Didn’t Know About Tipping

Man signing credit card bill at restaurant
Tetra Images—Getty Images

It's not your imagination. In today's world, we're expected to tip more people, and at increasingly higher amounts. What's up with that?

In the past few days, tipping has been at the center of controversies involving the Philadelphia Eagles’ LeSean McCoy, who left a 20-cent tip at a restaurant, and Marriott, which launched a campaign to encourage guests to tip housekeepers. The latter prompted many to respond by bashing the upscale hotel company for not paying maids higher wages in the first place.

Clearly, the subject of tipping—fraught with guilt and obligation, clouded with issues of class and income inequality—strikes a chord. It certainly doesn’t help that there’s so much we don’t understand about gratuities. For example …

Until very recently, most travelers didn’t tip hotel maids. Marriott’s initiative to prod guests to tip housekeepers seems to have firmly established the practice as standard. And indeed, it does seem to be the standard: Only 31% of American travelers said they don’t tip maids, according to a recent TripAdvisor survey. As recently as 2011, however, the ratio was reversed, with industry experts such as Michael Lynn of the Cornell School of Hotel Administration pointed to data suggesting that only 30% of hotel guests actually left tips for housekeepers. In 2006, New York Times columnist Joe Sharkey admitted he, presumably like nearly all business travelers, generously tipped almost every hotel staffer he encountered but had been overlooking the maids, “perhaps because they were unseen, working in the room when the guest was gone.”

Where you leave the money matters. Marriott provides envelopes so that guests can leave a tip, and perhaps a note of gratitude, for housekeepers. Hotel guests may not be exactly sure where to leave tips for the maid—and the maids themselves may not know if money left out in the open is intended for them. In one anonymous Q&A, a hotel maid offered the advice that hotel guests should “leave [the tip] where it’s obviously for the recipient—like a $20 on the nightstand for a hooker!” Her suggestions: on the tray with the ice bucket, or in the bathroom under the water glass.

Some stereotypes about tipping appear to be true. Certain ethnic groups are perceived to be less generous tippers than others. Apparently, these theories are not simply urban myths. One recent study found that Hispanics tipped less at restaurants than whites after controlling for factors such as bill size and the customer’s personal feelings about the quality of the service and food, while the conclusion in another survey declared “restaurant servers and their managers can expect below average tips from black customers regardless of their social class.” Only 11% of Italians in a recent survey, meanwhile, said that they “always” tipped for service on vacation, compared with 60% of Americans.

Millennials are bad tippers too. Millennials are known to love tasting new foods and tend to dine out in “upscale, casual-dining” establishment more than older generations, yet roughly one-third of Gen Y tips less than 15% at restaurants. Only 16% of people in demographics older than the millennials admit to tipping less than 15%.

Dads tip babysitters, moms stiff them. Men typically tip the babysitter for an average of $2.20, while the typical babysitter tip offered by women is $0, according to a PayScale survey.

There’s a payday loan banking alternative that runs on tips. It’s an app called Activehours, and it allows hourly employees to get paid for the time they’ve worked—before payday, and with no mandatory fees. Instead of the loanshark-like terms of the typical payday loan, users have the freedom to pay Activehours whatever amount (including $0) they want for the service.

Cheapness is only one reason people don’t tip. The NFL’s LeSean McCoy said that he is normally a generous tipper, but that he left a 20-cent tip on a recent restaurant bill as “a kind of statement,” with the message being that the food, service, and general level of respect weren’t up to snuff. Other restaurant customers have been shamed for using homophobia, racism, religion, and, in one instance, being spurned by the bartender after groping her, as excuses for why they didn’t tip their waitstaff.

Holiday season tipping can be traced back to newsboys. The annual tradition of tipping doormen, mail carriers, maids, nannies, and others originated in the 1700s, when young newspaper delivery boys got in the habit of hitting up subscribers for gratuities on Christmas or New Year’s Day. The practice, which existed well into the mid-1950s according to Bloomberg News, was adopted by bootblacks, street sweepers, and other local service people.

Waiters haven’t always gotten 20%, or even 15%. It makes sense that we tip more as time passes, just to keep up with inflation. That doesn’t explain why we’d be expected to tip at an increasingly higher percentage, however, because as our restaurant bills have gone up, so have the gratuities. (If a fancy dinner in 1950 cost $50, a 15% tip would be $7.50; if a comparable fancy dinner in 2000 ran $100, the tip at a 15% rate would double too.)

Nonetheless, the standard percentage to tip waitstaff has risen over the decades. According to a PayScale study, the median tip is now 19.5%. In recent years, some waiters and restaurants have suggested that 25% or even 30% is the proper gratuity level, and that a 20% tip, once considered generous, is just average today. As recently as 2008, though, an Esquire tipping guide stated “15 percent for good service is still the norm” at American restaurants. An American Demographics study from 2001 found that three-quarters of Americans tipped an average of 17% on restaurant bills, while 22% tipped a flat amount no matter what the bill, and the gratuity left averaged $4.67. Meanwhile, in 1922, Emily Post wrote, “You will not get good service unless you tip generously,” and “the rule is ten per cent.”

Emily Post herself sorta hated tipping. In that 1922 guide, Post wrote, “Tipping is undoubtedly a bad system, but it happens to be in force, and that being the case, travelers have to pay their share of it—if they like the way made smooth and comfortable.”

Tipping was once considered demeaning and anti-American. Slate, the New York Times, and Esquire are among the outlets that have published epic rants calling for the end to the “abomination” of tipping in the last year or so. No one made the case better than the Times’ Pete Wells, who summed up of our current tipping system, “it is irrational, outdated, ineffective, confusing, prone to abuse and sometimes discriminatory. The people who take care of us in restaurants deserve a better system, and so do we.”

Those who defend tipping, and/or those who just insist on always tipping generously tend to think of gratuities as the great equalizer: Tips are necessary because waitstaff and other workers aren’t paid enough by their employers, and gratuities help provide them a living wage. A century ago, however, anti-tipping groups felt they were being progressive by declaring war on the demeaning system because it implicitly created a servile class that depended on the generosity of richer, aristocratic customers—and was therefore anti-democratic and anti-American. The anti-tipping movement gained steam in the late 1890s and continued through the 1910s, when a half-dozen states tried (but ultimately failed) to make tipping illegal.

Waitstaff today need tips even more than you think. As much as some people would love to replace tipping with a more sensible system—like, you know, just paying workers more money—today’s waiters and waitresses remain stuck desperately in need of gratuities. The Wall Street Journal recently reported that nearly 15% of America’s 2.4 million waitstaff live in poverty, compared to 7% of all workers.

Some workers get tipped way more than waiters. Waiters and waitresses get an average of 63% of their wages from gratuities, per the PayScale study, but workers in the stripper/exotic dancer category earn the highest median hourly tips of all, at $25.40 per hour.

We tip for totally nonsensical reasons. Studies indicate that diners tip more when a waitress wears a barrette, flower, or some other ornamentation in her hair, when the server repeats orders to the customer, and when the waiter introduces him or herself by name ($2 extra, on average). Another study showed that the quality of service generally has very little effect on how much the customer tips. And in yet another survey, various consumers admitted that they tipped more when the server was white, black, female, or attractive, among other categories.

Sometimes even experts have no clue how much to tip. Or if you should tip at all. When Marketplace asked Cornell’s Michael Lynn earlier this year about the norm for tipping the barista at Starbucks, or any coffee shop for that matter, he paused and sighed before giving the honest answer: “I don’t know.”

MONEY Odd Spending

Meet the Drivers Making Toll Booth Lines Even Longer This Weekend

Line of cars waiting up at a toll
Bay Bridge Joshua McKerrow—AP

For some drivers, the fear of scams, overcharging, and government surveillance still outweighs the benefits of E-ZPass. They pay cash because they like talking to toll takers, too.

“Why would anyone NOT have E-ZPass?”

That question was posted at a Yelp forum … in 2007. The puzzled, frustrated individual asking the question pointed out that E-ZPass is “free and it saves so much time. It also reduces traffic for everyone. Someone, please please please tell me why everyone doesn’t have it?”

And yet, here we are, seven years later, with one of the year’s busiest road trip weekends upon us, and there will still be drivers backed up in gigantic lines at toll booths to pay cash—clogging up traffic in general while they’re at it—because they don’t have E-ZPass accounts. If anything, it’s even more difficult now to get around by car without an E-ZPass or another toll-paying transponder from a corresponding program, what with the expansion of cashless toll roads across the country. So what gives?

The Boston Globe recently reached out and talked with some “conscientious objectors” who refused to get on board with E-ZPass. Their reasons for sticking with cash and enduring longer-than-necessary waits at toll booths include:

They are concerned about government surveillance. They are apprehensive about erroneous fees charged automatically to their credit cards. They disapprove of eliminating good jobs held by toll takers for decades. And they would miss the small social exchanges with toll takers, the face-to-face contact, as they pass over their fare.

Is there validity to these concerns? Well, sure, there’s some. One of the big reasons states are pushing for cashless tolls is because doing so allows them to cut costs by getting rid of toll taker salaries. And there’s certainly nothing wrong with wanting to take a stance to help protect these workers and human contact in general in an increasingly cold, impersonal, automated world.

As for privacy and mistakes that could cost account holders money, there’s some evidence that they too are of legitimate concern. Occasionally, credit card errors or payment mix-ups result in huge bills for account holders. In one notorious case in the Seattle area, a couple with a Good to Go pass—a program that’s similar to E-ZPass—got hit with a bill for $8,346.82 because when their bank merged, the pass account was never updated, and tolls went unpaid for months. (The fines for nonpayment far surpassed the actual tolls themselves.)

By far, though, the biggest thing motivating E-ZPass refuseniks is the privacy issue. Bloggers have raised alarm bells by spreading word that the police and other authorities track E-ZPass travels all over metropolitan areas, not just at spots where tolls are paid. This summer, states such as Pennsylvania warned that phishing scammers somehow got hold of the email addresses of E-ZPass holders and were trying to get more personal information via fraudulent messages. The FTC later issued a national warning about phishing scams related to E-ZPass.

“Do I really want the government to keep a paper record on my comings and goings? No,” one E-ZPass-refusing driver told the Boston Globe. “It’s a slippery slope. Where does it end? I don’t like the trend.”

Still, considering the recent history of NSA surveillance programs and the news that a billion passwords were stolen by Russian hackers, it’s not like dumping your E-ZPass account is suddenly going to protect you from all forms of identity theft and other scams. In fact, privacy and Internet security experts generally say that everyday transactions like credit card payments and logging into email and other online accounts should be of far higher concern than using an E-ZPass.

None of this negates the need to be vigilant about protecting one’s personal information, of course. All in all, most people understand the individual’s fear of hackers and discomfort with government surveillance. Most people respect the individual’s right to make a stand about protecting privacy and workers’ jobs. It’s just that the vast majority of drivers would prefer that people wouldn’t be making this stand during Labor Day Weekend, when doing so makes already crowded roads and annoying tolls even more of a pain.

TIME Travel

Hotels Charging Record Fees in 2014, Study Says

FRANCE-HOTEL-LUXURY-PALACE-PENINSULA
A bellhop walks at the entrance of the "The Peninsula Paris" hotel on August 21, 2014 in Paris. Fred Dufour—AFP/Getty Images

Profits on fees can easily exceed 90%

Hotels will charge customers a record-breaking $2.25 billion in fees and surcharges in 2014, according to a new study that reveals the big business of little expenses.

The study, released Monday by New York University professor Bjorn Hanson, attributed this year’s record forecast to slightly higher occupancy rates, higher amounts charged for services and an ever-expanding list of chargeable services, from early departure fees to automatic gratuities to mini-bar restocking fees.

The study estimates that hotels can make a profit of roughly 80%-90% on fees and surcharges, and that the amount collected has steadily climbed since charging fees became a widely embraced industry practice in the late 1990s. In 2000, hotels were collecting $1.2 billion in fees and surcharges. By 2013, the amount had nearly doubled to $2.1 billion.

MONEY Banking

Get Paid Before Payday Without Any Fees, New App Promises

ActiveHours app screenshot

A payday loan alternative called Activehours promises employees that they can get paid immediately for the hours they've worked, without having to wait for a paycheck—and with no fees.

Payday lenders are often compared to loansharking operations. Critics say such lenders prey on people so desperately in need of quick cash that they unwittingly sign up for loans that wind up costing them absurdly high interest rates. According to Pew Charitable Trusts research from 2012, the typical payday loan borrower takes out eight short-term loans annually, with an average loan amount of $375 each, and over the course of a year pays $520 in interest.

These short-term loans are marketed as a means to hold one over until payday, but what happens too often is that the borrower is unable to pay back the loan in full when a paycheck arrives. The borrower then rolls over the original payday loan into a new one, complete with new fees, and each subsequent loan is even more difficult to pay off.

You can see how quickly and easily the debt can snowball. And you can see why payday loans are demonized—and mocked, as John Oliver just did hilariously on “Last Week Tonight”:

You can also see why many people would be interested in an alternative that isn’t as much of a rip-off. Payday loan alternatives have popped up occasionally, with better terms than the typical check-cashing operation. Now, Activehours, a startup in Palo Alto that just received $4.1 million in seed funding, is taking quite a different approach: Instead of offering a short-term loan, the app allows hourly employees to get paid right away for the hours they’ve already worked, regardless of the usual paycheck cycle.

What’s more (and this is what really seems like the crazy part), Activehours charges no fees whatsoever. In lieu of fees, Activehours asks users to give a 100% voluntary tip of some sort as thanks for the service.

There may be more than one reason you’re now thinking, “Huh?” On its FAQ page, Activehours explains that the service is available to anyone who gets paid hourly via direct deposit at a bank and keeps track of hours with an online timesheet. Once you’re signed up, you can elect to get paid for some or all of the hours you’ve worked (minus taxes and deductions) as soon as you’ve worked them. In other words, if you want to get paid for the hours you worked on, say, Monday, there’s no need to wait for your paycheck on Friday. As soon as your Monday workday is over, you can log in to Activehours, request payment, and you’ll get paid electronically by the next morning. When official payday rolls around, Activehours withdraws the amount they’re fronted from the user’s account.

As for voluntary tips instead of service or loan fees, Activehours claims the policy is based on something of a philosophical stance: “We don’t think people should be forced to pay for services they don’t love, so we ask you to pay what you think is fair based on your personal experience.” Activehours swears that the no-fee model is no gimmick. “Some people look at the model and think we’re crazy,” Activehours founder Ram Palaniappan told Wired, “but we tested it and found the model is sufficient to building a sustainable business.”

“People aren’t used to the model, so they think it’s too good to be true,” Palaniappan also said. “They’re judging us with a standard that’s completely terrible. What we’re doing is not too good to be true. It’s what we’ve been living with that’s too bad to be allowed.”

Yet Activehours’ curiously warm and neighborly, no-fee business model is actually one of reasons consumer advocates caution against using the service. “At first glance, this looks like a low-cost alternative to other emergency fixes such as payday loans,” Gail Cunningham of the National Foundation for Credit Counseling said via email in response to our inquiry about Activehours. “However, a person who is so grateful, so relieved to have the $100 runs the risk of becoming a big tipper, not realizing that their way of saying thanks just cost them a very high APR on an annualized basis. A $10 tip on a $100 loan for two weeks is 260% APR – ouch!”

Consumer watchdog groups also don’t endorse Activehours because it’s a bad idea for anyone to grow accustomed to relying on such a service, rather than traditional savings—and an emergency stash of cash to boot. Access your money early with the service, and you’re apt to be out of money when bills come due, Tom Feltner, director of financial services for the Consumer Federation of America, warned. “If there isn’t enough paycheck at the end of the week this week, then that may be a sign of longer-term financial imbalance,” he explained.

“Everyone thinks they’ll use the service ‘just this once,’ yet it becomes such an easy fix that they end up addicted to the easy money,” said Cunningham. “A much better answer is to probe to find the underlying financial problem and put a permanent solution in place. I would say that if a person has had to use non-traditional service more than three times in a 12-month period, it’s time to stop kicking the can down the road and meet with a financial counselor to resolve the cash-flow issue.”

The other aspect of Activehours that could be a deal breaker for some is the requirement of a bank account and direct deposit: Many of the workers who are most likely to find payday loans appealing are those without bank accounts.

Still, for those who are eligible and find themselves in a jam, Activehours could be a more sensible move once in a blue moon, at least when compared to feeling forced to turn to a high-fee payday loan outfit over and over.

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