The Boston Globe published an interesting article on what they term “the hidden economy”, the proliferation of unexpected charges that catch consumers unaware.

[The printer is] one of the most common peripherals in the computer age and so cheap — at first blush, anyway — that stores often give them away when you buy a PC. Yet how many people realize, when they walk out of CompUSA, a nice $99 inkjet model tucked under their arm, that it’s likely they’ve just committed themselves to spending nearly $1,500 on ink cartridges over the next four years? (In fact, only about 3 percent realize it, according to Stanford economist Robert E. Hall.)

$1500 in four years? Is this for real? Inkjet cartridges are expensive, no question, but do people really spend nearly $400/year on them? This is the old “give away the razor and make it up on the blades” trick.

The article discusses other hidden fees, from cell phone overage charges, to credit card fees, to hotel minibar rates. These shrouded fees are effective because many consumers are “unsophisticated”, or “myopic”. They only look at the Big Number (the price of the printer, the credit card interest rate, the hotel rate), but don’t look at the Little Numbers (the cost of ink, the credit card terms, the hotel’s parking fees and restaurant rates).

Truly sophisticated shoppers can save money by looking for companies and plans that feature hidden fees; so long as they stay on top of things, they save money. Everyone else, though, could save by paying more up-front and avoiding the danger of hidden fees.

[The Hidden Economy from The Boston Globe]

This article is about Odds and Ends