Last week my friend Deane and I were pumping some iron at the local, old school gym. It’s located in a New York City prewar building that oozes character, and has wonderfully warm radiators that ping when the heat is on full bore. During a workout there are many things to discuss. Somehow the topic of rental car hidden fees came up.
When you rent a car, there usually is a service fee to use the EZ Pass, Fastrak, or Sunpass (depending where you are in the US). Typically, the service fee is $10 a day. When you rent a car for an extended period, the hidden fees can really add up!
Deane told me that he once had to pay a $70 service fee and only $7 dollars of tolls during a 7 day rental period.
Sounds like “highway robbery!” What do you think?
There’s no way to avoid paying the service fee. When you agree to rent the car you must opt in to pay the service fee for using the toll transponder. Many times the rental car customers aren’t aware of the hidden fees they are paying.
Parallels with Investing
Many times investors are unaware of the expensive fees they are paying. Sometimes they can be too high. Unlike rental car companies, you do have options to not pay these egregious fees.
Target Date Retirement Funds
For instance, target date retirement funds are wonderful products, but they typically have higher expense fees than the funds that they are composed of. Most of the time, target date retirement funds have several investment funds. When you look at the fees for the individual investment funds they are usually lower than the fees on the target date fund.
You can check your investments and compare the fees on the target date funds versus the funds that make up the target date fund.
Mutual Funds and ETFs
Another example is mutual funds and exchange traded funds (ETFs). Sometimes the expense fees are just too high! Shop around and examine mutual funds and ETFs from different companies and compare their expense ratios to get a better deal.
Whether you are renting a car or investing your money, it’s always best to keep your expenses low and watch out for hidden fees!