Huge markups on everyday items can eat away at payday cash

Items at outrageous markups

Payday cash is still hard to come by despite the recession being marked as over. Economists note that the market is out of the recession of 2008/2009, but they also cite how prices on a select few items are still skyrocketing. Businesses are hurting and if they can find a way to bring in more revenue, they will. It’s difficult for consumers to manage, but there are items whose markups are so huge it’s difficult to justify the services.

Texting and its huge markup

In today’s technological age, it’s no wonder communication services are up in cost – take texting, for example. Cell phone users everywhere opt for the text message option because it’s quick, efficient and effective in communicating. When it comes to data, text messages cost about one-third of a penny to deliver. However, the cost to consumers averages about 20 cents a message. That’s a 6,500% markup. Srinivasan Keshav, computer scientist, said, “It’s pretty much pure profit. Carries would argue that they put that money towards investing in new technology.” Even if companies are investing in technology, they still are making huge profits every time a consumer texts.

Movie theaters cashing in, too

Everyone knows that movie theaters charge outrageous prices for their concessions, but not everyone knows just how much. For example, a medium bag of popcorn costs about 60-cents to make, but retails for up to $5. That’s an 800% markup. The reason for the markup is that movie theaters don’t make a lot in profits off of movies. In fact, a recent study showed that a $10 movie tickets only brings a slight percentage in revenue to the theater. Richard McKenzie, economics professor at University of California, said, “Popcorn is what pays for a lot of stuff in the movie theater. A lot of theater owners tell me, ‘I consider myself working in concessions, not movies.’”

The not-so free credit report

People looking to increase their payday cash normally look to improving credit as a means of lowering interest rates. It’s a great idea, but this is another area where the dreaded markup can rear its ugly head. Consumers ordering their credit report from can expect to pay about $179 a year for their account information. On the other hand, they can get the same information for free once a year from the three credit reporting agencies directly. The reason is that other credit-aid companies claim to “watch” consumer’s credit scores and report changes to them. Of course they can charge anywhere from $5.99 to $49.99 a month to do so. A lot of these companies have a small Terms of Service paragraph that tells customers that when they accept their credit report, they are automatically signed up for the watchdog service. Experts warn that if any company promising “free” credit reports requests a credit card number, they are planning on charging it monthly. There may be a free introductory period, but for the millions of consumers who miss it, charges add up quickly.

The markup and the economy

Anyone looking to maximize their payday cash should eliminate items with a large markup. It’s the smallest everyday items that are eating away at savings throughout the month and over time, can contribute substantially to savings. Companies will continue to markup products as long as consumers are willing to pay for them, so consumers have to be smart and watch their budgets themselves.

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