Service Charge

What is Service Charge?

Service Charge is a fee paid for using a service. It is the additional cost charged alongside the purchase of the principal good or service. Fees are often levied at the acquisition date. Many industries, including restaurants, banks, and travel and hospitality services, take service fees.

The fees received may be used to pay administrative or operational costs. Service charges are levied directly against the firm. They are not the same as bonuses paid to employees who provide services.

Service Charges in Different Industries

Banking Sector

The banking business levies a variety of service fees which are typically kept at a fixed basic rate. A recurring monthly fee is charged by a bank whenever you create a bank account with them. At every month's end, this amount is deducted from the balance. Banks also impose service fees for utilizing a competitive bank's ATM, text messaging services, or bank transactions.

Industry of Hospitality

A service charge as a proportion of the total payment is typical in restaurants and resorts. For example, in British Columbia, there is an unstated tradition to pay a minimum of 10% for dine-in or take-away.

Residential Real Estate

Some residential areas may also have a fee added to the current payment. A renter in a new condo may indeed be obliged to pay a condominium fee in addition to a cost. This fee is for regular cleanliness and amenities.

Industry of Utility Services

Many utility suppliers apply service costs to the fees for power utilized, in addition to the actual payment for electricity. For example, Hydro-Québec levies a variety of service fees like manual setup fees, regular meter-reading fees, and so on.

Travel Industry

Airlines impose a range of service cost, including checking or large baggage allowance, ticket modification or cancellation charges, early seat reservation fees, and in-flight services such as the internet, meal, drink, and recreation.

An airport development fee, sometimes known as an embarking fee, is levied on outgoing and continuing travelers at airports. It is charged by the state or an airport operations organization, and the profits are often used to pay for large airport renovations or airline service growth.

Based on the area, the airport development charge may be included in the price of a passenger's airfare, wherein the money will be forwarded to the relevant authority by the airline. But, in certain areas, the cost should be paid by the company of boarding.

Practical Example

Maria is having a birthday party with her colleagues. She decides to go to the finest pizza place in town. The meal itself costs $200, including taxes. Maria notices the excellent and additional services offered by the restaurant's servers and chooses to pay the service fee by adding an extra $10 with the total bill.

In Sentences

  • Jack's landlord has raised the monthly service charge and now, Jack needs to pay an extra $50 per month.


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