What Is A Service Charge: Overview And How It Works

What Is A Service Charge
What Is A Service Charge

In different sectors, you might find yourself paying an extra fee for a certain service which could you wondering and asking why you have to pay an additional fee. Well, in this article, you’ll look at what is a service charge, the overview and how it works.

Most of these charges are usually influenced by something and aside from knowing what a service charge is, you need to know the difference between a tip and service charges, reasons why there’s a service charge and what it is in different sectors.

This and many more information you’ll get from this article. Just don’t stop reading and who knows, you could gain knowledge or an additional knowledge on the subject matter.

What Is A Service Charge?

Service charges are also known as a service fee. Service fees or charges, whichever way you know it as is referred to as an additional fee required and collected to pay for the services (just as the name implies) that is related to a specific commodity or service that has been purchased.

In essence, it is more like an additional fee for any service that has been rendered in the purchase of a specific service and product inclusive.

An example of a service charge is when an additional fee has been added to your bill in a bar to pay the waitress and waiter who works or offers a service on your table.

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What Is The Service Charge In Different Sectors?

Just as you should know, service charges are different in each sector and apart from the fee being different, it also has different names as it all depends on the sector concerned.

Another thing to note about service charges in different sectors is that in a specific sector, the charges still differs from each person as it all depends on the type of service rendered.

The airline sector

The airline sector also has a number of additional fee charged as a service charges and if you’ve noticed, most of these charges are collected during the purchase of a plane ticket. In the airline sector, there are usually extra services such as the selection of seat, pajamas, utilities and kit, entertainment and even the handling of baggage.

This means that, for all of the service rendered to you on the plane, there is usually an additional fee for it. The additional fee that is charges by most airlines is usually exorbitant as they have increased drastically over the past 5 to 10 years.

Most airlines still don’t like the idea of having to pay service charges for mere services and they offer it for free. But, in the recent years, almost all the airlines require it and the fee ranges from $15-$25. It is known as a security fee in this sector.

Bank sector

This is one of the most popular sectors known for its service charge. You must know that the fee is typically charged to any bank account for the card maintenance and the maintenance of the account be it savings or current.

However, service charges in the bank sector varies as it depends on the bank and you may find out that the fee of a particular bank is higher or lesser than the other. Service charges are called a maintenance fee in the banking sector.

Health sector

Quite surprising? I know right but the health sector also requires a service charge for mere services offered to a patient in the hospital such as administering of drugs and food.

Still in the health sector, the service charge depends on the type of service rendered but the medical practitioner.

Airbnb sector

The Airbnb sector also requires service charges for the service rendered to an individual and the fee gotten is used to cover the cost of the company. One thing you need to know about the service charge is that it has a separate fee for the guest and a separate fee for the hosts.

The guest service charge is between the ranges of 10-15% as it all depends on the rental cost. While the host service charge is just 3% which is usually taken out of the total fee for reservation.

In addition to these charges, a tax such as the value added tax (VAT) is usually added on the service charge.

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What Is The Difference Between A Service Charge Vs Tip?

Even if they sound like the same thing, there is a difference between a service charge and a tip. Although they serve almost the same purpose, there is still a difference between them and that is what has been listed below.

Service charges is required by a specific sector and it is charged from every person that uses the service while a tip is given to a worker in a specific sector for the service rendered.

While a service charges are compulsory, tips are not as service charges are for the company’s upkeep while tips are for the workers/employees.

Service charges are used to improve the company while a tip is can be used by the person given for any purpose. Service charges is required from everyone that uses the service but a tip is not required from anyone that uses a service.

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Is Service Charge A Tip?

Service charge is not a tip, it is mandatory from every person that uses a service whereas the tip is optional. Although most of the industries that offers services usually try to replace the it with tips.

If the service charge is a tip, the fee will go directly into the pocket of the owner of the businesses. So in essence, a service charge is not a tip as most of the tip is given to the employee not the business owner.

That tip is paid voluntarily by the customer and the employee can do what they want to do with the money acquired from the tip and that is also established in the company’s code of conduct.

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What Is A Tip?

A tip is also referred to as a gratuity. It is known as an amount handed over to an employee at any sector. The tip is given voluntarily as nobody is forced to give any employee any amount of money.

The money given to the employee as a tip is a possession of the employee and it doesn’t go to the account of the company/business.

The tip usually occurs as a result of a good service rendered by an employee to a person and like they always say, a good service should be matched with the right compensation and the right compensation can come in the form of a tip.

You must know that a tip is not mandatory, it is not required from anyone, it is a form of a good will as it comes from the heart which shows how thankful you are.

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What Is A Bank Service Charge?

A bank service charge is known as the fee charged by the bank from the bank holder. It is a monthly fee required from all bank users.

In most banks, a service charge only occurs when the monthly balance in the account goes above a specific amount.

If you’ve noticed, there’s usually a debit message sent to you from the bank at the end of every month that explains the reason for the charge on the account statement.

Apart from the monthly maintenance charge, the bank also charges you for services such as an insufficient balance, an overdraft, an overdraft facility, ATM withdrawal charge, wire transfer charge, a bank statement charge and a foreign transaction charge.

All the fees charged are specified on the bank statement explaining the reason for the charge that occurred in the account.

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Conclusion

A service charge is an additional monetary fee that is using indicated on the bill or account of a particular service rendered by a business. Just as indicated in this article, the service charge differs in each sector as the service rendered is usually not the same.

What Is A Service Charge FAQs

Why Does My Bank Charge Me A Fee For The Service Charge?

The bank charges a monthly maintenance fee also known as the monthly service fee for the improvision of the bank and for the maintenance of the account. The bank service charge is automatically gotten from your account each month.

Do You Add A Tip To The Service Charge?

It is not mandatory to add a tip to the service charge and as a matter of fact, you don’t add a tip to the service charge.

What Is An Example Of A Service Charge?

An example of a service charge is the additional fee required by an airline for the service rendered such as baggage selection and utilities.

Is A Service Charge Indicated On A Bill?

A service charge is indicated on a bill but that doesn’t apply to all bills as it depends on the industry/sector and it also depends on the service rendered.

References

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