The cash price is the price a seller charges a customer given that they plan on paying immediately in cash. Credit card companies charge retailers a commission (a small percentage of the sale), so some stores will charge a different price for people who use credit cards versus cash to make up for the difference.
You may have noticed that gas stations sometimes advertise “$2.50 per gallon–cash || $2.53 per gallon — credit.” $2.50 is the cash price.
A management fee is the compensation that investment fund managers get in exchange for constantly trying to make a fund profitable. The money for management fees comes from investors, who pay into the management fee pot every time they invest in a fund.
The amount of the fee is determined in different ways. Sometimes it is a fixed rate and sometimes it is a percentage based on the manager’s investing success. Sometimes it’s both!
(photo credit: Richard Moross)
Don’t worry; you don’t have to pay to use the lavatory. Yet.
American airlines are taking a hint from European discount airlines: pack ‘em in and charge extra for everything.
“Even with the new fees, airlines are losing billions. So it’s either fees, higher fares, or we’ll see some more airlines fall into the aviation ash heap along with TWA, Pan Am, Skybus and Independence Air.” – George Hobica, Founder of AirfareWatchdog
Two and twenty is a typical fee structure of hedge funds, or other alternative investment vehicles, where the annual management fee is 2% of assets and there is also a performance fee of 20% of investment returns.
Once you deposit your money in a bank, it doesn’t just sit in a big vault until you decide to hit the ATM. Your bank uses those funds to offer financial products (such as loans and mortgages) to their customers, for a profit to the bank. Although banks often pay you interest for depositing your money with them, they find ways to earn more with your money than they are paying you. An example of this would be mortgages, where they lend money to a consumer for a relatively higher interest rate.
Banks also make a lot of money on the fees they charge their customers. Examples of these would be: late fees, overdraft fees, ATM fees, interest rates on credit cards, or checking account fees.
The combination of interest rates and fees allows a bank to run profitable businesses while also offering services to its clients.