Service Charge

Service Charge Definition 

A service charge is a fee added to the main product or service cost. Industries like restaurants, banks, and airlines often include service charges, which may cover service or transaction costs. 

Service Charge Explained 

Service charges are fees tied to services related to the main product or service. They are usually added at the point of transaction. Customers typically pay these charges, which are included in the bill. However, service charges are not mandatory in most countries. For instance, they can't be automatically added to restaurant bills. 

There are pros and cons to service charges: 

Pros: 

• They allow businesses to maintain quality customer service and products without raising product prices.

• No hidden costs are charged to customers.

• Service fees encourage competition and motivate businesses to provide top services, boosting revenue.

• They allow business owners to increase employee wages.

Cons: 

• They can deter consumers from purchasing due to potential cost concerns.

• Businesses might pressure customers to pay a service charge.