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Surge Pricing: What It Is & How It Works For Riders & Drivers

Last updated: August 30, 2021
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a vector image showing a woman holding a smartphone running the uber app and angry because uber surge pricing is active

Even if you memorize the standard cost of Uber in the cities you frequent most, your final cost may end up a little higher than you’d expect.

More often than not, the culprit behind this price increase is Uber surge pricing.

While Uber users always benefit from upfront pricing, the company’s complex pricing algorithm can make your fare breakdown harder to understand.

Unlike taxi rides, which are charged based on a set meter, Uber rides also take real-time conditions into account before providing your guaranteed price.

This article will explain what Uber surge pricing is, how it’s calculated, and how you can avoid high prices as an Uber rider.

What Is Surge Pricing?

Surge pricing is a variable in the Uber pricing model that multiplies fares when rider demand is higher than driver supply.

Uber surge pricing exists to create a balance between demand and supply.

When surge pricing is activated in specific neighborhoods, more rideshare drivers will drive toward the area to take advantage of higher earnings.

This creates the reliable service you’re used to when requesting rides through the Uber app.

How Does Surge Pricing Work?

a vector image showing a woman holding a smartphone running the uber app and angry because uber surge pricing is active

Uber’s surge pricing gets activated during high-demand times.

It’s a basic supply and demand model that occurs when there aren’t enough drivers on the road to handle a surge in ride requests from passengers.

This can happen due to the following factors:

  • Special events
  • Rush hour
  • Bad weather

A local sporting event, for instance, can cause a surge.

A large number of Uber ride requests can occur in an area where there aren’t enough rideshare drivers to handle the load.

Uber surge pricing is calculated based on real-time demand, which means the current multiplier can change every few minutes.

The exact multiplier of the moment is determined by Uber’s algorithm, which takes into account the number of available drivers on the road as well as how many customers request rides at the same time.

Once the algorithm settles on a multiplier, your fares will increase by that amount.

For example, if your local base fare is $10 for an UberX trip and the multiplier is 2.5, your fares will rise to $25.

The surge prices you get are always based on your present location, not your driver’s location.

When Did Uber Introduce Surge Pricing?

Uber first introduced the concept of surge pricing in 2014.

Many people resisted it, of course, because Uber users weren’t used to paying more for their rides at certain times.

Reports of high ride costs during holidays or other busy times helped drivers earn some great fares. The high costs also surprised some riders.

Over time, it’s become an expected aspect of Uber and even Lyft.

Why Does Surge Pricing Exist?

Making sure riders can always find rides when they need them is one of the main reasons Uber implemented surge pricing.

A higher base fare price motivates drivers to move into areas where riders might have a hard time finding their next driver.

How Are Surge Prices Calculated?

Another name for Uber’s surge pricing strategy is dynamic pricing.

It’s not a new concept at all.

The airline industry has used flexible prices since the 1980s.

Flexible pricing is where prices change constantly based on market fluctuations.

You can see this practice in action.

Visit any online flight marketplace and watch the prices change day-to-day or even hour-to-hour.

Uber uses a multiplier pricing algorithm to come up with surge pricing amounts for drivers and riders.

This multiplier might cause prices to go up by 25%, 50%, or even double.

During the busiest of times when demand is extremely high, it’s not uncommon to see the multiplier 3x or 4x the regular price of an Uber ride.

How Long Does Surge Pricing Last?

Surge pricing lasts until there are enough drivers in the overburdened area to handle the number of rides needed.

Depending on the reason why the surge happened in the first place, the surge time frame can last anywhere from a few minutes to half an hour or longer.

How long it lasts also depends on whether a nice volume of drivers exists just outside the surge radius or not.

If several drivers close to the busy area see that they’re just outside the surge pricing radius, they’ll typically drive to that area quickly.

As more of the drivers converge on the area, supply catches up with demand and the surge ends quickly.

Does Surge Pricing Actually Help Balance Supply and Demand?

Yes, surge pricing balances out the supply and demand balance.

Using the example from the previous section, drivers rush to surge areas.

This action balances out the fact that too few drivers were present in a busy area only a few minutes earlier.

Surge Pricing for Riders

If you’re going to make use of Uber to get around, then you need to come to terms with the fact that surge pricing is a regular part of the experience.

The rideshare industry isn’t going to stop using this type of dynamic pricing anytime soon.

Some people accuse Uber and Lyft of price gouging by using such pricing models.

But the companies haven’t ever had the practice deemed unlawful.

A good analogy for how this works is paying for sporting event tickets.

  • Ticket prices go up when the event is about to start and someone desperately wants to get into the stadium.
  • In this case, they’re willing to pay more.
  • The same thing happens during the playoffs.
  • The game itself didn’t change suddenly.
  • People accepted higher playoff ticket prices.
  • They knew higher demand outweighed the number of tickets.

How Surge Pricing Works for Riders

Surge pricing increases costs for riders.

You’ll notice that the cost of a ride will go up during these times.

It’s all based on the multiplier.

You might see a “2x” multiplier where a ride’s cost doubles compared to using Uber during times when the surge isn’t occurring.

Example of Surge Pricing for Riders

Let’s say you go to a concert and you used Uber to get there.

Unfortunately, one of your friends took too long to get ready and so you got to the concert late.

Since you arrived after the big rush of everyone else getting to the arena, you most likely paid a relatively low rate to hail a driver.

Maybe you paid $25 to get there.

Once the event ends and everyone in the arena wants to leave at the same time, then surge pricing will likely hit the area.

Too many people need an Uber ride compared to the number of available drivers.

If the surge pricing multiplier creates a 2x surge, then it’s likely that you’ll need to pay closer to $50 to get home.

You might pay closer to $100 for the same trip if the surge goes beyond 3x or 4x.

For people unfamiliar with surge pricing, you can imagine how surprised they become during these situations.

Is Surge Pricing a Bad Thing for Riders?

You could say that surge pricing is a bad thing for Uber riders.

But the process of meeting rider demand with more supply as quickly as possible benefits passengers in the long run.

It would probably take longer to find a ride if Uber didn’t provide a financial incentive for drivers to work in areas with high demand.

One strategy you might try is waiting to order your ride while other riders go ahead and take rides that cost them more than normal.

Depending on the situation, the surge time might end quickly and then you can select a ride at a price that makes you more comfortable.

Surge Pricing for Drivers

Drivers have an opportunity to make a little more money during surge times.

It’s like a ticket agency during the playoffs.

More people want the tickets and so they’re willing to pay more for the same piece of paper in their attempt to beat out the next fan who wants their tickets.

Some riders will pay a higher price to beat out another Uber passenger when the supply of drivers can’t meet the demand.

How Surge Pricing Works for Drivers

Surge pricing works similarly to how it works for riders.

The difference is that drivers benefit financially because they’ll earn more for the same effort put in during non-surge times.

Again, the multiplier dictates the increase in each fare.

Do Drivers Earn More During Surge?

Yes, drivers earn more during a surge pricing situation.

For a quick breakdown of how exactly you can increase driver income with Surge pricing, check out our video below:

Example of Surge Pricing for Drivers

Surge might happen for a driver when they’re located near a bar that’s about to close on a Saturday night.

All of a sudden, a wave of passengers want rides.

If only a couple of drivers are in the area, then those two drivers will probably pick up surge pricing rides.

They could potentially earn two to four times (or more) than the normal amount for driving the same distance.

Is Surge Pricing a Good Thing for Drivers?

Yes, surge pricing is good for drivers. It’s an opportunity to earn a little more if they’re able to get hailed when the surge multiplier might pay them twice or three times as much for their effort.

How Do I Know if Surge Pricing is Active?

Though surge prices are always charged upfront, Uber no longer displays the exact surge multipliers you’ll be charged.

However, as long as you know your city’s normal fares — which you can find through an Uber fare estimator tool — you can figure out if you’re being charged Uber Surge pricing by following these directions:

The Uber app tells you that surge pricing is active by using various shades of red on the map.

1. Ride Fare Pricing Is Increased

Passengers can immediately tell that surge pricing is active.

They’ll see prices jump higher than they’re used to paying.

  • Open the Uber app.
  • Tap the “Where to?” bar to enter your pick-up and drop-off locations.
  • Tap on your desired ride type.
  • Before you confirm your request, tap the info icon next to the service description to see your fare breakdown.

If your base fare is higher than they would be under standard rates, you’ll know a surge multiplier has been activated.

2. Surge Pricing Map

Drivers know about surge pricing because of the red areas on the map.

vector graphic showing the best times driving for Uber works

If you’re a driver, then you’ll see the color along with Uber surge multipliers.

For example, you might see 2X, 3X, or 4X accompanying the red surge price zones.

You’ll know that you might earn two, three, or four times your normal fare if you get pinged for pickups inside these zones.

What Do People Think About Surge Pricing?

Like every area of life, everyone has an opinion about surge pricing.

Some riders remain indifferent to it because they understand the concept of supply and demand.

Other people, like this politician, try to find ways to stop Uber surge pricing or Lyft prime time pricing.

Drivers think surge pricing is good when they see their earnings increase.

This dynamic only makes sense.

Even if we love a product or service, most of us would rather pay a little less for it whenever possible.

Most workers would prefer to earn more for what they do than earn less, if possible.

Disputing an Uber Surge Charge

You can dispute a surge charge if you feel you got price gouged in any way.

vector image of a man holding the uber app while a vector woman calls Uber customer service on her cell phone

Can You Dispute an Uber Surge Pricing Charge?

Sometimes, surge pricing goes up to an extremely high multiplier.

New Year’s Eve Uber surge pricing is a time when this might happen.

The demand on these nights is often “off the charts”.

In the past, some people saw the surge multiplier go as high as 30x, 40x, even 50x.

That might put a dent in your expected Uber budget!

Contact Uber customer support through your Uber rider app and ask them for help with an overly excessive surge charge.

They treat each situation on a case-by-case basis and you may very well get some money back.

How to Avoid Surge Pricing

Though surge pricing is inevitable, there are some strategies you can use to avoid it.

We’ll discuss a few of these tactics below:

1. Avoid Busy Times and Areas

One of the most obvious ways to avoid surge is simply to avoid busy times and areas.

We’ll start by defining when the busiest times usually occur.

On the average weekday, Uber surge pricing is at its highest during rush hour — usually from 7 a.m. to 9 a.m. and 4 p.m. to 6 p.m.

However, if there’s a major event near you, the times of highest demand can shift, typically to the start and end times of the concert, game, or festival.

Holidays can also increase demand.

When riders are bar hopping late night on New Year’s Eve, going out for dinner dates on Valentine’s Day, or heading out for fireworks on Independence Day, you can expect surge pricing at odd hours.

The busiest places on most days are downtown areas as well as tourist destinations with huge crowds like Times Square in New York City.

Again, areas near event venues can see an extremely high surge when events are due to start or end.

When possible, it can be worth walking a few blocks away from the crowds before requesting a ride.

There isn’t a way to visualize where Uber surge boundaries start and end on the rider-facing Uber app.

However, if you drive for Uber, you can open your Uber Driver app and use the heat map on the home screen to see where surge multipliers are the highest.

Otherwise, use your best judgment and request your ride in less densely populated areas when possible.

2. Schedule a Ride

If you don’t need an on-demand ride, schedule your Uber ride at least an hour (and up to 30 days) in advance is definitely the best way to avoid Uber surge pricing.

When you do so, the price estimate you receive will be the exact price you pay.

Your final cost won’t be impacted by sudden demand increases in your area.

Ride scheduling is usually available for all UberX, UberXL, Select, Black, and Black SUV rides in every market.

However, it’s never available for UberPool rides.

3. Get an Uber Ride Pass

uber monthly pass header image

If you’re a frequent UberX or UberPool rider, an Uber Ride Pass may be worth the cost.

For a monthly fee of $24.99 (prices may vary by city), you can unlock price protection on eligible routes so your final cost isn’t impacted by surge.

Most UberX and UberPool routes qualify for these savings.

Your subscription can also generally get you discounted rides, so even when price protection isn’t available where you’re headed, you can still limit the impact of Uber surge pricing.

Frequently Asked Questions

Some of the most common questions about surge pricing are answered below.

Who controls Uber surge pricing?

The market of supply and demand controls Uber surge pricing.

When too many passengers need rides and not enough drivers are in the area, surge pricing then activates on the Uber platform.

Is surge pricing good for the economy?

Yes, surge pricing is good for the economy.

It helps increase the income slightly for Uber drivers during busy times.

Those drivers then have a little more money to spend back into the economy.

The law of supply and demand is a basic tenet of a capitalist society.

This law depends on people working hard and producing income.

Then they buy goods and services from other hard-working business owners.

Those owners also produce goods and services for sale.

Without that, the economy doesn’t do well. More people would need to depend on the state for help.

What happens if you chargeback to Uber?

Unfortunately, Uber will make your account reflect a negative balance if you chargeback on a ride charge.

This means you’re not unable to use the service until the negative balance gets paid.

Uber implemented this policy to prevent some people from abusing the system, where they could get a ride and then place a chargeback request with their credit card company.

Your best method for disputing a charge is opening a support ticket with Uber customer support.

Explain your situation.

If you take the time to state your case clearly and with respect, then you’re more likely to obtain a satisfactory result than charging back without explanation.

Is congestion pricing different than Surge pricing?

No, congestion pricing is a different entity than Uber’s surge pricing.

Congestion pricing is typically a governmentally-imposed policy in densely populated cities.

These policies tack on a tax by way of an extra fee for anyone using a city’s high-traffic areas during the busiest times of the day.

Cities such as Singapore, Stockholm, and London have used congestion pricing to try and curb congestion, with New York City joining this model in 2021.

They’re using this as a way to deter some people from using the roads in certain neighborhoods during rush hour or pay a fee to continue to do so.

Does Lyft have a version of Surge pricing?

Yes, Lyft uses a form of Uber’s surge pricing and calls it “Prime Time”.

It works the same as Uber’s version, and can drastically increase the Lyft cost for passenger.

When demand goes up for rides and too few drivers exist in the area, the prices go up.

Passengers can pay more for their rides during these times or wait until prime time ends.

Drivers earn more during these busier times of the day.

Wrapping Up

Now that you know everything about surge pricing, what do you think about the Uber policy?

If you’re like most people, then you might have a mixture of feelings about it.

On the one hand, you probably understand the idea of supply and demand.

It makes sense that people might pay more for a service when the demand for it increases.

If you’re a rideshare company driver, then you’re thankful for the ability to earn a bit more for your effort during the busiest times of your day.

You might feel frustrated as a passenger when you need to pay higher prices, though.

Uber surge pricing is here to stay, and additional congestion pricing fees may make traveling even more expensive in the coming years.

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