I will sometimes do a 'surprise test'. It is usually for the earlier kyu ranks.
When I start, I just ask the student to demonstrate some techniques. As long as they are 'performing' as they practice in class I will ask them if they want that to count as their test. They usually are pretty humble about the performance, which is typically very good.
As far as charging - I don't charge for kyu ranks, but I believe that is unusual. Dan ranks are expected to donate something to the chief instructor/founder.