US retailer Kroger considers extended Visa credit card ban

US retailer Kroger considers extended Visa credit card ban

Having banned Visa credit cards at its Foods Co. stores over interchange fees, US retail giant Kroger has warned that it could extend the policy to more locations.

From next week, 26 Foods Co. stores will no longer accept Visa credit cards, citing what it considers unfair interchange fees.

Kroger CIO Chris Hjelm has warned that the dispute could escalate, with the ban spreading to the company's main brand, which has more than 2700 stores.

Hjelm told Bloomberg: "It's pretty clear we need to move down this path, and if we have to expand that beyond Foods Co., we're prepared to take that step. We don't believe we have a choice but to use whatever mechanism possible to get it back in alignment."

Foods Co. will continue to accept Visa debit cards, as wells as credit cards from MasterCard, American Express and Discover. Kroger works with Mastercard on its loyalty programme.

In a statement, Visa says it is "disappointed" and "remains committed to working with Kroger to reach a reasonable solution".

In 2017 Visa managed to resolve a similar dispute with Walmart, which had stopped accepting its credit cards at Canadian stores over "unacceptably high" fees.

Comments: (3)

A Finextra member
A Finextra member 07 August, 2018, 17:121 like 1 like

It'd be great to see other retailers follow the lead set by Kroger and work re-align unacceptably high Visa  & Mastercard fees. Competition between the two main card schemes is almost non existent and only results in even higher card charges to merchants as each competes to offer higher interchange fees to their card issuing banking partners. 

Ketharaman Swaminathan
Ketharaman Swaminathan - GTM360 Marketing Solutions - Pune 08 August, 2018, 15:52Be the first to give this comment the thumbs up 0 likes

For a long, long time, retailers have complained to the regulators and courts about high card processing fees but have continued to accept cards shamelessly; and, when card networks repealed the NO SURCHARGE rule, many of them brazenly started charging as high as 7.5% surcharge to customers despite incurring less than 3% interchange fees. This is the first time I'm seeing a retailer actually refusing to accept a card. Kudos to KROGER for adopting the right strategy for driving change in a capitalism. Let's see how its gambit plays out...

A Finextra member
A Finextra member 08 August, 2018, 20:06Be the first to give this comment the thumbs up 0 likes

Of course, following the interchange fee regulation, surcharging has now  been banned for all consumer cards in Europe and only allowed for Commercial cards - and even then charges must not exceed their costs. Despite the IFR, certain member states have banned surcharging altogether, even for commercial cards, so while your comments may be true in the US, it's certainly no longer true for Europe.

Even when surcharging was permitted in Europe, no merchant that I'm aware of surcharged for debit cards only credit cards. Those that did surcharge were in a very market dominant position where the consumer had little option other than to pay. Most High Street merchants never surcharged for fear of losing the customer to a competitor that didn't surcharge. 

That all said, I agree that some merchants (particularly the airline sectors) did charge way in excess of their costs which is down to pure greed and a total disregard for the customer.