Kroger has threatened to ban the use of Visa cards to pay for groceries because of card swipe fees.
The grocery store chain’s California subsidiary, Foods Co., already has announced it will stop accepting Visa credit card payments at 21 stores in California this month. Now Kroger is prepared to follow its lead, according to Bloomberg. Visa debit cards would still be accepted.
Kroger spokesman Chris Hjelm told Bloomberg “it’s pretty clear we need to move down this path.”
“When the amount retailers pay in card fees gets out of alignment, as we believe it is now, we don’t believe we have a choice but to use whatever mechanism possible to get it back in alignment,” Hjelm said.
While the company considers its next moves, Kroger’s spokesperson for the Louisville division, Erin Grant, said all Kroger stores in the Louisville and Lexington areas continue to accept Visa credit cards.
Around 2 percent of all transactions go toward swipe fees, but it can be as much as 4 percent for some premium rewards cards, according to the National Retail Federation.
Many retailers have said that swipe fees are one of their highest costs, behind wages and employee health benefits, the foundation stated.
“By NRF estimates, swipe fees cost the average U.S. household hundreds of dollars a year in higher prices and hurt retail sales because consumers buy less when prices go up,” the NRF website states.
The rates and fees for Visa are among the highest of any credit card brand, Foods Co. told Fox Business in a statement.
The money Kroger will save by banning Visa credit card transactions would lead to lower prices on goods, Foods Co. President Bryan Kaltenbacj said.
A Visa spokesperson expressed disappointment with Kroger’s California decision in a statement to CBS News.
“When consumer choice is limited, nobody wins,” a spokesperson for payments company said. “Our goal is to protect the interests of our cardholders to ensure they can use their Visa credit cards wherever they shop. Visa remains committed to working with Kroger to reach a reasonable solution.”
Matt Schulz, chief industry analyst at CompareCards, told Retail Info Systems Kroger is gambling in a move he called a clear sign retailers are ready to escalate in the card swipe battle.
“The average customer doesn’t know anything about swipe fees,” Schulz said. “All they would know is that their favorite grocery store no longer accepts their favorite credit card. That certainly seems like it would cost them some business, but that is clearly a gamble that Kroger and others are ready to take.”