Reuters reports that Smith’s Food and Drug Stores, a division of Kroger, will stop accepting Visa cards due to high interchange fees. The change will go into effect on April 3rd. This is in addition to the Foods Co division of Kroger which already implemented that change.
Apparently these chains are landing up with higher fees than the other Kroger brands (maybe more people with rewards credit cards?) so Kroger decided to just stop accepting Visa there. Surprising that they haven’t reached some agreement.
It’s interesting to see retailers put their foot down. Hopefully, this doesn’t hurt rewards credit cards in the long run.
I wanted to do some of my 10-transactions-a-month banana runs at a few Kroger-owned stores, and they already require you to enter a PIN for a MasterCard Debit transaction. No PIN? Kroger wants none of your business.
Unlike at Walmart where they can process Debit as Debit without a PIN, on Kroger terminals, you cannot proceed with a chip-based debit card without a PIN.
Since I didn’t want to give my PIN to Kroger for no reason, and I was already set about having a banana that day, I ended up paying with my AmEx — do they have lower interchange fees from AmEx? I don’t care either way, but they aren’t getting my PIN! I had to do my banana runs at other stores, too.
But not accepting any Visa, at a general purpose grocery store? I’d imagine this might be limited to Credit transactions? Else, they’ll just be losing way too much business.
Yeah, my primary debit card is a Visa, but entering the PIN means the transaction runs through the debit card network instead of Visa’s network. So I’m hoping if this no-Visa policy ever comes to main-brand Kroger’s stores too, I’ll still be okay on that. (I don’t mind entering my PIN on PIN pads inside major stores, though I always run credit on gas pumps, as those are the main place for skimmers to be placed. Non-bank ATMs are also a risk I avoid.)
It’s definitely going to keep getting harder and harder to meet non-PIN-transactions rewards checking account requirements in-person, as regardless of whether stores care about any fee differences, they want the reduced liability from requiring the PIN. Online transactions such as paying small amounts towards a cable/phone bill are still viable.
Contrarian here. I don’t see any reason that the customer should be happy with the middleman sucking a few percent out of every transaction between customer and merchant, just because the middleman gives a kickback to the customer. We play stupid credit card “reward” games, because it costs us not to, but life would be so much simpler if the fees were drastically lower and the games went away, and for the customer, the bottom line would basically be the same.
For most people, I agree. For us who read DoC, no.
I got 20k in rewards last year. Do you think I paid anywhere close to 20k in interchange fees? Even if they were charging 3 percent of my 60k of yearly credit card spend that is only $1800. And this is supply and demand. If the fees go lower the most obvious change is higher grocery store prices.
If you are on this site you obviously aren’t reading the articles about how to get bonuses if you would save money without interchange fees.
These types of merchant behaviors will be the tipping point for rewards cards. Look at Verizon who changed their billing policies to reward customers who didn’t pay with a CC. It is happening, and will continue to. Business and consumers vote most effectively with their wallets.
I just walked into my local Smith’s and saw the sign in front of the store saying they will no longer accept Visa. I walked 5 more feet and there is a big kiosk pushing the Kroger Mastercard. Me thinks Smith’s made a calculated move that they could get more from customers by pushing their own card.
What really burns my chaps is Smith’s trying to make it sound like they are doing this for the consumer. Will consumers see lower prices because of this? Not a chance! Will Kroger see an increase in profit because of this? Perhaps….
Costco and Winco are examples of companies that enforce limited payment choices, and seem to get away / succeed with that. If Smiths has a value proposition that makes people either get / use a MasterCard if they need a card for payment it could work. I still see a lot of people who appear to be unbanked using cash at grocery stores still. (or they may not be in the legal economy)
Costco also makes you pay a fee to enter the door. Big difference between a Costco customer and your average grocery store consumer.
Winco takes only cash or debit cards (very low interchange fees). That would seem to be a good compromise for Kroger if they’re only worried about the fees. And if you have credit cards, you probably have a bank debit card too, so Kroger probably wouldn’t lose many customers on that count alone. But I would bet that Kroger has considered doing that and rejected the idea because there are many other considerations than just the Visa interchange fees.
Kroger couldn’t ban ALL credit cards at Smith’s (go cash/debit only) because they’d lose their co-branded card business.
I think the problem is the higher swipe fees on the Visa Signature cards. Visa will not allow merchants to accept regular Visa but to deny Visa Signature. The only recourse open to the merchant is to deny all forms of Visa.
That’s a bold move — I’d be pretty pissed if I was an average consumer and was told “we don’t take visa”… For a while I ran 1 card only (who doesn’t take visa) so needing to come up with $30-50 cash to buy groceries would be a major turn off
I agree. The only time I usually personally pay with Visa at Smith’s is when Freedom 5% category is supermarkets. Otherwise I usually pay with my Amex which gives me a better return on spend (or this quarter I”m using Discover). But I’m sure there are lots of people who do not have a Visa, an Amex and a Discover to swap between. Then again, I see plenty of people paying with debit cards (entering the pin) and that’s usually an even lower fee that merchants are paying than credit cards.
Indeed. It’s certainly not unusual to hear “sorry, no AMEX or Discover” (though it seems to happen a lot less often in the past few years) but it’s an entirely different story if Visa or MC are unavailable considering how many people likely just have their one debit card and nothing else!
visa getting greedy. ultimately the price increase falls on customer heads.
What? Without those high fees you wouldn’t be getting any credit card rewards.