Kroger Extends Visa Ban On More Subsidiary Stores

Kroger Extends Visa Ban On More Subsidiary Stores



CINCINNATI, OH - Time for Visa to bust out the Ben and Jerry’s because it just got dumped. In a recent announcement, Kroger has decided it will not be accepting credit cards at a second group of subsidiary stores. Smith’s Food and Drug stores—a collection of 142 supermarkets and 108 gas stations across seven states—is the second of Kroger’s subsidiary brands to ban the use of Visa credit cards (excluding prepaid and debit cards) as of April 3, according to Fortune.

Due to rising transaction fees for Visa credit cards, Kroger will ban the brand at select stores in food and drug store chain

The company’s first ban on credit cards was enacted at its California Foods Co. Supermarket’s 21 stores and five fuel locations, as we reported last year. This brings the total number of stores with the Visa credit card ban to over 160 stores and over 110 gas stations. And though Kroger has made no announcements that it will extend the ban to all Kroger locations, the company did report last August that, “If we have to expand that beyond Foods Co., we’re prepared to take that step.”

"This is clearly Kroger flexing its muscles, trying to send Visa a message about credit card swipe fees," Matt Schulz, Chief Industry Analyst at CompareCards reached out and told us. "Retailers and card networks have been fighting over this for a long time, and this is an escalation in this battle."

Kroger claims that excessive interchange and network fees are what prompted the decision.

Michael Schlotman, Executive Vice President, Kroger“Visa has been misusing its position and charging retailers excessive fees for a long time,” said Mike Schlotman, Kroger’s Executive Vice President and CFO, in a press release. “They conceal from customers what Visa and its banks charge retailers to accept Visa credit cards. At Smith’s, Visa’s credit card fees are higher than any other credit card brand that we accept. Visa’s excessive fees and unfairness cannot continue to go unchecked.”

In a statement to Fortune, a Visa spokesperson expressed the company's disappointment in the decision, claiming that it will continue to look for a compromise.

“The Visa network delivers significant value for merchants including access to more customers; increased sales, security, and fraud protection; a quick and convenient checkout experience; and ongoing innovation and implementation of the latest technologies,” the spokesperson said. “Kroger enjoys all of these benefits, and there is a cost for these services, like any other. We have put forward a number of solutions to allow our cardholders to continue using their preferred Visa credit cards at Foods Co. and Smith’s without Kroger-imposed restrictions, and we continue to work toward a resolution.”

Some experts question the move to ban Visa as it may have an adverse effect on consumers.

Matt Schulz, Chief Industry Analyst, CompareCards"Credit card fees definitely hit merchants’ bottom lines in a very real way," commented Schulz. "The problem for Kroger is that consumers don't care about what happens behind the scenes. They just want to be able to use their favorite credit card whenever and wherever they choose. That means that Kroger is risking alienating some customers by making this move."

Will Kroger continue on the path to a Visa ban in all its stores? ANUK will deliver all the updates.

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