Kroger and Visa are once again on the outs. The retailer recently announced that Smith’s Food and Drug stores—a collection of 142 supermarkets and 108 gas stations across seven states—will be the second of Kroger’s subsidiary brands to ban the use of Visa credit cards (excluding prepaid and debit cards) as of April 3.
“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.”
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 on our sister site AndNowUKnow. This brings the total number of stores with the Visa credit card ban to over 160 stores and over 110 gas stations.
The press release noted that while no other Kroger banners are presently affected by this announcement, Kroger continues to explore options to reduce the cost of accepting credit cards in order to keep prices low for customers.
“Grocery is a competitive business and our ability to keep prices low for our customers depends on controlling costs,” said Kenny Kimball, President of Smith’s. “To help our customers through this transition, we have great offers inside our Smith’s stores today, including double reward points toward fuel purchases and other promotions to save on groceries."
"This is clearly Kroger flexing its muscles, trying to send Visa a message about credit card swipe fees. Retailers and card networks have been fighting over this for a long time, and this is an escalation in this battle,” stated Matt Schulz, Chief Industry Analyst at CompareCards. "Credit card fees definitely hit merchants’ bottom lines in a very real way. 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.”
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."
Will Kroger continue on the path to a Visa ban in all its stores? Deli Market News will deliver all the updates.