Supermarket chain Kroger, which last year banned Visa credit cards in its Food Co. stores, is expanding its ban to 250 Smith’s Food & Drug Store locations in seven states.
A division of Cincinnati-based Kroger, Smith’s has 142 supermarkets and 108 fuel centers in Utah, Nevada, New Mexico, Wyoming, Idaho, Montana and Arizona that will no longer accept Visa credit cards starting April 3.
Kroger, the nation’s largest grocer, banned Visa credit cards in August at its Foods Co. stores in California to save on fees paid to Visa to process credit-card purchases.
Kroger has now banned Visa credit cards for payment at two divisions. The supermarket chain operates nearly 2,800 supermarkets under several regional subsidiaries in 35 states, including: its namesake Kroger stores and Harris Teeter, Ralphs, Fry’s, King Soopers and Fred Meyer stores.
While the majority of its stores continue to accept Visa credit cards, the company said in its announcement Friday that it “continues to explore options” to reduce its so-called swipe fees paid to credit card companies.
These fees, which can range between 1 percent and 3 percent, add up to $90 billion that retailers pay annually.
“We’re not going to stand for these high fees,” said Mike Schlotman, Kroger’s chief financial officer. He declined to spell out Visa’s fee structure with Kroger, but noted Visa sometimes charges Kroger twice as much as other cards.
Schlotman said the ban was launched at a small California subsidiary to figure out how to handle such a boycott should Kroger decide to expand it elsewhere. He would not rule out continued expansion of the ban.
“We are prepared to take additional steps to reduce the cost of accepting credit cards in order to keep prices low for customers,” Schlotman said. “No option is off the table.”
Visa “has been misusing its position and charging retailers excessive fees for a long time,” Schlotman said in a statement announcing the action. “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 accept. Visa’s excessive fees and unfairness cannot continue to go unchecked.”
Kroger and Visa have been negotiating about the fee structure for months, but made no progress, Schlotman says.
Visa noted the “significant value” retailers get from its network, in a statement. “It is unfair and disappointing that Kroger is putting shoppers in the middle of a business dispute. 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.”
Smith’s stores will still accept all debit cards, including Visa debit cards, as well as MasterCard, American Express and Discover credit cards.
Smith’s employs more than 20,000 associates and operates 55 stores in Utah; 45 stores in Nevada; 23 stores in New Mexico; 7 stores in Wyoming; and 4 stores each in Idaho, Montana and Northern Arizona.
“To help our customers through this transition, we have great offers inside our Smith’s stores today, including double rewards points towards fuel purchases and other promotions to save on groceries,” Kenny Kimball, president of Smith’s, said in a statement.
Smith’s double fuel reward promotion runs through May 21.
Image: Kroger, which last year banned Visa cards in its Food Co. stores, is expanding its ban to Smith’s Food & Drug Stores in seven states.