Foods Co. Supermarkets, a California-based unit of grocery giant Kroger, will stop accepting Visa credit cards at 21 stores and five fuel centers on Aug. 14 due to high interchange fees. The stores will continue to accept Visa debit cards.
“It’s pretty clear we need to move down this path, and if we have to expand that beyond Foods Co., we’re prepared to take that step,” said Chris Hjelm, EVP and CIO of Kroger in a statement. 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.”
Merchants have long looked for ways to slash interchange fees, including lobbying lawmakers for lower rates and through technology upgrades that avoid traditional card payments entirely. In the case of Kroger, the company may be leveraging its size to negotiate a better interchange rate with Visa.
Visa spokesperson Amanda Pires said the company is disappointed in the decision, which she said limits consumer choice. “Our goal is to protect the interests of our cardholders to ensure they can use their Visa credit cards wherever they shop,” Pires said in a statement. “Visa remains committed to working with Kroger to reach a reasonable solution.”
Interchange fees are set by card networks like Visa and Mastercard, and sellers pay them to banks that issue the credit cards when consumers use those cards to shop. The fees have risen across the board in recent years:in total, retailers paid $43.4 billion in Visa and Mastercard credit card interchange fees in 2017, up from $25.9 billion in 2012, according to the Nilson Report.
Kroger’s announcement comes a week after Walmart’s decision to abandon Synchrony Financial after the two parties couldn’t agree to economic terms.