CINCINNATI -- If you shop for groceries with one of those premium Visa cards that offer travel rewards, cash back and other perks, you may have helped to create the current standoff between Visa and the Kroger Company.
The Cincinnati-based grocery chain announced this week that its 21-store Foods Co. banner in California will stop accepting Visa cards on Aug. 14 because of rising fees. Kroger might extend the ban to other parts of the country unless it finds away to reduce costs from Visa transactions.
Kroger spokesman Keith Dailey said the increased use of premium credit cards is a big factor in the dispute because premium cards charge retailers higher fees than other payment methods.
"It creates a hidden cost that's not fair to our customers," he said. "When Visa and the bank's activities go unchecked, it raises grocery prices for everyone."
Visa declined to comment on the premium-card issue but released a statement saying it's "committed to working with Kroger to reach a reasonable solution."
However, the founder of a company that advises businesses on how to get the best deal from credit-card processors said Kroger is right about premium cards. CardFellow president Ben Dwyer said a $100 transaction would cost Kroger as little as 26 cents in interchange fees if its customer uses a debit card, but the same purchase could could cost Kroger up to $2.20 if the customer uses a Visa Signature Preferred card. Interchange fees, which go to the bank issuing a credit card, represents the largest of three fees paid in a credit card transaction. It's also the fee that varies the most from customer to customer.
Dwyer provided a link to Visa's latest reimbursement fees to show how complicated fee structures can be.
"Very few cardholders are aware of the costs that businesses pay to accept their cards," he said. "Frankly, most businesses aren't aware."
Dwyer said Kroger isn't the first retailer to halt transactions over Visa fees. Walmart did the same thing with its Canadian stores a few year ago, he said, leading to an undisclosed settlement between the companies.