Foods Co. has announced that it will no longer be accepting payment from customers that are using Visa-issued credit cards as of mid-August amid clashes over payment fees and rates. Foods Co. is a California subsidiary of Kroger, the largest supermarket chain the Unites States.
The grocery store chain made the announcement on the policy change Monday when it said that it was due to Visa’s interchange rates – the amount merchants pay to banks after a specific card is used at the store.
“Visa’s rates and fees are among the highest of any credit card brand,” Foods Co. said in a statement. “The savings will be passed along to Foods Co. customers in the form of low everyday prices on the items shoppers purchase most.”
The ban will affect all 21 stores and five fuel centers in California and will take effect starting August 14.
But it doesn’t end there.
Kroger has said that it is also mulling expanding the ban imposed by Foods Co. to its mother stores in the latest signal that retailers are preparing a fresh battle over the $90 billion they pay in swipe fees every year.
“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 Kroger spokesman Chris Hjelm. “When the amount retailers pay in card fees [get] 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.”
Visa shares fell 3 percent amid the announcement while Kroger’s rose by 3.5 percent.
Merchants have long looked for ways to cut charges, including lobbying lawmakers for lower rates and through technology upgrades that avoid traditional card payments entirely.
Meanwhile, Visa has expressed disappointment at Kroger’s decision.
“When consumer choice is limited, nobody wind,” a spokesperson for the payments company said. “Our goal is to protect the interests of our cardholders to ensure they can use their Visa credit cards wherever they shop. Visa remains committed to working with Kroger to reach a reasonable solution.”