Foods Co's Visa Credit Card Ban Could Go Kroger-Wide

Kroger’s California subsidiary Foods Co will no longer accept Visa credit cards in what company officials said is an effort to save on the credit card company’s high interchange rates and network fees and maintain in-store product prices. 

The ban may be expanded across Kroger, spokesperson Chris Hjelm said in an interview with Bloomberg.

“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,” he told Bloomberg. 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,” he said.

Foods Co customers will still be able to use Visa debit cards, and the retailer will also accept Mastercard, Discover and American Express. 

The battle is the latest in a long history of tangles between food retailers and the banking industry over credit card transaction fees. Industry groups recently reacted unfavorably to a Supreme Court ruling in favor of American Express, which bans retailers from encouraging customers to choose cards with lower transaction fees. 

At the time of the ruling, NRF officials said the fact that retailers often need to build these fees into the price of merchandise. Hannah Walker, Food Marketing Institute senior director of technology and nutrition policy, said U.S. merchants pay an estimated $97 billion annually in “hidden processing fees.”

“These fees, particularly credit card fees, continue to increase unchecked every year and are hidden from consumers,” she said.

Foods Co President Bryan Kaltenbach said prices are one of the most important factors in customer choices, and that the Visa decision will help the retailer continue to deliver that value.

“We realize this will be a change for some customers,” he said. “But we believe this change will benefit all our customers by allowing our Foods Co stores to continue to offer the things our customers value most, including our low prices, fresh produce and services, more than payment type.”