Foods Co.—a California subsidiary of the Kroger Co.—will stop accepting Visa credit-card payment at its 21 stores statewide starting Aug. 14.
The new policy will also be applied to five gas stations of Foods Co. in central and northern California.
The Kroger Spokesman Chris Hjelm told Bloomberg on July 30, that the company may expand the ban. “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 said.
After the ban is implemented, debit cards from Visa Inc. and credit cards from other companies will still be accepted in the affected stores and fuel centers.
The ban is the result of a dispute between Kroger and Visa over the swipe fee—which is paid to Visa by Kroger to handle customer’s credit card transactions. Foods Co. told CBS 11 that the ban will reduce costs associated with Visa’s interchange rates and network fees.
According to ValuePenguin, interchange fees are charged to merchants by card networks—like Visa—for processing a debit or credit payment. The average interchange rate for a credit card payment is around 1.81 percent, while the typical rate for debit cards is 0.3 percent.
Th interchange fees make up the majority of the cost involved in accepting a card payment. They have been a lasting point of tension between merchants and card companies.
Merchants paid $43.4 billion in Visa and Mastercard credit card interchange fees in 2017—up 68 percent from $25.9 billion in 2012, the Wall Street Journal reported, citing the Nilson Report.
Before Kroger’s announcement, Walmart Inc. dropped a credit-card deal with Synchrony Financial in the week of July 26, after the two couldn’t reach agreement on the economic term. Amazon.com Inc. is also foraying into financial services—a move expected to save retailers $250 million a year in swipe fees, according to the Bloomberg.