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Check Out Fees Causing Headaches for All

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In the Spring of 2013, Sobel & Co. published a white paper entitled, “Check Out Fees Causing Headaches for All” in which we discussed the impact of credit card swipe fees on the retail sector. At that time the authors focused on the insights and reactions from retail trade groups, consumers, and the individual states that had rejected the class action settlement that had just been put into place.  

Five years later the headline of an article published on June 7, 2018 announces, “The Next Round of Lobbying Battles Over Swipe Fees is Starting.” Retailers and processors continue to be angry over their lack of influence regarding how fees are assessed. They push back that only Visa and Mastercard seem to be represented in spite of the financial burden being thrust on the retailers.  The current argument centers on the demand for more of a voice in setting standards for card security as well as having input on the new payment technology.    

This is just one of many public statements that are gaining traction regarding the abuse of power by the “card network,” that includes Visa and Mastercard. The complaint is, as it has been, that they are the ones who have all the control when it comes to managing credit card payments. 

So it is no surprise that on August 2, 2018 the title of an article that appeared in Money reads,“A Major Supermarket Chain Has Declared War on Visa. Here’s What You Need to Know.”  In this article, author Mahita Gajanan, writes that Kroger will stop accepting Visa credit cards at 21 of its Foods Co. supermarkets and five gas stations throughout California starting on August 14 as first reported by USA Today.  Kroger realizes that it will be a significant change, but they state that they are committed to saving customers money, and do not want to pass those rising costs on to consumers by raising their prices.

The challenge is that the swipe fees are significant- Bloomberg reports that  retailers pay about $90 billion in credit card processing fees each year, an amount that must be addressed.  Kroger could suggest extending the Visa ban beyond the Foods Co. stores to include other retail stores that are under the parent company.   Only time will tell the true effects of no longer accepting one of the largest and most frequently used credit card processors around.

We will continue to monitor the credit card swipe fees debate and will keep you posted!

John Mellage, CPA, Sobel & Co.

Chris Martin, CPA, Sobel & Co.