Kroger Subsidiaries End Visa Credit Card Boycott, but Terms of Their Accord Are a Secret

Two subsidiaries of The Kroger Co. have ended their boycott of Visa credit cards that started 14 months ago over acceptance costs, but it’s unknown if Visa granted the grocery-store giant any fee reductions.

Local media outlets in the West reported Wednesday morning that Visa credit card acceptance had resumed at Smith’s Food & Drug Stores, which operates 134 stores in seven Western states, and Foods Co., which has 21 supermarkets and five gas stations in California. Foods Co., complaining that acceptance of Visa credit cards cost more than other card brands, started the boycott in August 2018. Smith’s followed in April.

KSL, A Salt Lake City radio and TV outlet, reported Smith’s Web page is sporting a banner the reads “We now accept Visa credit cards, plus Mastercard, American Express, Discover and all debit and HSA cards.” The page gives no further information.

A regional Kroger spokesperson emailed this short statement to Digital Transactions News: “Kroger now accepts Visa credit cards at all our family of stores including Smith’s and Foods Co.” 

Spokespersons at Visa and Kroger’s Cincinnati headquarters had not responded to Digital Transactions News’s requests for comment as of mid-afternoon Wednesday.

Since terms of the accord between the two companies are not public, it’s hard to ascertain who, if either, won the extended dispute. But Ted Rossman, senior industry analyst at CreditCards.com, an Austin, Texas-based card-comparison service, believes Visa came out ahead.

“I see this as a win for Visa and the entire card industry,” Rossman says by email. “We don’t know the specific terms here, and maybe Kroger got a better deal, but my view is that card bans and surcharges are consumer-unfriendly and could actually hurt merchants. While merchants don’t like paying 2 or 3% in interchange fees to card companies, that’s a lot better than losing sales.”

Rossman adds that “banning all cards, or certain types of cards, or charging more to use cards, seems like a losing strategy that could push customers to competitors, especially in competitive, low-margin industries such as groceries.”

Rachel Huber, senior payments analyst at Pleasanton, Calif.-based Javelin Strategy & Research, concurs. ‘I think the ban likely hurt Kroger more than Visa,” she tells Digital Transactions News by email. “Consumers want to use their preferred payment method when making a purchase, and if that payment method was a Visa credit card, consumers were likely placing the blame on Kroger, not Visa. Unless Kroger was prepared to offer incentives that made the inconvenience worth it to their customers, it’s in their best interest to lift the ban.”

The Kroger subsidiaries continued to accept Visa debit cards during the credit boycott. Kroger, in a now-settled lawsuit against Visa over its implementation of EMV chip card acceptance, revealed that Visa debit cards were a highly important part of its payments mix, accounting for $29 billion in sales in 2015.

A 2018 consumer survey cited by CreditCards.com found that for supermarket purchases, 62% of the 1,222 respondents preferred to use debit cards, 23% preferred credit cards, and 13% liked cash. The survey was sponsored by processor Total System Services Inc. (TSYS), now part of Atlanta-based Global Payments Inc.