Kroger cites rise in costs for expansion of Visa ban

Kroger, the biggest U.S. supermarket chain, plans to widen a ban on Visa credit cards to its Smith’s food and drug division, blaming rising costs from premium cards.

Starting April 3, Smith’s stores won’t accept Visa credit cards, though customers can still use their Visa debit cards, the company said Friday in a statement. The ban follows Kroger’s decision in July to stop accepting Visa credit cards at its Foods Co. Supermarkets unit in California.

Kroger, the parent company of Fred Meyer, which has seven stores in Clark County, is responding to the growing popularity of premium cards, which come with higher swipe fees for merchants, Chief Financial Officer Mike Schlotman said in an interview. Banks including JPMorgan Chase, American Express and Citigroup have been offering ever increasing rewards on their high-end credit cards as a way to entice affluent customers.

“Premium-rewards cards carry significantly higher fees, and they entice the customer to use those,” Schlotman said. “When you’re in a business that has a margin of 2 percent or less, a 1 percent higher fee has a meaningful effect to the bottom line.”

The spat is part of retailers’ push to lower the $90 billion they pay each year in fees. Major retailers have long looked to cut down on such charges, including by lobbying lawmakers to lower the rates and through technology upgrades that avoid systems run by Visa and Mastercard Inc. .

Smith’s employs more than 20,000 and operates 142 stores in Utah, Nevada, New Mexico, Wyoming, Idaho, Montana and Arizona.

“It is unfair and disappointing that Kroger is putting shoppers in the middle of a business dispute,” Amanda Pires, a spokeswoman for Visa, said in a statement. Visa provides merchants access to more customers, and fraud protection, among other services, she said. “Kroger enjoys all of these benefits, and there is a cost for these services, like any other.”