Kroger is among a minority of large retailers analyzed by the Consumer Financial Protection Bureau that charge customers fees to withdraw cash when they make purchases, according to a report released Tuesday by the federal agency.
The grocery chain’s banners charge customers a fee of 50 cents or more per to withdraw up to $100, imposing added costs on consumers at a time when mergers, closures and “fee creep” in the financial services industry have made it harder for people to get cash from their accounts without incurring a charge, according to the CFPB, which monitors markets for consumer financial products.
“In this context, we observe that some retailers provide cash back as a helpful service to their customers, while other retailers may be exploiting these conditions by charging fees to their consumers for accessing their cash,” the agency said.
According to the report, data the CFPB analyzed shows that retail locations accounted for 17% of all transactions through which people withdrew cash from checking or savings accounts or by using prepaid cards.
In examining a sample of eight national chains, the CFPB found that three — Kroger, Dollar General and Dollar Tree — charge cash-back fees that the agency estimates bring in more than $90 million per year. The companies charge those fees even though the cost they incur to handle each transaction may only be a few cents, the agency said.
The CFPB noted that Dollar General and Dollar Tree have a big presence in rural and low-income areas and communities of color — places where the agency said banks have fewer branches and people depend more heavily on cash for everyday needs.
“Retailers are essentially filling a void in access to cash, which has historically been supplied by banks and credit unions in an affordable way,” the agency said in the report, adding that access can be especially helpful to people in areas where there is a shortage of banks and where financial institutions and ATM operators charge “significant” fees.
Retailers benefit from offering cash-back services because they save money by having less cash at the end of the day to count, according to a 2002 report from the Federal Reserve Bank of Philadelphia cited by the CFPB. Cash-back services can also draw shoppers into stores, the agency said.
The CFPB also analyzed data about cash-back transactions at stores run by Albertsons, Walgreens, CVS, Walmart and Target, noting that those retailers do not charge cash-back fees. Many independent grocers and the U.S. Postal Service also allow customers to withdraw cash without incurring a fee, according to the report.
