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Watchdog warns about sneaky charge at dollar stores and Kroger
Popular dollar stores and a major national grocery chain are charging customers to get cash back when they make a purchase, a landmark study has revealed.
Dollar General, Dollar Tree and Kroger charge for their cash-back service, despite competitors including Walmart, Albertsons and Target offering it for free.
Across the three major retailers, customers are paying $90 million a year in cash-back fees, according to estimates from the Consumer Financial Protection Bureau.
Americans with lower incomes or fewer local banking options are more likely to have to pay these fees, the CFPB found, which means vulnerable families may be hit hardest.
Dollar stores in particular are frequently located in small rural towns often with fewer branch locations where residents can get cash out for free, the watchdog warned.
Popular dollar stores and a major national grocery chain are charging customers to get cash back when they make a purchase, a landmark study has revealed
Consumers can get cash back when they make a purchase at certain stores using a debit or prepaid card at the register.
Shoppers typically have to choose from options of pre-set withdrawal amounts presented at the payment terminal at the time they make a transaction.
The CFPB found that Dollar Tree, which has 16,278 stores across the US, charges $1 for cash back at its Dollar Tree branded stores.
At its Family Dollar stores, meanwhile, it charges $1.50.
Dollar General, which has over 20,000 locations, charges between $1 and $2.50 depending on the amount of cash the customer wants and other variables.
Kroger charges different fees depending on the withdrawal amount at many of its brands, which include Kroger, Ralph's and Pick 'n Save.
According to the CFPB, the brands make consumers pay $0.50 for $100 or less in cash, and $3.50 for larger amounts up to $300.
The company also began charging shoppers for cash back this year at another of its brands, Harris Teeter, where it charges $0.75 for amounts of $100 or less and $3 for up to $200 in cash.
The watchdog estimates that the retailers' costs for managing the cash-back transaction are likely well below the fees customers have to pay, CNN reported.
It undertook the survey in order to work out who may have the least amount of choice in having to fork out cash-back fees because they are limited in where they can get cash out.
'The geographic distribution of dollar store chains and their primary consumer base raises concerns that these fees may be borne by economically vulnerable populations and those with limited banking access,' the agency said.
'Dollar stores are prevalent in rural communities, low-income communities, and communities of color -the same communities who may also face challenges in accessing banking services.'
While Americans are typically able to withdraw cash for free at an ATM owned by their own bank, local branches are closing across the US.
The CFPB found that Dollar Tree, which has 16,278 stores across the US, charges $1 for cash back at its Dollar Tree branded stores
Dollar General stores charge between $1 and $2.50 depending on the amount of cash the customer wants and other variables, with a maximum of $40 per transaction
Kroger charges different fees depending on the withdrawal amount at many of its brands, which include Kroger, Ralph's and Pick 'n Save
The retailers also set low limits in how much cash people are able to get back at a time, so they may have to pay the fees more than once to get the money they need.
For example, if there is a $1 fee to get back $50, as is the case at Dollar Tree, you will pay $2 to withdraw $100 - on top of the cost of what you are purchasing in order to get access to the cash-back service.
'Among the merchants sampled, Dollar General and Dollar Tree charge the highest fees for withdrawal amounts under $50,' the CFPB added.
'These fees combined with the constrained withdrawal amount may mean that the fee takes up a hefty percentage relative to the amount of cash withdrawn, and people may be less able to limit the impact of the fee by taking out more cash.'