A new report has revealed hefty profits that grocery and dollar stores make in cash-back charges. Retailers like Kroger, Dollar Tree, and Dollar General have racked up millions by charging customers to take out cash.
The Consumer Financial Protection Bureau exposed that over $90 million was earned in fees for taking money out. While conducting the report at eight of the nation’s largest retailers, such as Dollar General, CVS, Walmart, and Target, they found that three major retailers earned the most through the charges.
While retailers make significant cash through the fees, the profits don’t match the cost. According to the report, the cost to process the transaction may only amount to pennies. Despite this, these stores, in particular, are charging customers at a much higher margin.
At the multiple dollar stores, fees start at $1 to take out cash under $50. Kroger, a grocery chain with stores throughout the U.S. under different names, charges .50 to .75 cents at its stores like Ralph’s and Harris Teeter for patrons to get $100 or less.
However, the issue disproportionately impacts lower-income communities, where most dollar stores are located. While dollar stores are many people’s sole option for accessing cash, the spiked rates to do so could be predatory.
“While retail chains had long provided cash back on debit card purchases for free, the CFPB has found that dollar store chains and other retailers are now charging fees for access to cash,” said CFPB Director Rohit Chopra. “Many people living in small towns no longer have access to a local bank where they can withdraw money from their account for free. This has created the competitive conditions for retailers to charge fees for cash back.”
Upon the findings, Dollar Tree and Dollar General released statements on the hiked fees. Both companies expressed that they are helping customers by providing an option to gain cash despite the disproportioned costs.
“Like many retailers, Dollar Tree and Family Dollar offer cash back as a convenient service for our customers,” said a Dollar Tree company spokesperson, as detailed by Supermarket News. “Shoppers who want to take advantage of our cash-back offering are charged a clearly disclosed fee, which in turn helps offset the variety of costs we incur to offer this helpful service.”
Dollar General stated, “While not a financial institution, Dollar General provides cash back options at our more than 20,000 stores across the country as a service to customers
who may not have convenient access to their primary financial institution. These services may also help customers save money on fees compared to alternative, non-retail options such as check cashing locations or ATM fees.”Despite their stances, smaller and/or lower-income areas continue to face additional fees while companies secure massive profits.
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