Originally Posted by
tmiw
BTW, how does Smith's fit into the overall grocery ecosystem?
Kroger has 2,782 supermarkets. Of these 21 are Foods Co and 142 are Smith's. This means that Kroger just extended the Visa ban from 0.8% of its store base to 5.1%. I'm not yet convinced they are serious about this. If they implement the same policy at Ralphs or one of their Kroger banner divisions in the midwest or south, then we will be talking. But until then, I think it's mostly posturing. Maybe they are doing it a few stores at a time in order to maximize news coverage.
Originally Posted by
tmiw
Anyway, thinking about it some more, I wonder if just accepting surcharges for card transactions is going to be better for rewards cards in the long run. The savvy among us will still find a way to get more than 2-3% return from their points earning (not to mention bonuses from minimum spend) in that scenario, plus it likely won't require any cuts in interchange. Meanwhile, if Kroger and others succeed in getting interchange cut (since that'll be what it takes for them to start accepting Visa et al again), rewards definitely get cut.
I'm starting to think you are right. The loopholes become too "easy" to exploit, and there is pressure to close them. But new loopholes will emerge.
Originally Posted by
mikesyr18
Let the free market determine interchange rates. If merchants feel like they're paying too much, they can stop taking certain cards, but deal with the consequences when that $4,000 purchase goes out the window when the customer's Visa card isn't accepted. If 3/4 major networks are always accepted - the one network charging a higher interchange rate will be forced to lower theirs to compete.
That kind of logic only works in a competitive market. Credit card networks essentially operate in an oligopoly, where there is little, if any, price competition.
Only recently have some merchants (Kroger and Walmart) grown to a large enough size that they really have negotiating leverage with the networks. If this trend continues and retailers continue to consolidate (which I don't think is a good thing for consumers) then we may see more of these skirmishes.
Originally Posted by
mikesyr18
Suggesting some law that limits interchange fees to 0.7% or something is just some liberal mindset that will hurt everyone in the long run except the merchant, just like with the Durbin Amendment. I'm not sure what our Congress hoped to accomplish by voting in favor of Durbin because consumers and banks certainly haven't benefitted.
How do you know that consumers haven't benefitted? There may have been a reduction in price due to this. Prices are always fluctuating due to various factors so it may not be possible to measure it, but a couple of years ago, food prices hit a multi-decade low.