Another Kroger unit to stop accepting Visa credit cards due to high fees

(Reuters) - U.S. supermarket chain Kroger Co on Friday said its Smith's Food and Drug Stores division will stop accepting Visa Inc's credit cards, starting April 3, because of excessive transaction fees.

Kroger had stopped accepting Visa's credit cards at its Foods Co stores in California in August last year, because of a price dispute over interchange rates and network fees.

"At Smith's, Visa's credit card fees are higher than any other credit card brand that we accept. Visa's excessive fees and unfairness cannot continue to go unchecked," Kroger's Chief Financial Officer Mike Schlotman said https://reut.rs/2NzW0oi.

The company added it is going to continue to explore other options to reduce the cost of accepting credit cards and keep prices low for customers.

"It is unfair and disappointing that Kroger is putting shoppers in the middle of a business dispute," a Visa spokeswoman said, adding that the company has put forward a number of solutions to allow its cardholders to continue using their credit cards at Foods Co and Smith's "without Kroger-imposed restrictions."

"When consumer choice is limited, nobody wins," she added.

Smith's operates over 130 stores across the U.S. Together with Foods Co, almost 142 supermarket and 108 fuel center locations across seven states in the U.S. will stop accepting Visa credit cards from April.

The dispute between Kroger and Visa is the latest between payments processors and merchants over transaction fees. Card companies have said in the past that expenses for ramping up anti-fraud/anti-theft security measures to make payment processing safer have resulted in a fee hike.

Mastercard and Visa have another round of fee hikes, slated for April, which will be levied on merchant banks, not on the merchants directly, although the banks could pass on the fee hike to sellers, if they want to avoid absorbing it themselves.

Visa's shares were up 0.5 percent in morning trading, while Kroger rose 0.31 percent.

Smith's stores will continue to accept all other forms of payment, including major credit cards, and health savings account cards.

(Reporting By Aparajita Saxena and Soundarya J in Bengaluru; Editing by Shailesh Kuber)