CFPB Report Shows Kroger, Dollar Tree and Others Charging Fees for Cash-Back Transactions

A new report released Tuesday (Aug. 27) from the U.S. Consumer Financial Protection Bureau (CFPB) sheds light on a growing trend: Major retailers are now imposing fees on customers seeking cash back through debit and prepaid card transactions. This shift comes as bank branch closures and the rise of out-of-network ATM fees have diminished consumers’ access to free cash withdrawal options.

According to CFPB Director Rohit Chopra, retailers, discount store chains in particular have started charging for cash-back services, a departure from the longstanding practice of offering this benefit free of charge.

“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,” Chopra said in a Tuesday (Aug. 27) news release. “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.”

Cash-back transactions at retail stores, which allow customers to withdraw cash while making a purchase, have been a convenient alternative for accessing funds. Traditionally, these transactions came without fees, providing a valuable service in areas with limited banking options. But the CFPB’s new report indicates this practice is changing, particularly among dollar store chains.

The CFPB evaluated eight retailers — Dollar General, Dollar Tree/Family Dollar, Kroger, Albertsons, Walgreens, CVS, Walmart and Target — to assess their cash-back fee practices. Here are some of the report’s findings:

Significant Fees: Three of the retailers surveyed impose cash-back fees, collectively generating more than $90 million annually. The CFPB’s report highlighted that the cost to merchants for processing these transactions is minimal — often just a few pennies — while the fees charged to consumers are considerably higher.

Fees on Small Withdrawals: Many retailers set withdrawal limits between $5 and $50. When fees are applied to these small amounts, they can represent a substantial percentage of the total withdrawal, leading to multiple fees if consumers need to make additional withdrawals.

Retailers Charging Fees: Among the retailers studied, Dollar General, Dollar Tree/Family Dollar and Kroger were found to charge for cash-back services. Dollar General and Dollar Tree/Family Dollar impose the highest fees, at $1 or more for withdrawals under $50. Kroger, the largest U.S. grocery chain, recently introduced fees at its Harris Teeter stores (75 cents for $100 or less) and charges 50 cents for similar transactions at its other brands, including Ralphs and Fred Meyer.

Disproportionate Impact on Low-Income Consumers: The report reveals low-income communities and areas with limited banking access are disproportionately affected by these fees. Dollar stores, which are prevalent in rural and underserved communities, often serve as the primary or sole access point for cash. In these regions, residents are more reliant on cash transactions, making cash-back fees particularly burdensome.

PYMNTS reached out to Dollar General, Dollar Tree/Family Dollar, and Kroger for comment. Dollar General issued the following statement to PYMNTS:

“While not a financial institution, Dollar General provides cashback 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,” the statement said. “These services may also help customers save money on fees compared to alternative, non-retail options such as check cashing locations or ATM fees.”

As financial landscapes shift with fewer bank branches and higher out-of-network ATM fees, the CFPB’s report underscores a critical issue: the increasing cost of accessing one’s own money through retail transactions. While cash-back services at retail stores once provided a free alternative to bank withdrawals, the introduction of fees reflects a broader trend of commercialization in areas traditionally dominated by banking services.

With these developments, consumers may need to navigate a more complex landscape of cash access, balancing convenience with the rising cost of essential banking services.