Consumers may benefit from Smith’s cutting ties with Visa credit, economist says – KUTV 2News


by Kyle Harvey

Beginning April 3, Smith’s grocery stores will not accept Visa credit cards as payment. Visa debit cards will still be accepted. Corporate leaders say the fees on credit transactions are unreasonable. (Photo: KUTV)

SALT LAKE CITY (KUTV) —Beginning April 3, Smith’s grocery stores will not accept Visa credit cards as payment. Visa debit cards will still be accepted.

Corporate leaders say the fees on credit transactions are unreasonable.

“Unfortunately those fees drive up food costs, which is not fair to our customers,” said Aubriana Martindale, a company spokesperson, noting Visa’s fees are markedly higher than that of other companies.

Some shoppers 2 News spoke with Friday were OK with the move, others said they’ll likely shop elsewhere.

But what seems like an inconvenience to some may help everybody in the long run, according to Westminster College economist Dr. Hal Snarr.

Competition and disruption tend to favor customers, lowering prices at the expense of established market leaders.

“If you’ve got a three percent margin on a turkey, then that margin’s gone with a Visa transaction,” he said, adding that grocers are feeling pressure from online services offering grocery delivery. “Maybe they’ll get a better deal.”

Visa could cave to a large client’s demands and lower their price for Smith’s, or someone else will undercut them.

“[Visa] can’t charge more than the demand curve and if they do someone else will enter it and pull those prices down,” Snarr said. “Diner’s Club had 100 percent of the market share before Visa. In 1998, their market share was one percent.”

Whoever undercuts Visa will be good for Smith’s, Snarr said, and they’ll pass that savings onto you somehow.

“All of that is good for the customer,” he said.

Another possibility is that Smith’s, a member of the Kroger group of brands, will take Visa back, but with a new level of transparency.

Perhaps shoppers will see a three percent charge on their receipt for using a card. Such a move would pass the buck and allow the consumer to decide at an individual level whether the convenience Visa offers is worth the price, Snarr said.

“When you drive by a gas station, sometimes you’ll see the cash price and the card price,” Snarr said. “So the gas station is saying, ‘Hey, Visa costs us money. If you pay with cash, you get a discount.'”

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