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By Patrick Thomas and AnnaMaria Andriotis 

A second unit of supermarket chain Kroger Co. said Friday that it will stop accepting Visa Inc. credit cards at its 142 supermarkets and 108 gas stations across seven states.

Kroger's Smith's Food & Drug said it would stop accepting Visa credit cards on April 3. It will continue to accept Visa debit cards. Smith's operates stores in Utah, Nevada, New Mexico, Wyoming, Idaho, Montana and Arizona.

The company said the card ban was due to excessive network and interchange fees that Visa and its issuing banks charge retailers, which drive up food prices for its customers. Smith's stores will continue to accept other forms of payment, including Mastercard Inc., Discover Financial Services and American Express Co. credit cards.

A Visa spokeswoman said in an email that the card company provides significant value to merchants, including increased sales, security and fraud protection and quicker checkouts. The company continues to work toward a resolution, she added.

"It is unfair and disappointing that Kroger is putting shoppers in the middle of a business dispute," the spokeswoman said.

Smith's Food & Drug pays more in Visa fees compared with other card companies, said Kroger Chief Financial Officer J. Michael Schlotman. Those fees have been rising, cutting into the chain's profit margin, he said.

Customers also have been shifting more of their spending to rewards credit cards, which often carry higher fees. Kroger has seen a 54% increase in rewards card usage over the past three years, Mr. Schlotman said in an interview.

In July, Kroger said it would stop accepting Visa credit cards at 21 stores and five gas stations in California because of the card giant's fees. Foods Co supermarkets stopped accepting Visa credit cards on Aug. 14.

"It's obvious that we're serious about trying to rein in operating costs where we can," Mr. Schlotman said. When asked if other Kroger stores could follow suit, he said: "There's nothing that's off the table."

Card fees have been a long-running point of tension between merchants and card companies.

The Wall Street Journal previously reported that Visa and Mastercard, the two biggest U.S. card networks, were preparing increases to certain existing fees, effective this April. Fees that Visa charges financial institutions for processing card payments on behalf of merchants are also due to rise.

Write to Patrick Thomas at Patrick.Thomas@wsj.com and AnnaMaria Andriotis at annamaria.andriotis@wsj.com

(END) Dow Jones Newswires

March 01, 2019 13:49 ET (18:49 GMT)

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