WASHINGTON — Many US retailers offer the option to get cash back when you make a purchase with a bank debit card or prepaid card. But some charge a fee for that convenience.
It certainly can save you time because you don’t need to make a stop at an ATM. And it may save you from having to pay higher, out-of-network withdrawal fees if you’re not near any of your own bank’s cash machines. Bankrate recently found that the average combined cost of out-of-network withdrawal fees — which includes the fee the ATM owner charges you and the fee your bank may charge — is now a record $4.77.
But the fee some stores may charge you when you request cash back can really add up over time if you do it frequently. And consumers who live in areas with few, if any, banking services may not have much choice in the matter, according to a new analysis from the Consumer Financial Protection Bureau.
The CFPB surveyed the policies of eight major retailers as a sample pool: two dollar stores (Dollar General and Dollar Tree), two grocers (Kroger and Albertsons), two drugstores (Walgreens and CVS) and two discount stores (Walmart and Target).
Of the eight, the CFPB found that three of them—and many of their brand-name subsidiaries—charged for their cash-back service: Dollar Tree, Dollar General, and Kroger. Across these three major retailers, the CFPB estimates customers may pay $90 million a year in cash-back fees.
For example, the CFPB found that Dollar Tree charges consumers $1 for cash back at its Dollar Tree-branded stores and $1.50 in its Family Dollar stores.
Dollar General charges between $1 and $2.50, depending on the amount withdrawn and other variables.
The CFPB said Kroger has two different fee tiers at many of its brands, depending on the withdrawal amount: $0.50 for amounts of $100 or less and $3.50 for larger amounts up to $300.
One Kroger brand, Harris Teeter, said it charges $3 for cash withdrawals between $100 and its cap of $200, according to a spokesperson for that chain. This year it added a cash-back fee of $0.75 for amounts up to $100 due to an increase over time in the store’s cash transaction management costs, said the spokesperson, who added that the service fees are not an income generator for Harris Teeter.
Neither of the dollar store corporations nor Kroger replied to a request from CNN to verify their fees.
Economically vulnerable families may be hit hardest
The CFPB doesn’t regulate retailers. And it is not asserting that they are not allowed to charge fees for the cash-back services they provide, though the agency estimates the retailers’ costs for managing the transaction may be well below the fees they charge customers.
But the agency does have supervisory authority over the providers of many types of financial products and services, including most banks and credit unions. It undertook its cash-back fee survey with an eye toward those who might have the least amount of choice in paying the cash-back fees because they are limited in where they can go to get their own money.
“The geographic distribution of dollar store chains and their primary consumer base raises concerns that these fees may be borne by economically vulnerable populations and those with limited banking access,” the agency noted in its report. “Dollar stores are prevalent in rural communities, low-income communities, and communities of color — the same communities who may also face challenges in accessing banking services.”
And since the retailers set relatively low limits on how much cash you can get back, you may have to pay multiple fees to get the cash you need. For instance, if there’s a $2 fee to withdraw $50, you will pay $4 to withdraw $100, on top of the cost of something you may be buying just to access the cash-back service.
“Among the merchants sampled, Dollar General and Dollar Tree charge the highest fees for withdrawal amounts under $50. These fees combined with the constrained withdrawal amount may mean that the fee takes up a hefty percentage relative to the amount of cash withdrawn, and people may be less able to limit the impact of the fee by taking out more cash,” the CFPB said in its analysis.
To date, the agency has done other work that touches on the consequences of so-called banking deserts or near banking deserts, where people don’t have easy access to their own financial accounts where they live, despite banks being subject to laws requiring them to meet a “convenience and needs” standard.
Going forward, the cash-back fee analysis noted, the CFPB “will continue to monitor developments related to the fees consumers pay for accessing cash, and the underlying failure of banks and credit unions to adequately supply cash throughout the country in an affordable manner.”
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