CNN
—
Many retailers in the U.S. offer the option to get cash back when you make a purchase with a debit or prepaid card, but some charge a fee for this convenience.
You can definitely save time by not having to stop at an ATM. And you may not have to pay higher fees for out-of-network withdrawals if you’re not near an ATM from your own bank. Bankrate recently found that the average total cost of out-of-network withdrawals — including the fee the ATM owner charges you and the fee your own bank may charge — is now at a record high of $4.77.
But the fee some stores charge when you request cash back can really add up over time if you do it frequently. And consumers who live in areas with little or no banking services may not have much choice in the matter, according to a new analysis from the Consumer Financial Protection Bureau.
The CFPB examined the policies of eight major retailers as a sample: two dollar stores (Dollar General and Dollar Tree), two grocers (Kroger and Albertsons), two drugstores (Walgreens and CVS), and two discount retailers (Walmart and Target).
Three of the eight retailers – and many of their subsidiaries – charged fees for their cash-back service, according to the CFPB: Dollar Tree, Dollar General and Kroger. The CFPB estimates that customers of these three major retailers pay $90 million annually in cash-back fees.
For example, the CFPB found that Dollar Tree charges consumers $1 for cash back at its Dollar Tree brand stores and $1.50 at its Family Dollar stores.
Dollar General charges between $1 and $2.50, depending on the amount withdrawn and other variables.
According to the CFPB, Kroger charges two different fee tiers at many of its brands, depending on the amount of the withdrawal: $0.50 for amounts of $100 or less and $3.50 for larger amounts up to $300.
One Kroger brand, Harris Teeter, charges $3 for cash withdrawals between $100 and $200, according to a spokesperson for the chain. This year, a $0.75 cash-back fee was introduced for amounts up to $100 because the store’s cash transaction management costs have increased over time, said the spokesperson, who added that service fees are not a source of revenue for Harris Teeter.
Neither the dollar store companies nor Kroger responded to a request from CNN to confirm their fees. However, a Dollar Tree spokesperson said in an email, “Dollar Tree and Family Dollar offer cash back as a convenient service to our customers. Shoppers who choose to take advantage of our cash back offer pay a clearly stated fee, which in turn helps offset the various costs we incur in offering this helpful service.”
The CFPB does not regulate retailers, nor does it say that retailers cannot charge fees for the cashback services they offer. However, the agency estimates that retailers’ costs for processing the transactions are far less than the fees they charge customers.
But the agency has regulatory authority over providers of many types of financial products and services, including most banks and credit unions. It conducted its cash-back fee study with an eye on those who may have the least choice in paying the cash-back fees because they have limited options for getting 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 people with limited access to banking services,” the agency noted in its report. “Dollar stores are prevalent in rural communities, low-income communities, and communities with people of color – the same communities that may also have difficulty accessing banking services.”
And because retailers set relatively low limits on the amount you can get back, you may have to pay multiple fees to get the cash you need. For example, if you have a $2 fee to withdraw $50, you’ll pay $4 to withdraw $100. Plus, there’s the cost of the item you might buy just to get access to the cashback service.
“Among the merchants studied, Dollar General and Dollar Tree charge the highest fees for withdrawals under $50. These fees, combined with the withdrawal limit, can result in the fee being a high percentage of the amount withdrawn, and people may be less able to limit the impact of the fee by withdrawing more cash,” the CFPB said in its analysis.
So far, the agency has done other work addressing the consequences of so-called banking deserts or near-banking deserts, where people do not have easy access to their own bank accounts where they live, despite banks being legally required to meet a certain “convenience and need standard.” Going forward, the cash-back fee analysis said, the CFPB “will continue to monitor developments related to the fees consumers pay to access cash, as well as the underlying failure of banks and credit unions to provide sufficient and affordable cash across the country.”
This story has been updated with additional developments and context.
