WASHINGTON-- Americans are paying tens of millions of dollars in fees to access their own money when getting “cash back” at large retail stores when making a purchase with a debit or prepaid card, according to a new report from the CFPB.
“These cash-back fees are occurring against the backdrop of bank mergers, branch closures, and prevalence of out-of-network ATM fees that have reduced the supply of free cash access points for consumers,” the Bureau said.
In releasing its findings, the CFPB noted getting cash back at a store is a common way for people to get cash.
A ‘Convenience,’ But…
“While making a purchase at a retailer that offers the service, people can get access to their money by requesting cash back at the register,” the Bureau said. “Retailers typically have pre-set withdrawal amounts, including maximum withdrawal limits. Consumers benefit from having the cash, and merchants benefit by having a way to attract consumers and reduce their cash-handling costs.
“While this was often a convenient offering, getting cash at a store is sometimes the only option for people,” the CFPB continued. “Many retailers are filling a void in providing access to cash, as some communities lack access to a local bank. While some retailers have typically offered cash back for free, the CFPB’s recent market scan suggests that this is changing, particular at dollar store chains.”
Eight Large Chains Surveyed
The Bureau said it sampled eight large retail companies (Dollar General, Dollar Tree/Family Dollar, Kroger, Albertsons, Walgreens, CVS, Walmart and Target) and assessed their practices for charging cash-back fees.
The Findings
The CFPB reported it found:
- Cash-back fees cost consumers millions of dollars. “The CFPB found that three companies in the sample charge cash-back fees and estimates that they collect over $90 million in fees annually. The CFPB also estimates that the marginal cost to merchants for processing each transaction may be a few pennies, compared to the much higher fees these retailers charge consumers.”
- Cash-back fees are levied on low withdrawal amounts. “Many merchants pre-determine the withdrawal amount options in a single transaction, commonly between $5 and $50. Levying a fee on small transactions may constitute a hefty percentage of the withdrawal amount, and it may also induce repeat withdrawals, with consumers incurring a new fee each time.”
Cash-Back Fees
According to the report, three major retail chains in the sample charged cash-back fees.
“Dollar General, Dollar Tree/Family Dollar, and Kroger charge fees for this service while the other companies did not. At Dollar General and Dollar Tree/Family Dollar, cash-back fees for small withdrawal amounts are the highest in the sample ($1 fee or more for cash-back amounts under $50),” the CFPB said. “Kroger, the country’s largest grocery chain, recently announced new charges at their Harris Teeter stores (75 cents for $100 cash back or less), and charges 50 cents for up to $100 cash back at their other brand stores such as Ralph’s, Fred Meyer, and others.”
‘Disproportionate Cost’
The CFPB said consumers with lower incomes or fewer banking choices encounter cash-back fees disproportionately.
“Dollar stores are frequently located in small rural towns, communities of color, and low-income communities,” the CFPB said. “These areas are also more likely to have fewer bank branch locations and more residents reliant on cash for daily transactions than others.”
The CFPB report can be found here.