Airlines, banks, phone companies — each has boosted its bottom line by hitting customers with nickel-and-dime charges for services that were once offered for free.

Add Kroger, parent of Ralphs supermarkets, to the list of businesses reaching into your pocket for a little extra cash.

Ralphs joined other Kroger chains this month in rolling out a 50-cent “convenience fee” for providing cash back at the register for debit card purchases — a service most supermarkets have offered gratis for years.

Kroger is alone among leading California supermarket operators in imposing such a fee.


I contacted Vons, Albertsons, Pavilions, Trader Joe’s, Safeway, Lucky, Stater Bros., Gelson’s and Whole Foods. Each said they had no cash-back fee and no plans to introduce one.

“Our cash-back program is designed to save customers money vs. ATM fees, and to give them a safer and more convenient way to get the cash they need,” said John Votava, a Ralphs spokesman.

“Unfortunately, we cannot continue to offer this service for free due to the high demand and processing and labor costs,” he told me.

OK, let’s parse that.


High demand? Consumers have been receiving cash back at supermarkets since the 1980s, when the British retail chain Tesco realized providing cash back reduced the amount of hard currency on hand and the expense of transporting money to a bank. Over the last 30-plus years, this has served the interests of both consumers and merchants.

It’s possible demand for cash back has risen incrementally as banks’ ATM fees have gone up, but retail industry analysts say there’s no evidence to suggest consumers are abandoning bank machines in favor of supermarket checkout lines — just the opposite, in fact.

A recent study from Mercator Advisory Group found that consumers were more comfortable than ever banking via ATM, although most make sure they avoid fees by not using out-of-network machines.

As for labor costs, who are we kidding? The transaction is electronic and largely automated, requiring only a few seconds of a cashier’s time.


On the other hand, although a 50-cent fee for such a routine transaction might be small potatoes on an individual basis, over an entire customer base you’re talking big bucks.

Votava said that, in 2018, Kroger stores, including Ralphs, provided more than 150 million cash-back transactions.

At 50 cents a throw, that translates to at least $75 million in extra revenue for the company.

Seventy-five million. And if anyone thinks Kroger spends $75 million a year on cash-back transactions, there’s a cleanup on Aisle 3 they need to attend to.


Votava didn’t respond to my request for information about how much it cost Ralphs to handle those transactions. Federal law caps debit card “swipe fees” at 21 cents, meaning that’s the maximum banks and financial firms can charge merchants to make a sale go through. Banks typically charge businesses less for debit card transactions than for purchases by credit card.

Ed Mierzwinski, senior director of the federal consumer program for the U.S. Public Interest Research Group, called Kroger’s probable $75-million windfall “a nice chunk of revenue, likely well above cost.”

Sally Greenberg, executive director of the National Consumers League, said some shoppers may think twice before bringing their business to a supermarket that charges a cash-back fee.

“What’s next?” she asked. “If I pay with a $20 bill, will they charge me for making change?”


Kroger’s cash-back fee is oddly timed, coming, as it does, amid a major marketing campaign in which the company says it’s “celebrating its love of all customers and associates.”

As I wrote recently, Kroger’s Fresh for Everyone campaign is unusually touchy-feely for a rebranding exercise, aimed at elevating the “joy” and “fun” of shopping for food.

All I can say is that when you announce you’re celebrating your love for customers, and just a few weeks later you launch a $75-million cash grab, that’s some tough love indeed.

But it bears repeating: Kroger is by no means alone in recognizing there’s more money to be made in strong-arming customers than in offering free perks aimed at enhancing customer satisfaction.


Think ATM fees. When U.S. banks introduced the automated technology in the 1970s, they charged few if any fees for use of the machines. Banks wanted people to become comfortable with self-service. These days, ATM fees can top $4 per out-of-network transaction.

A recent study by the Federal Reserve Bank of Cleveland observed that banks traditionally made their money from charging interest on loans. Now, it said, more than a third of banking revenue “comes from so-called ‘noninterest income,’ which includes items such as overdraft fees and ATM charges.”

Airlines are the poster child for gratuitous fees. Most impose extra charges for baggage, seat assignments, legroom, snacks and even blankets — all things that once came free of charge.

Carriers now make about $5 billion a year from baggage fees alone, according to the U.S. Department of Transportation.


And don’t forget our friends in the phone and cable industries, which never met a fee they didn’t like. As I’ve noted previously, AT&T last year more than doubled its monthly “administrative fee” to $1.99 from 76 cents, raising an extra $800 million in annual revenue.

Meanwhile, Consumer Reports recently reported that fees represented more than $37 of average monthly cable bills, or about $450 in annual charges per customer.

“Companies are realizing that these can be substantial sources of revenue,” said Dipayan Biswas, a marketing professor at the University of South Florida.

Anthony Dukes, a marketing professor at USC, said businesses were frequently on the lookout for ways to capitalize on customer relationships.


“They want to capture the incremental value they offer through these services,” he explained. “For example, the fact that I can have cash back when I buy my groceries has value to me because I do not have to make an extra stop at the ATM. Ralphs wants a piece of this value.”

In other industries — airlines, telecom — the typical pattern is for one company to inflict a less-friendly charge on customers, with competing firms quickly jumping in with their own me-too fees.

That doesn’t seem to be the case here. Not one supermarket chain I contacted said they were studying Kroger’s move and mulling over a similar policy.

The sense I got was that the rest of the industry is a bit baffled by Kroger slapping customers with a fee for something that’s been taken for granted by supermarket shoppers for decades. In a highly competitive business, that could be seen as an insult by some shoppers.


So we’ll just nod politely as Ralphs insists it merely wants customers to have a “more convenient way to get the cash they need.”

Even though there are 75 million reasons to think that’s a load of hooey.