Popular dollar stores and a major national supermarket chain are giving customers cash back when they make a purchase, a milestone study has revealed.
Dollar General, Dollar Tree and Kroger charge a fee for their cash back service, while competitors like Walmart, Albertsons and Target offer it for free.
According to estimates from the Consumer Financial Protection Bureau, customers at the three largest retailers pay $90 million in cash back fees each year.
Americans with lower incomes or fewer local banking options are more likely to pay these fees, the CFPB found, meaning vulnerable families could be hit the hardest.
The regulator warned that dollar stores in particular are often found in small rural communities, where there are often a limited number of branches where residents can withdraw cash for free.
Popular dollar stores and a major national supermarket chain are making customers pay cash to get cash back when they make a purchase, a groundbreaking study finds
Consumers can get cash back when they make a purchase at certain stores with a debit card or prepaid card at the checkout.
Normally, customers have to choose from preset withdrawal amounts that are displayed on the payment terminal at the time they make a transaction.
The CFPB found that Dollar Tree, which has 16,278 stores in the U.S., charges $1 for cash back at Dollar Tree stores.
At Family Dollar stores they charge $1.50.
Dollar General, which has more than 20,000 locations, charges between $1 and $2.50, depending on the amount the customer wants and other variables.
Kroger charges varying fees depending on the withdrawal amount at many of its brands, including Kroger, Ralph’s and Pick ‘n Save.
According to the CFPB, the brands charge consumers $0.50 for $100 or less in cash, and $3.50 for larger amounts up to $300.
The company also began charging cash at another brand, Harris Teeter, this year. For amounts of $100 or less, the company charges $0.75 cash, and for amounts up to $200, it charges $3 cash.
The regulator estimates that the costs incurred by retailers in managing the cashback transaction are likely to be significantly lower than the costs incurred by customers, CNN reported.
The research was conducted to find out who has the least choice when it comes to paying cashback fees, as they are limited in where they can withdraw money.
“The geographic spread of dollar store chains and their core customer base raises concerns that these costs may be borne by economically vulnerable populations and those with limited access to banking services,” the agency said.
“Dollar stores are prevalent in rural communities, low-income communities, and communities of color. These are the same communities that can also have difficulty accessing banking services.”
Americans can usually withdraw money from their own bank’s ATM for free, but local branches are closing across the US.
The CFPB found that Dollar Tree, which has 16,278 stores in the U.S., charges $1 for cash back at its Dollar Tree stores
Dollar General stores charge between $1 and $2.50, depending on the amount the customer wants and other variables, with a maximum of $40 per transaction
Kroger charges varying fees depending on the withdrawal amount at many of its brands, including Kroger, Ralph’s and Pick ‘n Save
Retailers also have low limits on the amount of cash people can get back at a time, so they may have to pay the fees multiple times to get the money they need.
For example, if you are charged $1 to get $50 back, like at Dollar Tree, you will pay $2 to get $100 back. This is in addition to the cost of your purchase to access the cash back service.
“Of the merchants surveyed, Dollar General and Dollar Tree charged the highest fees for withdrawals under $50,” the CFPB said.
‘These costs, combined with the limited withdrawal amount, can result in the costs accounting for a significant percentage of the amount withdrawn. As a result, people may be less able to mitigate the impact of the costs by withdrawing more cash.’