On August 27, 2024, the CFPB published a new report finding 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 the CFPB, these cash-back fees are being introduced amid a wave of bank mergers, branch closures, and widespread out-of-network ATM fees, all of which have decreased the availability of free cash access for consumers.
The CFPB’s recent market analysis suggests that retailers, particularly dollar store chains, are now charging cash back fees when it used to be free. The CFPB 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 CFPB’s analysis found the following:
Cash-back fees cost consumers millions of dollars. The CFPB found that three companies charge cash-back fees, collecting over $90 million annually. The cost to merchants for processing each transaction is only a few pennies, much less than the fees consumers are charged.
Cash-back fees are levied on low withdrawal amounts. Many merchants set fixed withdrawal amounts, typically between $5 and $50. Fees on small transactions can be a significant percentage of the amount and may lead to repeat withdrawals, with consumers paying a new fee each time.
Three major retail chains in the sample charged cash-back fees. Dollar General, Dollar Tree/Family Dollar, and Kroger charge cash-back fees, unlike other companies. Dollar General and Dollar Tree/Family Dollar have the highest fees for small withdrawals ($1 or more for amounts under $50). Kroger recently added fees at Harris Teeter (75 cents for $100 cash back or less) and charges 50 cents for up to $100 cash back at other stores like Ralph’s and Fred Meyer.
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. These areas are also more likely to have fewer bank branch locations and more residents reliant on cash for daily transactions than others.
Read the CFPB’s press release here.
The full report can be found here.