.svg)
A new report from the Consumer Financial Protection Bureau (CFPB) reveals that Americans are increasingly paying significant fees when requesting cash back at large retail chains using debit or prepaid cards.
The CFPB report, published on August 27, highlights that this trend is particularly pronounced at dollar store chains, where consumers are now being charged for a service that was once free.
The report comes as many communities across the country experience reduced access to traditional banking services, driven by bank mergers and the closure of local branches.
These changes have left many Americans, particularly those in rural areas and low-income communities, with limited options for free cash withdrawals. As a result, retail stores have stepped in to fill the gap, but often at a cost to consumers.
“Retail chains have historically offered cash back on debit card purchases for free, but our findings indicate that this is changing, especially at dollar stores,” said CFPB director Rohit Chopra.
“In small towns where local banks have disappeared, people are now facing fees to access their own money. This shift is creating a competitive environment where retailers can charge for cash-back services.”
Report findings
The CFPB’s report analysed practices at eight major retail companies: Dollar General; Dollar Tree/Family Dollar; Kroger; Albertsons; Walgreens; CVS; Walmart; and Target.
The findings reveal that three of these companies — Dollar General, Dollar Tree/Family Dollar and Kroger — are charging customers for cash-back transactions.
The fees, while seemingly small, add up to millions of dollars in additional costs for consumers, the CFPB has said.
The regulator estimates that the three retailers charging for cash-back services collect more than $90m annually from these fees.
This significant sum stands in stark contrast to the minimal cost of processing such transactions, which is estimated to be just a few cents.
Consumers, however, are charged considerably more, leading to a substantial financial impact.
These fees are often applied to small cash-back amounts, where they represent a large percentage of the withdrawal.
This pricing structure can encourage consumers to make repeated withdrawals, each time incurring a new fee, and the cumulative effect of these charges can significantly erode the financial well-being of individuals who rely on cash-back services.
The impact of these fees is felt disproportionately by vulnerable communities, particularly in rural, low-income areas and communities of colour.
Dollar stores, which are widespread in these regions, are the primary culprits in imposing these charges, and with fewer banking options available, residents in these areas are often forced to rely on cash and, by extension, cash-back services that now come with a fee.
Among the retailers analysed, Dollar General, with more than 20,000 stores nationwide in the US, charges between $1 and $2.50 for cash back, with a maximum withdrawal limit of $40 per transaction.
Dollar Tree and Family Dollar, which together operate more than 16,000 locations, impose fees ranging from $1 to $1.50, with a $50 maximum withdrawal.
Kroger, which operates various brands including Harris Teeter and Fred Meyer, charges 50 to 75 cents for cash-back amounts up to $100, with higher fees for larger withdrawals.
No action taken ... yet
In the conclusion of its report, the CFPB said that it is concerned that reduced access to cash undermines the resilience of the financial system and deprives consumers of a free, reliable and private means of engaging in day-to-day transactions.
“The CFPB will continue to monitor developments related to the fees consumers pay for accessing cash, and work with agencies across the federal government to ensure people have fair and meaningful access to the money that underpins our economy,” the regulator said.
Often viewed as one of the more interventionist agencies in the US due to action taken on topics such as credit history data and buy now, pay later (BNPL) agreements, the CFPB may end up stepping in here, particularly due to the hit on consumer’s pockets.
In Europe, the picture is vastly different. In the UK, for example, the government made changes to the law in 2021 to allow people to request cash back from their local store without needing to make a purchase or pay a fee.
In the EU meanwhile, the proposed update to the revised Payment Services Directive (PSD3) introduces two key measures to improve access to cash.
First, it exempts retailers from licensing requirements when offering cash withdrawals without a purchase.
Second, PSD3 defines "ATM deployers" as operators of ATMs that do not service payment accounts. These ATM deployers will remain exempt from PSD3 licensing but must now register and provide specific documentation.
The regulation also mandates greater transparency on all charges, requiring that users are informed of fees both before and after completing a withdrawal.
