Three of the country’s largest retailers – Dollar General, Dollar Tree and Kroger – charge fees to customers who ask for “cash back” at checkout. According to the Consumer Financial Protection Bureau, these fees amount to more than $90 million a year.

Many retailers offer a cashback option to consumers who pay for their purchases with a debit or prepaid card.

But charging a fee for this service could be an “exploitation” of certain customers, especially those who live in so-called banking deserts and do not have easy access to a bank branch or free cash withdrawals, according to a CFPB analysis released Tuesday.

This dynamic tends to disproportionately impact rural communities, low-income earners and people of color, according to the CFPB.

Not all retailers charge cashback fees, which can range from $0.50 to more than $3 per transaction, according to the agency, which has cracked down on financial institutions charging so-called “junk fees” in recent years.

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Five of the eight companies surveyed by the CFPB offer free cash back.

They include grocer Albertsons, drugstore chains CVS and Walgreens, and discount retailers Target and Walmart. (Kroger has proposed a $25 billion merger with Albertsons in 2022, but that deal is still pending in court.)

“Cash refund fees are just another small amount that adds up,” says Adam Rust, director of financial services at the Consumer Federation of America.

“It makes it harder and harder to get through,” he said. “It’s thousands of little cuts all at once.”

A Dollar General spokesperson said cash back can help customers save money compared to “alternative, non-retail options” such as cashing checks or ATM fees.

“While Dollar General is not a financial institution, it offers cash back options in our more than 20,000 stores nationwide as a service to customers who may not have convenient access to their primary financial institution,” the spokesperson said.

Spokespeople for Kroger and Dollar Tree (which operates Family Dollar and Dollar Tree stores) did not respond to CNBC’s requests for comment.

Kroger, Dollar General and Dollar Tree were the fourth-, 17th- and 19th-largest U.S. retailers by revenue in 2023, according to trade group National Retail Federation.

The practice of charging fees for cashback is relatively new, explained Rust.

For example, in 2019, Kroger Co. introduced a fee of $0.50 on cash backs of $100 or less and $3.50 for amounts between $100 and $300, according to the CFPB.

This included brands such as Kroger, Fred Meyers, Ralph’s, QFC and Pick ‘N Save.

However, Kroger Co. began charging a cashback fee for its Harris Teeter brand in January 2024: $0.75 for amounts of $100 or less and $3 for higher amounts up to $200, the CFPB said.

Retail cash withdrawals are the second most popular way to obtain cash, accounting for 17% of transactions between 2017 and 2022, according to an analysis of the CFPB’s Diary and Survey of Consumer Payment Choice.

ATMs were the most popular at 61%.

However, according to the CFPB and consumer advocates, there are some key differences between retail and ATM withdrawals.

For example, due to the relatively low caps on cashback amounts, it is difficult to limit the impact of fees by spreading them across larger withdrawals, it said.

The average cash withdrawal at retail stores was $34 between 2017 and 2022, while the average ATM withdrawal was $126, according to the CFPB.

But for consumers living in a banking desert, retail may be the only sensible way to get cash, experts say.

More than 12 million people – about 3.8 percent of the U.S. population – will live in a banking desert by 2023, according to the Federal Reserve Bank of Philadelphia.

This number has increased from 2019, when it was 11.5 million, or 3.5% of the population, the report says.

Generally speaking, a banking desert is any geographic area without a local bank branch. These people don’t live within 10 miles of a physical bank branch. The rise of digital banking, accelerated by the Covid-19 pandemic, has prompted many banks to close their branches, says Lali Shaffer, a payments risk expert at the Federal Reserve Bank of Atlanta.

These deserts “could harm vulnerable populations” who already have less access to online and mobile banking, she recently wrote.

Retail representatives believe that banks are responsible for cashback fees.

Merchants must pay fees to banks when customers use a debit or credit card to make purchases. These fees can range from 2 to 4 percent of a transaction, for example.

Because the cashback amount is included in the total transaction price, merchants also pay banks fees for each cash consumers request.

The “overwhelming majority” of retailers do not charge a fee for cash back and therefore accept financial losses by offering the service to their customers for free, says Doug Kantor, general counsel at the National Association of Convenience Stores and a member of the executive committee of the Merchants Payments Coalition.

“The banks have failed many of these communities and are now fleeced by retailers just because they accept their credit cards or give them cash,” he said.

But consumer advocates say this calculation overlooks the benefit retailers get from offering cashback.

“You’d think they’d see this as a free way to attract customers: They’re coming into the store because the bank branch isn’t there,” Rust said. “Instead, they’re just charging another junk fee.”