Visa expands $10 free grocery offer for shoppers hit by Walmart's Visa ban

Visa and Walmart are engaged in an all-out battle over credit card fees. And it appears neither side is close to backing down.

"No one's blinking," says McMaster University business professor Marvin Ryder. "They just keep upping the ante."

Visa is the latest to strike. It's offering its customers in Thunder Bay a $10 rebate if they use their card to spend $50 or more at a grocery store.

Of course that store can't be Walmart. The big box giant stopped accepting Visa cards at its three Thunder Bay locations in July.

The month before Walmart announced it would roll out a Visa ban at is more than 400 Canadian stores to protest what it calls "unacceptably high" fees charged by the credit card company.

Visa won't confirm that its latest offer takes direct aim at Walmart. But its promotions lately have focused on the two regions where Walmart has now axed the credit card.

Last week Visa started offering its customers in Manitoba the same rebate deal on groceries purchased anywhere but Walmart. The retail giant dropped Visa from its 16 stores in the province last month.

Striking 'where it actually hurts'

When the credit card ban first hit Thunder Bay, Visa popped up with a similarly generous deal for locals: a $25 online gift card for customers who used their Visa to buy $75 worth of groceries.

Food distribution and policy expert Sylvain Charlebois believes it's no accident Visa has launched a food fight.

The Dalhousie University professor says Walmart is on a quest to become Canada's top grocer. The retailer is already gaining ground with its plan which would bring more habitual shoppers to its stores, he says.

"Visa is aiming at Walmart where it actually hurts — its food retailing strategy," says Charlebois. "It speaks to how critical the situation is for [Visa]."

Walmart wants Visa to lower the fee it charges for credit card purchases. The retailer claims it currently pays more than $100 million in credit card fees annually in Canada.

But Charlebois says if Visa concedes to Walmart, other retailers will also demand a lower rate.

"You can imagine how many companies would line up to get the same deal."

McMaster's Ryder believes that if Visa gives in to Walmart Canada, then its much bigger U.S. counterpart — American Walmart — will come looking for the same discount.

"In the U.S., it's not a hundred million dollars in credit card fees, it's a billion dollars," he says.

"The high stakes aren't in Canada, the high stakes are in the States," concludes Ryder. "And Visa, knowing what they're going to do, says, 'We're not backing down.'"

Walmart also doesn't appear to be backing away. So Ryder's prognosis? "It's going to get bigger and bigger, deeper and deeper. You're kind of watching the cold war play out here."

Next battle tactic?

Visa would not reveal its next move. "We periodically conduct promotions to encourage Visa cardholders to use their cards in new and different places," said spokeswoman Carla Hindman in an email to CBC News.

Walmart also won't say where it will strike next in it's rolling Visa ban. But the company is adamant it's sticking to the master plan. "There's no change in what we said we're going to do," spokesman Alex Roberton told CBC.

Some industry experts had speculated that Walmart's battle was sputtering because it has only targeted two regions so far since it announced its cross-Canada ban five months ago.

But Walmart says dropping Visa across the country takes time. "It's quite a complex undertaking. There's technology changes that need to be made, there's training of associates," said Roberton.

He added that Walmart needs time to spread the word.

"We want to make sure customers are prepared and don't show up at the cash with a cartload of groceries and two kids, and don't have the right form of payment."

Both Walmart and Visa say they're hopeful a deal can be reached. But if Walmart does permanently drop Visa from all its stores, it won't be the first major retailer to shun the credit card.

Neither Loblaw's discount grocer No Frills nor Costco warehouses in Canada accept Visa.