There's Profit Hidden in Those "Free Grocery" Promotions

(MoneyWatch)  Last month, I said it was smart when Cincinnati-based Kroger placed broad terms on its bid to pick up some of the economic stimulus money that's showing up in shoppers' hands this week. While Sears/Kmart offered a 10 percent bonus only if you handed them your whole stimulus check, Kroger shoppers could turn state or federal tax refunds into Kroger gift cards, as well. And Sears wanted a live check, leaving many who use direct deposit out of luck.

Other companies thought Kroger was smart, too. Supervalu, Wal-Mart, Safeway, and many regional store chains have since offered cash bonuses, or at least free check cashing -- a valuable thing in lower-income circles.

Now Kroger has upped the ante. Bring in $300, $600 or $1,200 -- they don't care how you get it -- and the supermarket chain will add 10 percent on a gift card until July 31. And once again, other operators are following suit.

At MorningNewsBeat.com, Kevin Coupe passes along a comment from one of his readers, who adds a factor I hadn't thought of: Those plastic gift cards are as convenient as credit cards but don't cost the merchant 5 percent in transaction fees with every swipe:

I spoke with a client today and they are going to start selling $330 cards for $300 as an ongoing promotion and it will be mutually exclusive from the stimulus checks. Look to see other retailers do this as well.

My client stated that just from the reduced credit card transaction fees they will save a lot of money. Better to have one $300 transaction than ten $30 ones.

Credit card companies are going to hate this.

Coupe's comment: "Gee, that's a shame."