Dinners Club Alliance with MasterCard
 

Diners Club to Expand Its Network

Alliance With MasterCard
To Boost Number of Places
Where the Card Is Welcome
By JANE J. KIM
DOW JONES NEWSWIRES
April 27, 2004; Page D2

NEW YORK -- Consumers who use Diners Club, a high-end charge card known for its flexible rewards program, soon will be able to rack up more points by taking advantage of a greatly expanded merchant network.

Diners Club, a unit of Citigroup Inc., said a planned alliance with MasterCard International would allow cards issued by the Diners Club North America business to carry the MasterCard brand and be accepted at all merchant locations world-wide that accept MasterCard credit cards. In addition, Diners Club cards issued by Diners Club International franchises around the world would carry the MasterCard identifier on the back of the card, indicating acceptance at merchants in the U.S. and Canada that accept MasterCard credit cards.

The alliance would nearly triple the number of places where card members could use the Diners Club card, which is accepted at about 8.4 million merchants. MasterCard is accepted at more than 22 million merchants world-wide. The partnership is an extension of MasterCard's relationship with Citigroup, one of the largest issuers of MasterCard products, including American Airlines' AAdvantage card.

Cardholders have abandoned Diners Club in droves in the past decade as the number of merchants who accepted the card declined. Still, a core group remained because the card allowed them to exchange Diners Club rewards points for miles with any major U.S. airline, something you can't do with American Express Co.'s credit card. Now that Diners Club will be accepted in even more places than American Express, thanks to the new partnership with MasterCard, Diners Club could see a large number of miles-seeking people push its card back up to the top of their wallets.

Diners Club noted that there are currently no changes to the Diners Club products or programs.

The move is a "huge boost" for Diners Club, since it takes a brand with a limited distribution network and more of a private-label status and gives it a national-brand status, said Robert Hammer, an industry consultant in Thousand Oaks, Calif.

For MasterCard, the partnership will give the company an opportunity not only to pick up Diners Club's volume but also the chance to "siphon off the volume that would have gone to cards where Diners was not accepted," such as American Express and Visa, said Robert McKinley, chief executive of CardWeb.com.

The Diners Club card also could attract more businesses and frequent travelers. The Diners Club program is widely viewed as one of the more flexible rewards programs because of its partnerships with more than 20 major airlines, including AMR Corp.'s American, UAL Corp.'s United and Delta Air Lines. (In contrast, American and United don't participate in American Express's Membership Rewards program.) In addition, the card also has a longer grace period than most so-called charge cards, giving individuals and small businesses two billing cycles to pay off their balances.

"You've got a formidable product that could put some heat on American Express," Mr. McKinley said. Indeed, the move could possibly be seen as a defensive measure, after American Express announced a co-branding deal with credit-card giant MBNA Corp. in January, since there was a sense that other issuers were considering adding American Express cards to their portfolio, he added.

Although the Diners Club card will be accepted at more places, it could remain largely a "travel and entertainment card" used primarily by business travelers because of its $95 annual fee, especially as more firms roll out low- or no-fee rewards programs, said Randy Petersen of InsideFlyer magazine.

Given Citigroup's deep pockets, the company is sure to make a big marketing splash behind the new product and could launch new variations of the Diners Club product, ranging from an entry-level version to a premium card, Mr. McKinley added. In fact, consumers might be more open to the idea of a charge card amid the hassles and increasing fees of owning a credit card.

"It's good news for MasterCard in the market-share wars...and reaffirms their new leading position," said Stu Feldstein, president of SMR Research Corp., a financial-services market research firm in Hackettstown, N.J. At the end of 2003, MasterCard's share of the number of accounts of general-purpose cards was 43.7% compared with Visa's 41.4%, while its share of the dollar amount of receivables was 43.8%, slightly above Visa's 43.1%, according to SMR's research. With 42.6% of card transactions, however, Visa still leads over MasterCard's 33.8% share.

Wow .. thats exciting news. Thanks.

-David

This would have been phenomenal news...had DC not neutered their product last year when they implemented a feee structure for converting DC points to airline mile.

DC - always the bridesmaid, never the bride. DC card got dumped by a whole lot of people when they added this fee last year.

Day late, dollar short also comes to mind.

Ultimately, this card (DC and/or a DC/MC hybrid) will never be the "card of choice" for high volume chargers because of their inherent ball and chain feature of the DC...not known to almost any other program.

Even though I love flying AA - and have never flown SWA - the idea of a SWA domestic ticket to give away for every 12K charged (annual DC-SWA promo) is very enticing.

Yes - this is very good news for DC.

Couples with occasional lounge access when I am not flying an airline I have status on - the DC is turning out to be a very good deal!

This is fantastic news. I may get more work than I bargained for when I volunteered to moderate this sleepy forum! :D

fees for converting
 

"This would have been phenomenal news...had DC not neutered their product last year when they implemented a feee structure for converting DC points to airline mile."

JUST WONDERING...

I have stopped using DC since DC charged fees for converting points. Is there anyone due to this reason?

Is there anyone... using it less, you mean? Yeah, me -- I keep it around for car rentals, mainly, and I'll be lucky to break $5k in charges this year.

This MC alliance is the first sign in years that Citibank isn't actively trying to murder Diners Club. They've raised the annual fee, imposed that redemption charge for FF account transfers, dropped most partners from the Miles-to-Points program, introduced a laughable "Carte Blanche" high-end variant and a pointless "Montage" credit card (I think Montage has been snuffed, actually)... the list of value dilutions is endless.

The program's main saving grace in recent years has been a British Airways promotion in the summer months that permitted Club Rewards::BA Executive Club transfers at a straight 1:1 rate (normally it's 2:1). But even that deal is dead for this year -- in its place is a compromise 1.5:1 rate transfer offer that ends in June.

Pathetically, DC keeps publishing little lists of retailers and chain restaurants that allegedly have agreed to accept DC ("Hey, we're in Bennigan's now!" etc.). But most retail people seem to think it's a gas card or something -- many have never seen it before. Other places that display the DC sticker in the window actually reject it when you try to use it. I've never had such trouble trying to use a card.

- raising the annual fee does dilute value, but "only" by $15/year.

- imposed redemption charge also dilutes, but it's only 4.75 percent of the value of the miles or $23.75 per 25k miles transferred. This adds only .095 cents to the cost of a mile.

- As far as I know, Delta was the only one to drop out of the Miles-to-Points program.

- The Carte Blanche and Montage cards have nothing to do with the value of the main Diners Club card, unless you count the 3000 point, no fee bonus they offered to Diners Card holders to open a new Montage account.

Not really too bad compared to the devaluations of other programs like (e.g. Hilton, BA)

IMHO, the small fee increases did little drive people away. I would think the article had it right when they blamed it on a lack of merchants accepting the card. Of course the reduction in the annual BA promo wasn't going to help moving forward ...

I'm almost positive that was engineered by BA - I'm sure DC would have loved to continue at the 100% bonus rate. And it's still the only way to get a 50% bonus for airlines miles - IIRC, Delta (NW?) was only 25%.

When I signed up, I was happy with 1 mi/$, 'cuz I didn't know better in those days, so any sort of bonus is a plus for me.

dhacker -- you have a point. While I have long used Diner's for car rental and airline charges I don't think I have ever "stopped by" this forum before . . . and I am on daily with the NWA and Hyatt forums. I had given up my AE card until it was needed for Hyatt's Faster Free Nights promo a year or so ago. Other than that Diner's, Visa and MC certainly cover enough that I can chuck my AE card, again. I have been very happy with Diner's service, and I like to "bank" those miles/points.

thank god
 

finally... this is my company card, and I find I can't use it save for travel... but this is good news... any target on a start date?

New DC member
 

Well, I don't remember how it was in the "old" days because I was not a member, but since the $ took a tumble overseas and I started vacationing stateside, it was a no brainer for me to pick up a DC card.

5 days of a car rental easily pays for the $95 annual fee because of the Primary Insurance Coverage provided re the CDW/LDW, and I would much prefer getting something -- the DC card -- for my payment, instead of nothing to show for the same "payment" to the car rental company which results in nothing in the end.

Further, although the wife likes AMEX MR, I don't have it, so this provides me with greater flexibility for points/miles redemptions.

Would I like less of a fee for redemptions and would I like a less expensive annual fee -- of course, but it does not appear to be in the cards.

Re the BA miles promo, I don't fly them, I have a fair amount of AA miles, we have a ton of CO miles, and as I have said above, the $ is in the toilet, so am not planning to cross the pond any time soon.

The alliance with MC will be fantastic!

Way to go DC!

The utility of Diners is a big YMMV. I have used it for the past three years as my primary biz expense card; 95%+ of my biz-related transactions go to Diners.

I might find once a month that I can't use the card. Even in Little Rock.

In Brazil, Diners Club and MasterCard have been accepted at all of the same merchants for as long as I can remember. Neither card bears the other's logo, but they both use exactly the same point-of-purchase terminals. A few VISA terminals used to accept American Express, but this is no longer the case. Nearly every big merchant has three terminals: one for DC/MC, one for VISA, and one for AMEX. In Chile, Diners, Master, and VISA all seem equivalent, with AMEX separate from the rest.

I'd have to think about other countries, but the union of Diners Club with Master Card is not a new idea!

Only for US members...
 

Good news: I'll be able to use my DC card in the US without hearing the never-seen-this-card-before comments :)

This partnership is only for "Citibank US" issued cards, so no change for us, european members.

In Europe, Diners Club is managed by franchisees, and MasterCards are issued under licences of Europay International. The market situation of DC vs. MC vary from country to country. Difficult to say if this partnership is possible there...