When Frank McNamara created a small card program for use at 14 restaurants in NYC, it marked the birth of Diners Club… the world’s first credit card.
That was 1950 and around 200 cards were issued. Today – over 60 years later – the number of cards in circulation feels to be about the same, right?
While Diners Club is still semi-popular in some markets (i.e. Latin America), the Diners Club US division has been on a downward spiral for decades.
The thing no one wants…
For starters, let’s talk about how this company operates…
- It operates as a franchise – each geographic market is independently owned.
- In 1981 Citi scooped up some of the largest franchises (incl. North America, Germany, and Switzerland) as well as Diners Club International, which is the actual owner of the name.
- In 2008, Discover paid $165M to buy Diners Club International from Citi. They did this because they wanted the international payment network, not because they gave a crap about issuing those cards (which is why they didn’t buy Diners Club USA from Citi, the division that issues cards in the United States).
- In 2009, Citi sold off Diners Club US/Canada to Bank of Montreal (BMO).
- From November 2011 and beyond, all Diners Club cards in the USA are being issued and managed by BMO.
With the transition to BMO come some drawbacks, including…
- American Airlines dropped from the rewards program for US cardholders.
- Diners Club used to have no pre-set limits (like American Express charge cards) but now, they have a definitive and exact spending limit like most credit cards.
- A reported $35 annual charge for secondary cards (though I have not personally confirmed this myself).
- Because of the previous affiliation with Citibank, some Citigold customers got their Diners Club fee-free. Now it sounds as if they will have to pay the annual fee like everyone else.
Equally disappointing is something that is NOT changing, at least not yet…
- There’s still a foreign transaction fee. Being that it’s a card that’s primarily tailored to travelers, it’s surprising they’re still getting away with this (when there are many other cards with similar fees nowadays, like the Chase Sapphire Preferred, that charge 0% foreign transaction fees).
Will cardholders stick around or not?
Forums are buzzing about long time cardholders who have cancelled their card due to one or more of the changes. That being said, the US Diners Club charge card still offers some compelling reasons to keep it, considering the somewhat reasonable $95 annual fee:
- Club Rewards to Airline Miles
Even though AAdvantage is axed, there are still a number of 1:1 conversion opportunities which give AmEx and their Membership Rewards a run for their money:
- Primary Rental Coverage
One of the biggest complaints I hear about the premium AmEx charge cards is that they only offer secondary coverage on rentals. The Diners Club card will continue to include primary coverage (which some have cited as the only reason they still keep the card).
- Chip and PIN
US cardholders will finally get the chip and PIN, a much needed feature for credit card usage abroad. That being said, other banks are beginning to roll this out on some of their cards too, so the cachet of a chip card will be short-lived.
- Roadside Assistance
You already get this on the Gold American Express. Now you will have it on Diners Club charge card, too.
Ultimately, whether Diners Club sticks around or goes the way of the dinosaurs I think will depend on whether or not BMO puts some marketing muscle behind them. Because truth be told, D.C. is not as much of a joke as you may think – being that they operate on the MasterCard network in the US, it means they actually have good acceptance.
Last by not least… BMO if you read this, it would be nice to see Diners Club actually have something to do with dining! As it stands today, that’s not the case. Perhaps a 5% discount program at partner restaurants, or at the very least, give 2x points for dining purchases like other travel cards do.
My recommendation for 2016?
It’s time to ditch Diners. A good replacement I highly recommend is the Sapphire Preferred: