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The world’s oldest credit card, Diners Club, is joining forces with the world’s newest major credit card, Discover. Citigroup has sold Diners Club International to Discover Financial Services for a deal valued at $165 million. The Diners Club brand and payment network will be acquired. Discover will not be extending any credit to the cardholders. The revolving lines of credit on Diner Club cards will continue to be offered by the financial institutions which already issue them, including Citi. Discover will only be generating their revenue from the transaction fees themselves. The shakeup was made public on Monday, April 7th, 2008.
Discover credit cards currently have the lowest market share among the major players (Visa, MasterCard, American Express) and the Diners Club acquisition will certainly help level the playing field. Discover wants wider acceptance outside the United. Diners Club, which is geared towards travelers and international customers, should help do just that. Citi states their reason for the sale is to make their operations more lean by disposing of nonessential parts of their business, such as Diners Club.
Currently outside the United States, over $30 billion is put on Diner Club cards internationally. Their primary customers are corporate accounts and affluent individuals. Experts suspect the move is to help pit Discover card head to head with American Express over the next few years.
Right now, more than $30 billion is spent each year with Diners Club cards outside North America by more than 80,000 commercial and business clients. The deal is expected to be completed within 3 months and the total merging of the two entities may take as long as 2 to 3 years.