Why everyone's talking about the Diners Club Card Elite

Back in September I was the first blogger to observe that the new Diners Club Card Elite, which earns 3 Club Rewards points per dollar spent at "grocery stores, supermarkets, drug stores, pharmacies and automobile fuel service stations when you pay at the pump," allows points transfers, according to Flyertalk, to Starwood Preferred Guest at the not-totally-unreasonable rate of 1250 Club Rewards points to 750 Starpoints.

Personally, I don't pay $300 annual fees, so I was a bit surprised to find that the Diners Club Card Elite was one of the most popular topics of conversation last weekend in Phoenix. That convinced me to take a second look at the card's value proposition.

Finding the right comparison

In my first back-of-the-envelope calculation, I compared the Diners Club Card Elite to the "old" Blue Cash, which turned out to be an unfortunately timely comparison, given the wave of Blue Cash shutdowns (and PayPal warnings!) that occurred in October.

It turned out that most folks I spoke with in Phoenix were actually comparing the Diners Club Card Elite not to a straight cash back card like Blue Cash, but rather to the American Express Starwood Preferred Guest card, which earns 1 Starpoint per dollar spent.

This comparison is complicated by the fact that the Starwood Preferred Guest American Express and Diners Club Card Elite earn points, while their annual fees have to be paid in US dollars. What we need is a common point of measurement, which is happily provided, as usual, by the Barclaycard Arrival Plus MasterCard.

Since the Starwood Preferred Guest American Express earns just 1 Starpoint per dollar, and has no bonus categories (besides SPG properties themselves), anyone who is willing to manufacture spend on the card is already implicitly giving their Starpoints a value of at least 2.2 cents each by foregoing the same amount of spend on the Barclaycard Arrival Plus MasterCard.

Since the Diners Club Card Elite, in its extremely common bonus categories, earns 1.8 Starpoints per dollar spent, a user will break even when she spends, in bonus categories, that amount of bonused spend which generates the $235 difference in the annual fees between the Diners Club Card Elite and the Starwood Preferred Guest American Express.

That break-even amount, remarkably, is just $13,352. At that level of spend, a user will generate 40,057 Club Rewards points, which can be transferred to 24,034 Starpoints, or 10,682 more than with the Starwood Preferred Guest American Express. As shown above, those points are worth $235, the difference in the two cards' annual fees.


On this blog, I always try to go where the numbers take me, leaving at the door as much prejudice and superstition as possible. And that's what the numbers say: at quite low levels of bonused spend, the Diners Club Card Elite generates enough "excess" Starpoints to justify paying the annual fee, assuming you do, in fact, value Starpoints at 2.2 cents or more each.

But this analysis requires two big caveats. First, there are other cards which bonus grocery store spend, like the American Express Preferred Rewards Gold and Hilton HHonors Surpass, and the US Bank Flexperks Travel Rewards cards. Ironically, the $300 annual fee of the Diners Club Card Elite will pay the annual fees of all three of those cards ($175, $75, and $49, respectively). And that's a big problem with paying high annual fees: it's not that it's impossible to recoup the annual fee in value – of course it's possible. But it requires a commitment to doing so, at the expense of other points you may want or need over the course of the year.

The second caveat is that any comparison with the American Express Starwood Preferred Guest or Barclaycard Arrival Plus is inherently misleading, since those cards earn at the same rate regardless of the merchant, while the Diners Club Card Elite requires cannibalizing already-bonused grocery or drug store spend.

Unless, of course, your "old" Blue Cash card has already been shut down. In that case I think there's a clear argument for moving drug store spend, a cheap and plentiful, but now rarely-bonused, merchant category, to the Diners Club Card Elite.

Back-of-the-envelope assessment of the Diners Club Card Elite

I saw today that Diners Club is now issuing consumer credit cards in the United States, and I mentioned on Twitter that the $300 annual fee might be worth paying if you value miles transferred from the program at more than 1.7 cents. That's an extortionate annual fee, and I won't be applying for the card myself, but in case you do value your airline miles that highly I want to show my work to explain how I arrived at that number.

The Diners Club Card Elite card gives 3 points per dollar spent at gas stations, grocery stores, and drug stores. The problem is that gas stations and grocery stores are already such heavily-bonused categories that neither, alone or together, could justify paying a $300 annual fee.

You can already earn 3 flexible Membership Rewards points per dollar spent at gas stations with the Amex Everyday Preferred card, and earn 2 US Bank Flexpoints per dollar spent at grocery stores (worth between 1.33 and 2 cents each when redeemed for airfare) while paying just under 50% the annual fee of the Diners Club Card Elite.

Drug stores, on the other hand, are not as frequently-bonused as they used to be, so the most relevant comparison is the "old" American Express Blue Cash card, which earns 5% cash back at drug stores after the first $6,500 in spend per membership year.

The Comparison

I consider the risk-minimal amount of spend at drug stores per month to be $13,000 for a single person, in most parts of the country (two PayPal accounts and a Serve account, if you have access to Family Dollar store locations). It's easy to spend more, but that provides a benchmark for monthly drug store spend.

Over the course of a year, that amount of spend would earn $7,540 with the "old" Blue Cash card (since the first $6,500 would earn just 1% cash back), or 468,000 transferrable Diners Club points (in which case you'd incur an annual fee of $300).

At that point it's easy to see that the surplus of $7,840 implies a value per transferred mile of 1.67 cents. If you value each one of your transferred miles at more than that, you might be better off with the Diners Club Card Elite.

Note the emphasis above: it's not worth earning the transferrable points if you occasionally redeem them for high-value awards – you need to value all the miles you earn, on average, at over 1.67 cents each.

While I used the "risk-minimal" amount of drug store spend in this comparison, in fact this is very close to the analytical limit: doubling annual drug store spend yields $15,340 in cash back and 936,000 transferrable points, or 1.63 cents per mile, because of the slowly diminishing importance of the $6,500 "penalty." In other words, having either or both cards doesn't affect the imputed mile valuation by much, regardless of your annual spend.

So, what are your miles worth?

From FlyerTalk, here are the transfer partners for the Diners Club rewards program (the catalog requires you to log in to view redemptions):

  • OneWorld: British Airways
  • SkyTeam: Delta Airlines, Korean Air.
  • Star Alliance: Air Canada, Eva Airways, SAS, South African Airways, Thai Airways.
  • Independent: Alaska Airlines, El Al Airlines, (1000:20), Frontier Airlines, Hawaiian Airlines, Iceland Air, Southwest Airlines (1500:1200), Virgin Atlantic.
  • Hotels: Best Western (1250:3300), Choice (1250:2400), Hilton (1250:2000), Hyatt (1250:750), Intercontinental Hotel Group (1250:1500), Marriott (1250:1500), Starwood (1250:750).
  • Rail: Amtrak.

What caught my eye here is the not-totally-unreasonable hotel transfer ratios, particularly the "mere" 40% penalty you incur transferring your points to Starwood Preferred Guest. At 0.6 Starpoints per Diners Club rewards point, you can earn 1.8 Starpoints per dollar spent at drug stores. While it doesn't convince me personally, there's certainly a lot of value that can be unlocked there — plus it's a good escape valve in case you decide to apply for the Diners Club card and end up unable to use the points for direct airline transfers.


In any case, that's how I glance at an earning ratio and decide what mile valuation is imputed – plus a quick review of the Diners Club Card Elite!