Lufthansa launches a new UK Miles & More charge card – partly as a Diners Club (Part 1)

Well, I didn’t see this coming.

Lufthansa has launched a new UK credit card – but it isn’t a credit card.

The Lufthansa people I spoke with when their MBNA credit card was closed were adamant that there would be a replacement credit card before 31st March 2019, which is when the ‘amnesty’ on miles expiring for ex-MBNA cardholders ends.

I didn’t doubt they would manage it – Lufthansa is THE European loyalty leader in terms of the number of different countries in which it runs credit cards – but I didn’t pick up any whispers at the Loyalty Summit conference last week that anything was imminent.

I certainly didn’t expect it to look like this!

I have split this article into two parts.  This part looks at the ‘hard facts’ of the new offering.  Part 2, also published today, contains my thoughts on whether you should apply.

You can find out more, and apply, here.

The new Lufthansa credit card is from Diners Club.  And it isn’t a credit card.

[You may want to stop reading for a minute to take this in.  Once you’ve got over the shock, read on.]

Yes, the card that time forgot is back.  Unfortunately, just because the card is back, it doesn’t mean anyone is accepting it.

This is bizarre beyond belief.  Diners Club was the first ever ‘deferred payment’ card, I think, but I can’t remember the last time I saw one and I’ve certainly never had one.  If you thought using American Express was tricky at times …..

Diners Club is not impacted by the cap on interchange fees because it has less than 3% of the UK payment card market.  This card may be capped because it is co-branded – I need to dig out the ruling again.  However, this makes no practical difference because I doubt that anyone who applies will actually carry around the Diners Club card.

You see, the good news is that it is actually a double pack.  You ALSO receive a Mastercard, featuring a smart picture of the virtually unknown Boeing 747-800 with the extended upper deck:

What is the card called?

The Miles & More Global Traveller Card

Who is behind the card?

The Miles & More Global Traveller cards are issued by Affiniture Cards Ltd which is Diners Club in disguise.

However, the companion Mastercard card is issued on behalf of Affiniture by Cornercard UK Ltd.  Cornercard is a Swiss bank which offers a Lufthansa-branded card in Switzerland.  This complex structure is required because Affiniture / Diners Club does not have a licence to issue a Mastercard itself.

What is the sign-up bonus?

10,000 Miles & More miles, until 31st December 2018.  This credits with your first purchase – there is no spend target to hit.

From 1st January it will drop to 5,000 Miles & More miles.

If you apply before 31st December you will also receive a voucher for a Lufthansa Business Lounge visit.  This would include the Lufthansa lounge in Heathrow Terminal 2.

It is not clear if you need to be flying with Lufthansa / Swiss / Austrian to use the voucher.  It IS transferable according to the small print.  The voucher is valid for six months.

What is the on-going earning rate?

This is the interesting bit.

You earn 1.25 miles per £1 spent.  This is a VERY good rate for a Mastercard, even one with an annual fee.  It isn’t as good as the market leading Virgin Flying Club Reward+ Mastercard (1.5 Virgin Atlantic miles per £1) but the fee is 50% lower.

What is the annual fee?

£79

Is there a foreign exchange fee?

Yes, 2.99%

What is the interest rate?

There isn’t one.  This is a charge card and NOT a credit card.

You MUST repay your balance in full each month.

What the heck does this bit of the T&C’s mean?

“My Mastercard says pre-paid on it, do I have to add funds before I can use it?”

“No. The card works in the same way as your Diners Club Charge Card with all charges and credits appearing on your monthly statement. The card is automatically “loaded” with cash from your account for every transaction you make. You don’t have to do anything, nor do you have to have a credit balance on your Mastercard.”

I spoke to a credit card consultant and he told me Diners Club will, in effect, load your pre-paid Mastercard a fraction of a second before the money is authorised for the payment.  You don’t need to do anything out of the ordinary.  This will, he felt, lead to a higher rate of declined transactions because each transaction must be authorised TWICE – once by Mastercard and then a split second later by Diners Club as it decides whether to load your pre-paid Mastercard or not.

How does Diners Club make any money from this?

It isn’t clear how Diners Club makes money here.  The interchange fee on Diners Club transactions is high, and those transactions will be profitable – except you will never use it.

The interchange fee on Pre-Paid Mastercard transactions on a consumer card is only 0.2% – see the Mastercard website here.

Let’s assume Lufthansa is getting 0.75p per mile, which costs Diners Club (0.75p x 1.25 miles per £1) 0.94p per £1 you spend.  Diners Club gets 0.2p per £1 in interchange fees on the Mastercard.  Once you have spent £11,000 per year they have ‘used up’ your £79 annual fee and will be losing money on every transaction.

This very simplistic exercise also ignores all of the running costs of the card including their funding costs.  In reality, they might start losing money if you make as little as £5,000 per year of annual spend on the Mastercard, assuming £0 on the Diners Club card.

Can I get a supplementary card?

No. They are not allowed.  No idea why.

Is there an app?  Can I use it with Apple Pay?

There is no mention of this but I would lean towards ‘no’.

Any other problems I may face?

You do not automatically get Section 75 protection if a retailer goes bust as this is not a credit card. I don’t know if Diners Club is voluntarily offering cover, as Amex does to charge card holders.

The Mastercard, as a pre-paid card, may not work at places requiring preauthorisation, eg hotels and car rental outlets.

What other benefits do I get with my Miles & More Global Traveller Card?

You can access a curated portfolio of airport lounges for £15 per visit.

Does this credit card stop my Miles & More miles from expiring?

Yes.  Miles & More has a VERY aggressive expiry policy – your miles expire 36 months after you earn, irrespective of what activity you have.

There are only two ways to stop expiration.  You either need Miles & More elite status or you need to hold a Miles & More payment card.  Miles expiry will stop when:

• You have been a holder for at least 3 months and
• You make at least one miles-earning purchase on the card each month

Is this card better than the Starwood Preferred Guest American Express for getting Lufthansa miles?

Here is an important thing to remember:  this card has the same earnings rate (1.25 Miles & More miles per £1) as you get indirectly via the Starwood Preferred Guest American Express card, which has a £75 fee. 

The only caveat is that you need to convert your Starwood / Marriott points in chunks of 60,000 (£20,000 of card spend) to get the 1.25 Miles & More miles per £1 rate.  On the other hand, Starwood / Marriott points are MASSIVELY more flexible than Miles & More miles because there are another 40 airline partners plus of course hotel room redemption options.

If you have Lufthansa status – and so don’t have a problem with miles expiry – the Starwood Amex may be a better option.  For the rest of us who are worried about our Miles & More miles expiring, we are stuck with this new Diners Club package.

Next steps …

These are ‘the facts’ of the new Lufthansa Miles & More Global Traveller cards.  In Part 2 of this article on the new Lufthansa UK credit cards – click here – I look at whether they are worth getting or not.

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