U.S. Bank and Delta battle for cardholders

  • Article by: SUZANNE ZIEGLER , Star Tribune
  • Updated: May 3, 2009 - 7:28 AM

WorldPerks Visa holders are in the middle of a tug of war with SkyMiles' American Express for their business.

If you're one of the million-plus World-Perks Visa cardholders, you're a hot commodity right now.

The credit card, which allows customers to accumulate Northwest's frequent-flier miles as they shop, will be shut off in August, a victim of Delta Air Lines' acquisition of Northwest last fall. Delta, which for now operates Northwest as a separate subsidiary, wants WorldPerks card users to move over to its Delta SkyMiles credit card, issued by American Express. And U.S. Bank, which operated the WorldPerks card, wants to keep the cardholders under its new FlexPerks Visa program.

Both sides are pulling out all the stops to get the lucrative business. American Express started an ad blitz last week offering up to 25,000 bonus miles. U.S. Bank is telling customers it will send out new Visa cards this summer with the same credit card numbers, no need to reapply.

Last week, Northwest's World- Perks program sent out a letter, calling the U.S. Bank card the "generic travel card that will have NO relationship with Delta and Northwest."

Confused about what to do? You're not alone.

"Everyone is up for grabs, so to speak," said George John, director of the Marketing Department at the Carlson School of Management at the University of Minnesota. "There is so much profit to be made on the back ends of the cards that they're willing to put out for very attractive deals on the front end," he said. American Express paid Delta $1.05 billion for a five-year contract for the rewards program.

His advice: "Call both of these folks up and say, 'What can you do for me?''' The longer you wait, he said, the better the deal may be.

The biggest difference between the cards: The American Express card is part of the airline's official program, and the only one offering benefits such as free upgrades and higher status levels, an important consideration for many frequent travelers.

U.S. Bank's card will be a new, separate program, not unlike the many credit card reward programs already available that offer airline tickets and gift cards at certain retailers. New points won't be added to existing WorldPerks miles but can be used separately.

At the end of the day, cardholders don't have to take either card --or they can take both.

Why so heated?

The stakes are high. Tens of millions of dollars -- if not more -- are up for grabs from annual fees, merchant fees and interest on outstanding balances. Many cardholders run just about anything through the cards -- from groceries to utility bills -- to maximize mileage rewards.

Minneapolis-based U.S. Bank has had the WorldPerks business since 1994.

"This is going to be a big battle," said Minneapolis travel expert Terry Trippler. "You've got to feel sort of empowered as a WorldPerks member."

U.S. Bank would not say how many WorldPerks cardholders it has, but estimates range from 1 million to 4 million, with most concentrated in the Twin Cities and other Northwest markets. A year ago, Amex had an estimated 3.7 million SkyMiles customers, who pay an estimated $300 million plus in annual fees alone.

The brawl even has gone to court, although briefly. Delta sued in federal court April 24 to stop U.S. Bank from moving WorldPerks credit card customers over to the new FlexPerks card next month, noting customers couldn't earn WorldPerks miles through August, when the program is set to expire. The parties came to an agreement announced late Friday, though they were mum on details. U.S. Bank spokeswoman Teri Charest said in a statement that the parties "have many ongoing relationships with one another and were able to resolve their differences on mutually agreeable terms."

Asked about the competition for the business, David Rabkin, who handles the Delta credit card portfolio for American Express, said: "We just really want to make sure people understand who we are and how much we want them. And of course, that they really do have to take an action to continue being with the airline."

Anyone wanting the Delta SkyMiles card, he said, will need to apply.

"These are terrific customers and we are absolutely rolling out the red carpet for them and to invite them to switch," he said.

Bob Daly, vice president of retail at U.S. Bank, said the FlexPerks product combats what he called "mileage creep" -- when airlines charge more miles for reward tickets -- that frustrates many users of the reward programs. "Ours is any seat, on over 150 airlines, travel when you want to travel, for 20,000 FlexPoints," he said.

WorldPerks Visa cardholders will be informed exactly when in August their cards will expire, he said.

Trippler said it's too early to see how things will shake out but, in general, he thinks that many business travelers will lean toward the Delta card. "That's going to help them stay with their elite status. It's so important to some people that they will fly places just to accumulate miles just so they can make their elite status the next year."

Leisure travelers might lean toward the FlexPerks program because they can earn tickets more quickly and have more flexibility with the airline. And, he said, U.S. Bank is making it easy for people to get the new card. "That was genius," he said.

Donald Baker of Minneapolis, who has held a WorldPerks Visa card for about five years, said he has been inundated with material from both sides.

He saw an American Express/ Delta full-page newspaper ad on Thursday that looked enticing. "But how do we know that U.S. Bank isn't going to offer something better once the dust settles?"

Suzanne Ziegler • 612-673-1707

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