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Rod Smith

Caesars MasterCard Wins Little Credit

9 December 2003

Park Place Entertainment Corp.'s latest marketing program -- a Caesars Entertainment-branded MasterCard -- debuted Monday with many credit officials and gaming foes attacking the bank-casino company partnerships.

The new MasterCard offers "comp" rewards to customers of Caesars, Bally's, Paris, Flamingo and Grand Casinos resorts that can be used to pay for hotel rooms, dining, show tickets, spa services, golf fees and other amenities at 15 casino resorts in Las Vegas, Atlantic City, the Mississippi Gulf Coast and other Park Place markets.

"We're not looking to make money from the card. We're looking to drive more trips," explained Steve Rosen, the company's senior vice president for marketing.

"How clever of them," said Durand Jacobs, a clinical professor of psychological and behavioral sciences at Loma Linda University Medical School in California.

"They've got to know the customer base they'd be trying to attract are problem gamblers," said Jacobs, who is also former vice president of the National Council on Compulsive Gambling.

"For people who are short on funds because they've gambled so much away, this offers one more source of funds for gambling," Jacobs said.

"From a commercial point of view, I think it's a very ingenious approach and one I'm sure will be followed by other casino groups," Jacobs said.

University of Nevada, Las Vegas professor and casino industry expert Bill Thompson called it "an unhealthy relationship" that is likely to spread.

"They're going to try to figure out how to use credit cards to gamble. It's a relationship that should not be brought into casinos," he said.

"We haven't crossed the line to use credit cards in slot machines, but it's an easy step, and with this it'll be hard to stop," Thompson said.

The Caesars-branded MasterCard is issued by Wilmington, Del.-based Juniper Bank, a full-service credit card issuer, for Park Place Entertainment, which will change its name to Caesars Entertainment on Jan. 6.

MBNA Bank, also based in Wilmington, Del., has offered a similar Visa credit card program through Harrah's Entertainment for several years.

David Norton, Harrah's senior vice president for relationship marketing, said the program has been very successful in terms of customer acceptance and driving added business into casinos.

However, Tom Coates, director of consumer credit for Iowa, was one of two sources who described these partnerships as "unholy alliances."

"Players have easy access to credit cards now. (Consumer) debt is up 400 percent (in a decade). When people gamble, they enter a surreal environment. The banks are combining credit problems with addictive behavior," he said.

The Rev. Tom Grey, executive director of the National Coalition Against Legalized Gambling, warned anytime the banks and gaming companies get together, the public had better beware.

"I see this as a lethal combination. Banks that (are supposed to) represent sound financial underpinnings have entered into a relationship with a casino (company) and both are marketing with a mutual advantage to separate people from their money," he said.

Coates, the only witness before the National Gambling Impact Study Commission to address the problem of gambling and bankruptcies, sees another problem with the alliances.

He said the bank credit cards are a way to pass customer losses and bad debt off onto the general public.

"They're passing off profits, losses to patrons, on the general population through the abdication of debt. It's passed on to the rest of us, (which) means casino (operators) are enhancing their revenue at the expense of the public."

Thompson said the new MasterCard is also bad for individual consumers.

"It's a terrible incentive. 'How do we get value out of our card? Hey, we blew a lot of money in a department store so now we gotta go to Caesars,' " Thompson said.

Michele Johnson, chief executive officer of the Las Vegas-based Consumer Credit Counseling Service, said the card will potentially create problems where they might not have existed by enticing cardholders into casinos.

While she acknowledged the cards also represent an effective marketing tool, she said a huge proportion of the individuals who seek her counseling services are being forced into bankruptcy because of their gambling habits, which the cards may end up reinforcing.

Carol O'Hare, executive director of the industry-funded Nevada Council on Problem Gambling, acknowledged the new card is a marketing scheme designed to bring people into the casino.

"(But) I'm not sure it's any better or worse than any other scheme casinos would use, just being tied to a credit card," she said.

However, Grey said: "In this case, you have banks becoming pushers and not just of credit cards any more."

Juniper spokesman Ben Brake said the credit card program targets mainly existing Caesars customers and added customers through a direct mail campaign and the Caesars Internet site.

Juniper will bear the risk of the program, the first it has had with a gaming company.

However, Brake said the bank has experience issuing cards with thousands of other companies, and the possibility of higher levels of risk associated with casino customers was not a concern.

"This credit card is appealing to such a broad population segment we don't expect a higher credit problem (than with cards issued to the general population)."

Rosen said there is no added risk for Park Place to bear "because we're not qualifying anybody. That's all up to the bank."

Cardholders using the Caesars Entertainment MasterCard will earn a 1 percent credit for any purchases made with the card that they can redeem for comps at 15 of the company's domestic resorts.