Aiming for wider use of its credit cards, Discover Financial Services Inc. plans to rebate fees for restaurants in August.
The rebates will be part of "Dine Out with Discover Card," the first of a series of promotions meant to increase consumer awareness and merchant acceptance, the Morgan Stanley Dean Witter & Co. unit said.
Discover will distribute free tip trays and check presenters to participating restaurants, to remind cardholders to choose Discover.
"We have found that cardholders make their decisions about which card they will use at the point of sale," said Sebe Wiliford, vice president of restaurant acceptance for Discover.
In addition to the rebates for participating restaurants, people who use Discover cards at them in August will receive a "special cash-back bonus," said a Discover spokeswoman, Beth Metzler. She declined to provide more details.
"You are going to see lots of promotions targeting different types of merchants," Ms. Metzler said.
Discover announced in April that it would begin courting merchants with lower fees. David W. Nelms, president of Discover Financial Services, said he wants to snatch business away from Visa and MasterCard.
"Merchants have become the forgotten parties of the credit card industry," Mr. Nelms said at Faulkner & Gray's Credit Card Forum in Orlando, Fla. "Discover intends to change that for our merchant base."
Mr. Nelms was hired in September to engineer a strategy of market-share growth. Ms. Metzler said the company has since approached more than 20,000 merchants that do not accept Discover and are interested in doing so.
"We have signed up more merchants this year than in any year since the Discover Card was launched" in 1986, Ms. Metzler said. It is accepted by more than three mil-lion merchants in the United States.
Mr. Wiliford of Discover said merchant penetration "is not the problem- we just want to increase our overall sales in the industry." He declined to provide specific numbers about Discover's merchant coverage, except to say that 99% of major restaurant chains accept Discover cards.
The Nilson Report, an industry newsletter based in Oxnard, Calif., said Discover's share of card purchases was 5.43% in the first quarter, down 53 basis points from a year earlier.
"Discover is in the unfortunate position of losing market share very steadily," said David Robertson, president of the newsletter. "What they need is for the cardholder to pick up the spend on the card."
The "Dine Out with Discover Card" program "is really about having the merchant be part of an advertising channel for the card," Mr. Robertson said.