A brief look at Discover

Compared to the other major credit card companies Discover is a youngster. In many ways it is the credit card that is always forgotten as it is not accepted everywhere and is not available to the average person.

In the early 1980s the Sears Corporation was the largest retailer in the United States. In a bid to grow the company’s footprint and portfolio it purchased Dean Witter Reynolds brokerage and Coldwell, Banker & Company in 1981. To increase growth the credit manager of the company, Ray Kennedy (father of Grammy-winning country singer Ray Kennedy Jr.) decided to issue a credit card through the Sears Financial Network. The first cards were issued in 1986 and had a small embossed image of the Sears Tower in Chicago which was the company’s headquarters.

Discover proved popular with consumers but not merchants. It was one of the first companies to use Super Bowl advertising to introduce their product as they did during Super Bowl XX. Unlike American Express it had no annual fee and its users could earn a cashback bonus (around 1 to 1.5%). Spending limits were also higher than its competitors. By 1990 nearly 2.1 million cards were in circulation. It was the only card to be accepted by the U.S. Customs Agency to pay duties and it was the only card accepted by Sam’s Club until 2006. Despite this it was not accepted by other retail giants like Wal-Mart and Toys-R-Us who saw accepting the card as helping their rivals at Sears. Operating losses began piling up and in 1993 Sears sold Discover to the Dean Witter Financial Services firm (which had managed the card since it was introduced and began to be spun-off from Sears in the early 1990s). Witter merged with Morgan Stanley in 1997. The bank used, Greenwood Trust, changed its named to Discover Bank in 2000. For many years the Novus company was used for card processing and was synonymous with Discover. Novus was merged with Discover Financial Services in 1999 and since then the Discover logo has been used.

Discover was involved in a landmark case against Visa and MasterCard. They challenged the policy that a bank could not issue Discover or American Express cards. The verdict came back in their favor and they were awarded damages and the ability to have their cards issued so Discover acquired the EFT company Pulse to begin marketing debit cards. Morgan Stanley decided to spin Discover off into its own company and after much waffling did so in 2007.

While the card is not as widely accepted in the United States it has gained a wider international base. Several foreign banks, like HSBC, issue Discover cards and in China it is widely circulated through UnionPay, the only bank available all throughout the world’s second most populous country. It is also available though the JCB in Japan. Because of that Discover is the most widely accepted card throughout the world.

Today Discover is a publicly traded company headquartered in Riverwoods, Illinois. It had its Initial Public Offering in 2007 sandwiched around MasterCard (2006) and Visa (2008). Among the other holdings of the company are the Diner’s Club and the Home Loan Center. They are active in other financial services as well with checking accounts, home loans, student loans, personal loans and market investment services.

Obtaining a Discover card is not easy. With all of the rewards that are offered as well as 100% U.S. based customer service the company feels it should be an exclusive card. A good credit score is needed to even have a chance at being approved. Like American Express they offer different levels of their cards, each one linked to a different reward package. Thanks to this the company has seen steady growth over the past few years and shows no signs of slowing down.