What Is Discover Card?
Discover Financial (DFS) is an American financial services company that issues the Discover credit card brand.
Retailer Sears, Roebuck & Co. first issued discover cards in 1985 and launched nationally in 1986. Their reduced fee structure and pioneering cashback rewards program distinguished them from other cards. Discover has been an independent company since 2007.
Today, Discover Cards are among the most widely accepted cards in the world, along with those from Visa (V), Mastercard (MA), and American Express (AXP).
History of Discover Card
A subsidiary of Sears created Discover in 1985 when many individual retailers and businesses introduced branded credit cards for their stores to their customers.
One of the first cashback rewards programs and charging no annual fee quickly distinguished Discover from the competition.
Discover originally experienced slow growth, as few competing retailers were willing to accept the Sears department store card. However, the gradual expansion of its network has now allowed Discover to be accepted in 99% of stores that accept credit cards and in 200 countries.
As of 2021, the seventh largest issuer of cards globally is Discover.
How Discover Cards Work
Although Discover cards may seem similar to Visa or Mastercard from a consumer’s perspective, there are some important differences in how they operate.
We can see this by comparing Discover and Visa cards, for example. Whereas Visa licenses the use of its brand name to issuing banks, which then offer Visa-branded credit cards to their customers, Discover issues credit cards directly using its brand.
Visa generates revenue from its payments network but does not directly profit from the credit card balances of its end users, as Discover Financial does by charging interest income from its credit card customers, in addition to payment processing fees to the merchants that accept the Discover card as payment. Discover’s business model is more similar to that of American Express than to other credit card issuers because both companies are direct issuers.
It makes sense that Discover cards have offered attractive terms to attract new users, such as being the first major credit card brand to offer cashback rewards. The company’s profitability relies on increasing not only the card’s acceptance among merchants (thus boosting transaction processing fees) but also the average outstanding balance of their cardholders.
Given Discover Financial’s overall business model, it makes sense to offer incentives to encourage customers to borrow more using their Discover cards, such as increasing credit limits or waiving annual account fees.
Discover Cardholder Perks
The Discover it Miles card offers 1.5x miles on every purchase with no rotating categories or limits to the miles you can earn, making it a good choice for those who want to rack up airline miles quickly. However, you’ll get less value from your miles since they’re worth only one cent each when redeeming for travel.
Discover offers cards that primarily earn Cashback, as well as one that offers generic airline miles (Discover it, Miles). Discover’s Cashback rewards program provides a percentage back on all purchases, with 5% cash back on rotating spending categories and merchants on eligible spending up to $1,500 each quarter (with 1% after that) and 1% on all other spending.
The Discover it Miles card offers 1.5x miles on every purchase with no rotating categories or limits to the miles you can earn, making it a good choice for those who want to rack up airline miles quickly. However, you’ll get less value from your miles since they’re worth only one cent each when redeeming for travel.
Discover it®, Discover it®, Chrome, Discover it®, Miles.
Discover cards earn Cashback rewards: Discover it®, Discover it® Chrome, and Discover it® Miles.
- Discover it Cash Back
- Discover it Gas & Restaurants
- Discover it Student Cash Back
- NHL Discover it
Other Discover cards have different cashback rewards structures.
The Discover it Chrome and Chrome Student cards offer 2% cash back on restaurant and gas purchases and 1% on other spending.
The Discover card offers a unique feature that automatically matches all cashback rewards earned in the first year, which is beneficial for consumers who want to maximize rotating 5% cashback categories to get 10% cash back on purchases in their first 12 months.
An excellent reward rate for credit card churners makes the first year of having a Discover card.
Example of a Discover Card
Let’s say that Mia is considering applying for a new credit card. When researching her options, she noticed significant variation in the terms and features offered by the various cards. There is significant variation in the terms and features offered by the various credit cards. For instance, plain vanilla cards offer low fees in exchange for few—if any—rewards programs. In contrast, other cards, such as the Discover it Cash Back offered by Discover Financial, offer more generous rewards programs and cashback benefits.
Mia learned that the different business models employed by the major credit card brands explain the differences in annual percentage rates (APR) and account fees.
In addition to making money from transaction volumes, other companies, such as Discover Financial and American Express, also lend money directly to their cardholders. Therefore, these companies that issue cards directly to their customers have a greater incentive to offer rewards programs and other features that encourage customers to use their cards more frequently.
How Do I Make Discover Card Payments?
Payments for Discover cards are made by calling the number on the back of the card, mailing in the payment with the payment stub on the bill, logging in to Discover online and paying individually, or setting up automatic payments.
Where Is Discover Accepted?
In the United States, Discover is accepted by 99% of the places that take credit cards. Internationally, Discover is accepted in 200 countries.
How Can I Request a Credit Line Increase for a Discover Card?
Suppose you need an immediate credit line increase from Discover. In that case, you can call the number on the back of your card or log in to the Discover website and select “Card Services” and then “Credit Line Increase” from the account services tab.
Is Discover a Visa or a Mastercard?
Discover is a separate card processing system entirely and is accepted globally in many of the same places where Visa, Mastercard, and American Express are accepted.
Who Owns Discover?
Sears originally owned Discover, then financial services provider Morgan Stanley, but Discover has been an independent company since 2007.
Where Can I Find My Discover Account Number?
Your Discover credit card account number can be found on the front of your card, by logging in to your online Discover account, or by finding your latest paper statement.
The Bottom Line
If used conscientiously, Discover cards offer a rewards rate that can be hard to beat with other personal credit cards currently on the market. As with all credit cards, it is important to be aware of your spending to avoid accumulating too much debt. Discover, like American Express, is a direct issuer, meaning that it benefits financially when customers carry a balance from month to month.
