Discover Card: History, Perks, And FAQs

Discover Card, a prominent credit card brand, is renowned for its cash-back rewards and cost-effective fee structure. Initially introduced by retailer Sears in 1985, it has evolved to become one of the most widely accepted credit cards across the globe. Discover has a unique history that sets it apart in the world of credit cards.

The history of Discover Card is defined by its groundbreaking approach to credit cards. Unlike many of its competitors, Discover broke new ground by not charging an annual fee. Additionally, it was a pioneer in offering cash-back rewards, a concept that has since become a standard in the credit card industry. While it had a slow start due to initial hesitancy among retailers to accept the Sears department store card, Discover gradually expanded its network and is now accepted in 99% of stores that accept credit cards and in 200 countries. In fact, as of 2021, Discover has become the seventh largest issuer of credit cards on a global scale.

What sets Discover apart from many other credit card brands is its business model. While some credit card companies merely license their brand names to issuing banks, which then offer branded credit cards to customers, Discover takes a different approach. Discover issues credit cards directly, using its own brand. This distinction means that Discover Financial earns interest income from its credit card customers, in addition to charging payment processing fees to the merchants that accept Discover cards as payment. This direct profit model aligns Discover more closely with companies like American Express.

Given this business model, Discover has historically offered appealing terms and rewards programs to attract and retain customers. For instance, it was one of the first major credit card brands to introduce cash-back rewards. This approach makes sense, as Discover’s profitability relies not only on the card’s acceptance among merchants, which increases transaction processing fees but also on the average outstanding balance of their cardholders. To enhance profitability, Discover employs various incentives to encourage customers to use their Discover cards for transactions, such as extending credit limits or waiving annual account fees.

Discover cardholder perks are notably generous, with a particular highlight being the automatic matching of all cash-back rewards earned in the first year. This feature allows savvy consumers to maximize rotating 5% cash-back categories to receive an impressive 10% cash back on purchases in their initial 12 months of card ownership. This incentive makes the first year of having a Discover Card an excellent opportunity for those who seek to maximize their credit card rewards.

Consider a scenario where Mia is contemplating applying for a new credit card. In her research, she observes significant variations in the terms and features offered by different cards. While some offer low fees with minimal or no rewards programs, others, such as the Discover it Cash Back card offered by Discover Financial, provide more generous rewards programs and cash-back benefits.

These differences are not solely explained by varying annual percentage rates (APRs) and account fees associated with the cards. Mia discovers that these variations also stem from the distinct business models employed by major credit card brands. While some companies, like Visa, generate revenue mainly from transaction volumes, others, such as Discover Financial and American Express, also extend credit directly to their cardholders. This business model motivates the companies that directly issue cards to offer rewards programs and features that encourage their customers to carry higher balances on their cards.

Discover cards are widely accepted and provide competitive rates and rewards. The automatic cash-back match in the first year offers a rewards rate that can be challenging to beat with other personal credit cards currently available. It’s essential for consumers to be mindful of their spending, as Discover, like companies such as American Express, profits when customers maintain balances and don’t pay them off each month. Therefore, responsible spending is key to making the most of Discover Card’s benefits.

Payments to Discover are made directly to the company, and various methods are available for your convenience.

Discover is widely accepted in the United States and in 200 countries internationally.

Discover frequently raises credit lines for customers, aligning with its profit model. You can request an increase through a simple process.

Discover is a separate card processing system, accepted globally alongside other major card brands.

Discover has been an independent company since 2007, after its origins with Sears and a stint under Morgan Stanley.

Your Discover credit card account number is the same as the one on your card. It can be found through various means, including online access.