History
At the time Discover was introduced, Sears was the largest retailer in the United States. It had purchased the Dean Witter Reynolds brokerage organization and Coldwell, Banker & Company (real estate) in 1981[5] as an attempt to add financial services to its portfolio of customer services. Ray Kennedy Sr., father of country singer Ray Kennedy and the credit manager for Sears, conceived the card.[6] After a trial period in 1985, starting with a $26.77 purchase at an Atlanta Sears on September 17,[7] the actual launch was pushed through by Philip J. Purcell and Mitchell M. Merin, the company's senior vice president for corporate administration and manager of financial analysis, respectively.[8] Together with the Discover Card (and its issuing bank, the Greenwood Trust Company, owned by Sears), this was named the Sears Financial Network. Early Discover Cards bore a small embossed symbol representing the Sears Tower, then the company's headquarters.
Discover was part of Dean Witter, and then Morgan Stanley, until 2007, when Discover Financial Services became an independent company.[9] Novus was once the major processing center that partnered with the company. The Novus logo was retired, replaced by the Discover Network logo.
Unlike other attempts at creating a credit card to rival MasterCard and Visa, such as Citibank's Choice card, Discover gained a large national consumer base. It carried no annual fee, which was uncommon at the time, and offered a typically higher credit limit than similar cards. Cardholders could also earn a "Cashback Bonus", in which a percentage of the amount spent would be refunded to the account (from 1% to 5%), depending on how much the card was used.[10] Discover was also noteworthy for being the only credit card accepted by the U.S. Customs Service to pay customs duty, effective February 19, 1987.[11] Since it did not charge a percentage fee to retailers, unlike Visa, MasterCard, and American Express, Discover was also the only credit card accepted at Sam's Club; the retailer has since started to accept MasterCard and American Express (see below). A 1989 study found that Discover had strong consumer adoption in the U.S.; the number of households with Discover cards increased by 2.1 million, or 14 percent, in 1989.[12] In this same year, Discover also signed a restaurant in Delaware as its 1 millionth merchant in its payment network.[13]
The plan to create a one-stop financial-services center in Sears stores was not as successful as Sears had hoped, and its promotion of Discover was thought both to hurt Sears turnover and to restrict the card's potential. Other retailers resisted it, as they were developing their own credit products and they believed they would be helping their competitor. Sears began to face difficulties in the late 1980s in light of these developments, and with strong competition both from Walmart and from so-called category killers such as Toys "R" Us. Discover's introduction was costly; Sears's Discover credit card operations accounted for a loss of $22 million in the fourth quarter of 1986, and a loss of $25.8 million in the first quarter of 1987.[14]
In 1993, Sears spun off its Dean Witter division into a new publicly traded company,[15] and began to accept MasterCard and Visa in addition to its store credit card and Discover. Discover became part of the Dean Witter financial services firm, and the new company was called Dean Witter, Discover & Co. In 1997, this company merged with Morgan Stanley to become Morgan Stanley Dean Witter, Discover & Co. In 1999, this company rebranded itself as Discover Financial Services, Inc.[16]
Discover Bank
The Greenwood Trust Company was founded in 1911 and is based in Greenwood, Delaware. It was acquired by Discover Financial Services in 1985 and renamed Discover Bank in 2000.[17] The original location of the Greenwood Trust Company on East Market Street in Greenwood is now the town hall and police station.[18]
Global alliance
Starting around 2005, to increase acceptance around the world, Discover has formed several agreements with other payment networks internationally. This allows Discover cardholders to perform transactions while traveling abroad. Vice versa, cardholders of other countries may utilize their cards at U.S. merchants that accept Discover.[19] Some major examples include:
Currently, Discover is accepted in 185 countries.[21]
