What Is a Discover Card?

 Young woman stands outside and shops online with her phone, using a credit card
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DEFINITION
A Discover card is a credit card issued by Discover Bank, one of four major U.S. payment processing networks.

A Discover card is a credit card issued by Discover Bank, one of four major U.S. payment processing networks. Discover cards offer cash-back and travel rewards that cardholders earn by making qualifying purchases and there is no annual fee.

Discover cards are widely accepted along with Visa, Mastercard, and American Express, and they consistently top consumer satisfaction surveys.

Definition and Example of Discover Cards

Discover Financial Services includes a digital banking segment and the processing network segment (Discover Network). “Discover card” refers to one of several consumer credit cards issued by Discover Bank, the digital banking segment.

Discover cardholders can use their cards to make purchases and pay the balance off over time with interest. Discover cards’ stated consumer advantages include cash-back rewards, no annual fee, and a positive customer experience. 

Discover cards include cards for consumers, students, and a secured credit card. The issuer offers a cash-back credit card and miles-earning travel credit card. Each features the Discover logo with an orange letter "O."

How Discover Cards Work

Discover is both the credit card issuer and payment processing network for its consumer credit cards. As a card issuer, Discover determines the acceptable credit risk for its credit cards. It is responsible for marketing card products, approving new credit card applications, and providing customer assistance.

Discover also issues Diners Club credit cards for consumers and small businesses in select nations around the world.

Card Acceptance

Discover card acceptance (or lack thereof) is a frequent misconception, the issuer notes. Discover cards are accepted at 99% of U.S. businesses. Discover cards are accepted where the Discover Global Network is active; the Discover network includes Discover Network, Diners Club International (DCI), PULSE debit network, and other partners. 

Globally, Discover cards are accepted at 61 million businesses, according to the Nilson Report. This is significantly less than Visa and Mastercard, each accepted at 80 million businesses. American Express falls just behind Discover with 60 million businesses accepting payments. 

Discover cards are widely accepted in most countries in North America, South America, Europe, and Australia. They may only be accepted in some countries in Africa and Asia.

Some merchants don’t display all card logos on store windows. Some stores might not display a Discover logo—but do display a Diners Club logo (Diners Club is accepted at 45 million businesses worldwide). A shop with a Diners Club logo will accept a Discover card. Ask a merchant if you’re unsure.

Payment Processing

Discover provides the technology to facilitate transactions made on its cards, and Discover card transactions in the U.S. can be streamlined if the merchant has a relationship with Discover:

  1. Cardmember makes purchase with their Discover card at a merchant
  2. Merchant sends the transaction amount to the Discover Network
  3. Discover reimburses the merchant for the amount, minus any fees

If the merchant doesn’t have a relationship with Discover, a bank acquirer or processor acts as a middleman between Discover and the merchant.

Discover Card Benefits

Cardholders benefits for Discover cards are fairly standard among issuers: 

  • Fraud protection: Social Security number inquiry and new account alerts; Freeze It (fast account freezing); Discover Card monitoring
  • Free FICO Score checking
  • Recurring charge dashboard and spending analyzer
  • Tap to pay with a contactless card
  • Pay using rewards at Amazon and PayPal
  • Ability to add your card to digital wallets

Types of Discover Cards

Discover issues four types of credit cards, each with rewards and with no annual fee.

Cash Back

The cash-back credit card offers up to 5% cash-back rewards on purchases. Consumers qualify for the card based on their credit history and income.

Student

Discover's student credit card is available for college students to help build their credit history.

Secured

Discover's secured credit card allows consumers to establish or rebuild their credit. Consumers make a security deposit to guarantee the balance. It’s also one of the few secured credit cards that offers cash back on purchases. With responsible use, cardholders may be able to upgrade their card to an unsecured account.

Travel

Purchases on the Discover travel card earn miles that customers can redeem for a statement credit against travel purchases or for cash back. While mile earnings and redemption are pretty straightforward, Discover's travel card lacks common perks offered by a few other annual-fee-free travel cards, like travel accident insurance, car rental damage waiver, or an extended warranty.

Discover has offered small business cards in the past, but does not currently offer the cards.

Key Takeaways

  • Discover cards are issued by Discover Bank, a financial services and technology company.
  • All Discover cards offer rewards at no annual fee.
  • Discover issues and processes its cards rather than relying on an outside financial institution.
  • Acceptance is in line with the other card networks for domestic payments but may not yet have widespread global acceptance.

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