Editorial Policy

Discover Card Acceptance Hits New Record

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By Eva Norlyk Smith, Ph.D.
August 30, 2010

Discover credit cards have long had an uphill battle in winning over consumers, despite pioneering one of the most attractive cash back programs in the industry. Because Discover Card isn’t accepted by all merchants, many consumers have shied away from the issuer, instead preferring credit card giants Visa and MasterCard.

In the last few years, however, the number of merchants that accept Discover cards has sharply increased. By April this year, nine out of ten merchants were accepting Discover Card, an all time record.

Introduced in 1986 by Discover Financial Services, Discover credit cards are relative newcomers on the financial scene compared to Visa, MasterCard and American Express. Like American Express, the fourth largest payment processing network in the U.S., Discover Financial Services both issue credit cards and process the transactions made with the cards. Visa and MasterCard, in contrast, simply license their brands to banks, which issue credit cards, and then use the Visa and MasterCard electronic payment networks to process the charges made with the cards.

Discover cards early on made headways by pioneering America’s first cash back credit cards. Discover credit cards were the first no-fee cash back cards to offer unlimited rewards that don’t expire as long as the card is in use.

Both domestically and internationally, Discover has taken on a larger role on the credit card scene in recent years. By working with third party merchant-acquiring organizations, which sign merchants up for credit card acceptance, the company managed to bolster the number of merchants accepting credit cards in North America from 77 percent in 2007 to nine out of ten merchants in April of this year.

Internationally, Discover has been making strides as well, starting with its 2005 partnership with China’s UnionPay. The alliance rendered Discover the most accepted US credit card in the nation. Shortly thereafter, the issuer partnered with Japan’s JCB (2006), Brazil’s Redecard (2009), and Korea’s BC Card (2010).

Discover’s 2005 purchase of PULSE allowed the card company to issue ATM and debit compatible cards; PULSE later partnered with the UK’s Link Network, giving Discover a greater entry point into the UK credit card market. Further, the 2008 acquisition of Diner’s Club International is expected to skyrocket Discover’s acceptance among international countries from 50 to 185 by the end of this year.

Discover continues to be a major player in the cash back credit card field, with the Discover More card offering 5 percent cash back in categories that rotate every three months. In recent years, the card issuer has also branched into travel rewards cards, with the Miles by Discover Card, and the issuer’s first annual-fee card, the Escape by Discover card. The latter is currently one of Discover’s most attractive credit card offerings: for a $60 annual fee, Escape by Discover cardholders earn two miles per dollar spent, as well as an attractive sign-up mileage bonus for new cardholders, currently at 25,000 miles, paid out at 1,000 miles for each month the card is used.