Who Invented the Discover Credit Card?

By Jacquelyn Jeanty

  • Overview

    Who Invented the Discover Credit Card?
    Who Invented the Discover Credit Card?
    Of all the major credit cards today, the Discover Card has quite the convoluted history. It's unique offerings brought new services and options to the credit card industry. This new approach to credit offerings allowed the card to endure in spite of the twists and turns encountered along the way.
  • History

    Known as America's cash rewards pioneer, Discover was the first major credit card to offer cash-back rewards with no annual fees. The card was invented in 1985 by the Sears Corporation, which at the time was the largest retailer in the United States. Sears was looking for ways to expand its reach, and the Discover Card was invented to work in conjunction with its issuing bank--the Greenwood Trust Company. This marked the start of the Sears Financial Network. With the added perks and a higher credit limit than that offered by Visa or MasterCard, it didn't take long for the new card to catch on.
  • Sears Struggles

    The Discover Card's cash-back allowance refunded 2 percent of every purchase back to the cardholder's account. Heavily used cards received a 5 percent cash-back allowance. Every Sears store featured a one-stop financial services center where the Discover Card was promoted. From there on, Sears stopped accepting Visa and MasterCard in its stores in an attempt to increase its number of cardholders. Customers and competing stores didn't take to this too well, resulting in a slowed customer turnover, while other retailers refused to accept the Discover Card so as not to promote Sears' business.


  • New Ownership

    Sears began to struggle toward the late 1980s as superstores like Wal-Mart gained a foothold in the retail world. The company eventually sold its financial services division to Dean Witter Financial in 1993. By 1997, the Greenwood Trust Company became the Discover Bank following the acquisition of Dean Witter by Morgan Stanley. From there on, the new bank became the sole issuer for the card. In 2004, the bank acquired PULSE, an electronic funds transfer association. This service allowed the company to issue and market its own automatic teller machine cards. It happened on the heels of a Supreme Court ruling where Discover challenged exclusionary policies put forth by Visa and MasterCard. These policies were put in place to prevent banks from issuing Discover Cards where Visa and MasterCards were issued. The court ruled in Discover's favor. This paved the way for the PULSE acquisition.
  • Potential

    Soon thereafter, Discover Bank worked out a deal with GE Consumer Finance. Since Wal-Mart and Sam's Club banked through GE, the card was now accepted in those stores. It became the only card accepted by Sam's Club until 2006, at which time the business reverted back to accepting MasterCard only. By 2007, the Discover Network branched out on its own as an independent company and became the Discover Financial Network. And while the company did become one of the leading credit card issuers, its reach remained limited to the United States.
  • Considerations

    Today, the Discover Card has over 50 million cardholders with a network of over four million merchant and ATM locations, though only a few countries outside of the United States accept the card. However, ATM locations around the world do grant cash access to cardholders. In spite of Sears selling off its card services, it continues to accept account payments on behalf of Discover at participating Sears stores. This also extends to the Canadian-based Sears stores. While just a handful of Canadian retailers accept the card, their preference is still for Visa and MasterCard.
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