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Credit Card Applications » News » Other » Discover announces a successful quarter

Discover announces a successful quarter

October 23, 2010
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Discover Financial Services is one of the leading credit card companies in the country and it has been a persistent effort from the company to align its policies in sync with the new credit card reform legislation. The latest release from the company seems to show that the strategies are indeed paying off. The company usually announces its quarterly numbers a whole month ahead of its competitors in the credit card industry and they seem to be reasonably good in spite of the many restrictions imposed by the new rules which were supposed to eat into the revenues of credit card companies. The profits of the credit card company fell less than expected which is surely a good sign. The net income of the company fell from 552.9 million dollars during the third quarter of last year to 258.2 million dollars this quarter. Even the revenue has fallen by 7% in 2010 from the previous year's revenue of 1.71 billion dollars.

During the conference call announcing the third quarter results, the chief executive office of the company stated that the nation's unemployment rates have become a primary concern for the company and hence the primary strategy involved cutting off the credit to consumers with a bad credit rating and a poor payment history. The company according to the CEP will continue to separate credit card portfolio from high rates of unemployment without repeating mistakes of the past. This means that the company wouldn't be offering credit cards to individuals who have a bad credit record and hence present a high credit risk. It was also part of the statement that the dropping rates of interest have helped the business of the company as the credit card holders are spending more to take advantage of the lower interest rate.

Although introductory offers of credit cards offered a very lucrative business at one point of time, Discover seems to be cutting back on them. These offers once cost between 2-3% of the amount being transferred but now costs almost double at 4-5%. Before the legislation came into affect the credit card issuers were able to make quite some revenue from the balance transfer offers because the equity part of the payment was applied towards the lowest interest of the balance first. This would lead to account continuing to build interest causing customers to pay more interest on top of what they were already paying. A part of the new profits is also due to increase in merchants accepting the card.

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