Discover 2014 Annual Report Download - page 23

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All Discover card accounts generally have the same billing structure. We generally send a monthly billing
statement to each customer who has an outstanding debit or credit balance. Customers also can waive their right to
receive a physical copy of their bill, in which case they will receive email notifications of the availability of their billing
statement online. Discover card accounts are grouped into multiple billing cycles for operational purposes. Each billing
cycle has a separate billing date, on which we process and bill to customers all activity that occurred in the related
accounts during a period of approximately 28 to 32 days that ends on the billing date.
Discover card accounts are assessed periodic finance charges using fixed and/or variable interest rates. Certain
account balances, such as balance transfers, may accrue periodic finance charges at lower fixed rates for a specified
period of time. Variable rates are indexed to the highest prime rate published in The Wall Street Journal on the last
business day of the month. Periodic finance charges are calculated using the daily balance (including current
transactions) method, which results in daily compounding of periodic finance charges, subject to a grace period on new
purchases. The grace period essentially provides that periodic finance charges are not imposed on new purchases, or
any portion of a new purchase, that is paid by the due date on the customer's current billing statement if the customer
paid the balance on his or her previous billing statement in full by the due date on that statement. Neither cash
advances nor balance transfers are subject to a grace period.
Each customer with an outstanding debit balance on his or her Discover card account must generally make a
minimum payment each month. If a customer exceeds his or her credit limit as of the last day of the billing period, we
may include all or a portion of this excess amount in the customer's minimum monthly payment. A customer may pay
the total amount due at any time. We also may enter into arrangements with delinquent customers to extend or
otherwise change payment schedules, and to waive finance charges and/or fees, including re-aging accounts in
accordance with regulatory guidance.
In addition to periodic finance charges, we may impose other charges and fees on Discover card accounts,
including cash advance transaction fees, late fees where a customer has not made a minimum payment by the required
due date, balance transfer fees and returned payment fees. We also charge fees each time we decline to honor a
balance transfer check, cash advance check, or other promotional check due to such reasons as insufficient credit
availability, delinquency or default.
The Credit Card Accountability Responsibility and Disclosure Act of 2009 (the "CARD Act") required us to
review, every six months, certain interest rates that were increased on accounts since January 1, 2009 to determine
whether to reduce the interest rate based on the factors that prompted the increase or factors we currently consider in
determining interest rates applicable to similar new credit card accounts. The amount of any rate decrease must be
determined based upon our reasonable policies and procedures. Any reduced interest rate must be applied to the
account not later than 45 days after completion of the review.
Student Loans
The terms and conditions governing our student loans vary by product and are specified in the borrower's
promissory note and disclosures. Each borrower signs a promissory note and accepts the loan terms during the
application process. Student loans feature zero origination fees, fixed or variable interest rates, and potential rewards.
Student loans may include a deferment period, during which borrowers are not required to make payments while
enrolled in school at least half time. This period begins on the date the loan is first disbursed and ends six to nine
months after the borrower ceases to be enrolled in school at least half time. We also offer an optional "In-School
Payment" product that requires a student to make monthly payments while in school. The standard repayment period is
15 to 20 years, depending on the type of student loan. Borrowers can choose to receive electronic communications, in
which case they will receive email notifications of the availability of their monthly billing statements online. There is no
prepayment penalty, and borrowers may decide whether or not to apply any excess payments toward their next
monthly payments and advance their next due date.
We calculate interest on a daily basis on the outstanding principal loan balance until the loan is paid in full. The
interest rate will never be higher than the maximum allowed by law, as stated in the promissory note and disclosures.
The variable interest rate we offer, is equal to a variable index (e.g., based on the prime rate, London Interbank Offered
Rate ("LIBOR") or T-Bill) plus a fixed margin assigned to the loan during origination. Variable interest rates may adjust
quarterly if the index changes. We may impose other charges, including late charges when a customer has not made a
minimum payment by the required due date and a returned check charge. In certain circumstances, we may offer
borrower assistance programs including forbearance periods of up to 12 months over the life of the loan or short-term
payment reductions. We accrue interest when loans are in forbearance or in other payment assistance programs.