Discover 2015 Annual Report Download - page 18

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Credit Cards
We currently offer credit cards issued to consumers. Our credit card customers are permitted to "revolve" their
balances and repay their obligations over a period of time and at an interest rate set forth in their cardmember
agreements, which may be either fixed or variable. The interest that we earn on revolving credit card balances makes up
approximately 83% of our total interest income. We also charge customers other fees as specified in the cardmember
agreements. These fees may include fees for late payments, balance transfer transactions and cash advance transactions.
Our credit card customers' transactions in the U.S. are processed over the Discover Network. Where we have a
direct relationship with a merchant, which is the case with respect to our large merchants representing a majority of
Discover card sales volume, we receive discount and fee revenue from merchants. Discount and fee revenue is based on
pricing that is set forth in contractual agreements with each such merchant and is based on a number of factors including
industry practices, special marketing arrangements, competitive pricing levels and merchant size. Where we do not have
a direct relationship with a merchant, we receive acquirer interchange and assessment fees from the merchant acquirer
that settles transactions with the merchant. The amount of this fee is based on a standardized schedule and can vary
based on the type of merchant.
Most of our cards offer the Cashback Bonus rewards program, the costs of which we record as a reduction of
discount and interchange revenue. See "— Marketing — Rewards/Cashback Bonus" for further discussion of our
programs offered.
The following chart* shows the Discover card transaction cycle as processed on the Discover Network:
Student Loans
Our private student loans are available to students attending eligible non-profit undergraduate and graduate
schools. We also offer certain post-graduate loans, including bar study and residency loans. We encourage students to
borrow responsibly and maximize grants, scholarships and other free financial aid before taking student loans.
We currently offer fixed and variable rate private student loans originated by Discover Bank. We market our
student loans online and through direct mail and email to existing and potential customers. We also work with school
financial aid offices and high school guidance counselors to create awareness of our products with students and their
families. Students can apply for our student loans online, by phone, or by mail, and we have dedicated staff within our
call centers to service student loans. We invite applicants to apply with a creditworthy cosigner, which may improve the
likelihood for loan approval and a lower interest rate.
As part of the loan approval process, all of our student loans, except for bar study and residency loans, are
certified by and disbursed through the school to ensure students do not borrow more than the cost of attendance less
other financial aid. Upon graduation, for variable rate loans originated before May 2014, students are generally
eligible to receive a graduation reward. Students may redeem their graduation reward as a credit to the balance of any
of their Discover student loans or as a direct deposit to a bank account. For all loans originated in May 2014 and after,