10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

x	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
	For the quarterly period ended August 31, 2012

o	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
	For the transition period from                    to

Commission File Number 001-33378

DISCOVER FINANCIAL SERVICES

(Exact name of registrant as specified in its charter)

Delaware	36-2517428
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)
2500 Lake Cook Road, Riverwoods, Illinois 60015	(224) 405-0900
(Address of principal executive offices, including zip code)	(Registrant’s telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  S    No  ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).     Yes  S    No  ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer  x	Accelerated filer  o
Non-accelerated filer  o (Do not check if a  smaller reporting company)	Smaller reporting company o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).    Yes  ¨    No  S

As of September 28, 2012, there were 504,775,854 shares of the registrant’s Common Stock, par value $0.01 per share, outstanding.

DISCOVER FINANCIAL SERVICES

Quarterly Report on Form 10-Q

for the quarterly period ended August 31, 2012

TABLE OF CONTENTS

Part I. FINANCIAL INFORMATION	1
Item 1.      Financial Statements	1
Item 2.      Management’s Discussion and Analysis of Financial Condition and Results of Operations	51
Item 3.      Quantitative and Qualitative Disclosures About Market Risk	79
Item 4.      Controls and Procedures	80
Part II. OTHER INFORMATION	81
Item 1.      Legal Proceedings	81
Item 1A.   Risk Factors	81
Item 2.      Unregistered Sales of Equity Securities and Use of Proceeds	81
Item 3.      Defaults Upon Senior Securities	81
Item 4. Mine Safety Disclosures	81
Item 5.      Other Information	81
Item 6.      Exhibits	81

Except as otherwise indicated or unless the context otherwise requires, “Discover Financial Services,” “Discover,” “DFS,” “we,” “us,” “our,” and “the Company” refer to Discover Financial Services and its subsidiaries.

We own or have rights to use the trademarks, trade names and service marks that we use in conjunction with the operation of our business, including, but not limited to: Discover^®, PULSE^®, Cashback Bonus^®, Discover^® More^® Card, Discover^® Motiva^SM Card, Discover^® Open Road^® Card, Discover^® Network and Diners Club International^®. All other trademarks, trade names and service marks included in this quarterly report on Form 10-Q are the property of their respective owners.

Part I. FINANCIAL INFORMATION

Item 1. Financial Statements

DISCOVER FINANCIAL SERVICES

Condensed Consolidated Statements of Financial Condition

	August 31, 2012			November 30, 2011
	(unaudited) (dollars in thousands, except share amounts)
Assets
Cash and cash equivalents	$	6,237,610		$	2,849,843
Restricted cash	301,349			1,285,820
Other short-term investments	250			—
Investment securities:
Available-for-sale (amortized cost of $6,250,126 and $6,019,927 at August 31, 2012 and November 30, 2011, respectively)	6,377,502			6,107,831
Held-to-maturity (fair value of 92,268 and $96,042 at August 31, 2012 and November 30, 2011, respectively)	90,005			98,222
Total investment securities	6,467,507			6,206,053
Loan receivables:
Mortgage loans held for sale, measured at fair value	272,082			—
Student loans held for sale	—			714,180
Loan portfolio:
Credit card	48,124,468			46,638,625
Other	5,893,952			4,733,742
Purchased credit-impaired loans	4,867,010			5,250,388
Total loan portfolio	58,885,430			56,622,755
Total loan receivables	59,157,512			57,336,935
Allowance for loan losses	(1,687,664		)	(2,205,196		)
Net loan receivables	57,469,848			55,131,739
Premises and equipment, net	519,621			483,250
Goodwill	287,043			255,421
Intangible assets, net	192,181			188,018
Other assets	2,433,255			2,383,793
Total assets	$	73,908,664		$	68,783,937
Liabilities and Stockholders’ Equity
Deposits:
Interest-bearing deposit accounts	$	42,175,032		$	39,463,887
Non-interest bearing deposit accounts	143,280			113,575
Total deposits	42,318,312			39,577,462
Short-term borrowings	250,139			50,000
Long-term borrowings	19,246,113			18,287,178
Accrued expenses and other liabilities	2,948,187			2,627,086
Total liabilities	64,762,751			60,541,726
Commitments, contingencies and guarantees (Notes 9, 12, and 13)
Stockholders’ Equity:
Common stock, par value $.01 per share; 2,000,000,000 shares authorized; 552,572,624 and 549,748,783 shares issued at August 31, 2012 and November 30, 2011, respectively	5,526			5,497
Additional paid-in capital	3,570,371			3,507,754
Retained earnings	6,877,990			5,243,318
Accumulated other comprehensive loss	(31,326		)	(51,679		)
Treasury stock, at cost; 45,086,760 and 20,918,354 shares at August 31, 2012 and November 30, 2011, respectively	(1,276,648		)	(462,679		)
Total stockholders’ equity	9,145,913			8,242,211
Total liabilities and stockholders’ equity	$	73,908,664		$	68,783,937

The table below presents the carrying amounts of certain assets and liabilities of Discover Financial Services’ consolidated variable interest entities (VIEs) which are included in the condensed consolidated statements of financial condition above. The assets in the table below include those assets that can only be used to settle obligations of the consolidated VIEs. The liabilities in the table below include third party liabilities of consolidated VIEs only, and exclude intercompany balances that eliminate in consolidation. The liabilities also exclude amounts for which creditors have recourse to the general credit of Discover Financial Services.

	August 31, 2012			November 30, 2011
	(unaudited) (dollars in thousands)
Assets
Restricted cash	$	295,439		$	1,274,175
Credit card loan receivables	33,517,582			33,815,860
Purchased credit-impaired loans	2,631,970			2,839,871
Allowance for loan losses allocated to securitized loan receivables	(1,074,058		)	(1,510,730		)
Other assets	33,638			33,724
Liabilities
Long-term borrowings	$	17,337,914		$	15,842,512
Accrued interest payable	13,906			13,184

See Notes to Condensed Consolidated Financial Statements.

1

DISCOVER FINANCIAL SERVICES

Condensed Consolidated Statements of Income

	For the Three Months Ended August 31,					For the Nine Months Ended August 31,
	2012		2011			2012		2011
	(unaudited)  (dollars in thousands, except per share amounts)
Interest income:
Credit card loans	$	1,451,836	$	1,423,496		$	4,296,757	$	4,243,803
Other loans	217,433		157,424			630,313		428,762
Investment securities	21,371		15,676			58,869		42,535
Other interest income	4,329		2,496			11,207		10,234
Total interest income	1,694,969		1,599,092			4,997,146		4,725,334
Interest expense:
Deposits	204,982		241,719			650,213		749,584
Short-term borrowings	423		33			424		116
Long-term borrowings	119,905		120,301			368,472		375,060
Total interest expense	325,310		362,053			1,019,109		1,124,760
Net interest income	1,369,659		1,237,039			3,978,037		3,600,574
Provision for loan losses	126,288		99,514			510,401		692,763
Net interest income after provision for loan losses	1,243,371		1,137,525			3,467,636		2,907,811
Other income:
Discount and interchange revenue, net	265,531		282,889			795,166		809,631
Protection products revenue	104,201		107,858			310,256		321,527
Loan fee income	80,012		84,243			241,719		250,596
Transaction processing revenue	59,168		43,931			163,823		131,792
Merchant fees	4,426		4,110			11,654		12,981
Gain (loss) on investments	—		(3,614		)	28		(3,622		)
Other income	80,912		32,546			154,247		135,526
Total other income	594,250		551,963			1,676,893		1,658,431
Other expense:
Employee compensation and benefits	274,366		241,881			770,448		684,782
Marketing and business development	160,534		133,398			410,975		393,244
Information processing and communications	68,812		63,547			210,723		194,852
Professional fees	107,749		106,042			317,334		301,122
Premises and equipment	19,562		18,063			55,728		53,268
Other expense	194,884		79,476			486,194		245,431
Total other expense	825,907		642,407			2,251,402		1,872,699
Income before income tax expense	1,011,714		1,047,081			2,893,127		2,693,543
Income tax expense	385,028		398,263			1,098,844		979,414
Net income	$	626,686	$	648,818		$	1,794,283	$	1,714,129
Net income allocated to common stockholders	$	620,770	$	641,772		$	1,776,770	$	1,694,636
Basic earnings per share	$	1.21	$	1.18		$	3.39	$	3.11
Diluted earnings per share	$	1.21	$	1.18		$	3.39	$	3.11
Dividends paid per share	$	0.10	$	0.06		$	0.30	$	0.14

See Notes to the Condensed Consolidated Financial Statements.

2

DISCOVER FINANCIAL SERVICES

Condensed Consolidated Statements of Comprehensive Income

	For the Three Months Ended August 31,					For the Nine Months Ended August 31,
	2012			2011		2012			2011
	(unaudited)  (dollars in thousands, except per share amounts)
Net income	$	626,686		$	648,818	$	1,794,283		$	1,714,129
Other comprehensive income, net of taxes
Unrealized gain on securities available for sale, net of tax	9,931			38,170		24,626			54,897
Unrealized (loss) gain on cash flow hedges, net of tax	(241		)	8,208		(2,497		)	7,330
Unrealized pension and post-retirement benefit gain (loss), net of tax	—			1		(1,776		)	342
Other comprehensive income	9,690			46,379		20,353			62,569
Comprehensive income	$	636,376		$	695,197	$	1,814,636		$	1,776,698

See Notes to the Condensed Consolidated Financial Statements.

3

DISCOVER FINANCIAL SERVICES

Condensed Consolidated Statements of Changes in Stockholders’ Equity

		Common Stock			Additional Paid-in Capital		Retained Earnings			Accumulated Other Comprehensive Income (Loss)			Treasury Stock			Total Stockholders’ Equity
		Shares	Amount
	(unaudited) (dollars and shares in thousands)
Balance at November 30, 2010		547,128	$	5,471	$	3,435,318	$	3,126,488		$	(82,548	)	$	(27,883	)	$	6,456,846
Net income		—	—		—		1,714,129			—			—			1,714,129
Other comprehensive income		—	—		—		—			62,569			—			62,569
Purchases of treasury stock		—	—		—		—			—			(207,560		)	(207,560		)
Common stock issued under employee benefit plans		40	—		906		—			—			—			906
Common stock issued and stock-based compensation expense		2,308	24		56,439		—			—			—			56,463
Dividends—common stock		—	—		—		(77,437		)	—			—			(77,437		)
Balance at August 31, 2011		549,476	$	5,495	$	3,492,663	$	4,763,180		$	(19,979	)	$	(235,443	)	$	8,005,916
Balance at November 30, 2011		549,749	$	5,497	$	3,507,754	$	5,243,318		$	(51,679	)	$	(462,679	)	$	8,242,211
Net income		—	—		—		1,794,283			—			—			1,794,283
Other comprehensive income		—	—		—		—			20,353			—			20,353
Purchases of treasury stock		—	—		—		—			—			(813,969		)	(813,969		)
Common stock issued under employee benefit plans		41	—		1,323		—			—			—			1,323
Common stock issued and stock based compensation expense		2,783	29		61,294		—			—			—			61,323
Dividends—common stock		—	—		—		(159,611		)	—			—			(159,611		)
Balance at August 31, 2012		552,573	$	5,526	$	3,570,371	$	6,877,990		$	(31,326	)	$	(1,276,648	)	$	9,145,913

See Notes to the Condensed Consolidated Financial Statements.

4

DISCOVER FINANCIAL SERVICES

Condensed Consolidated Statements of Cash Flows

	For the Nine Months Ended August 31,
	2012			2011
	(unaudited)
	(dollars in thousands)
Cash flows from operating activities
Net income	$	1,794,283		$	1,714,129
Adjustments to reconcile net income to net cash provided by operating activities:
Provision for loan losses	510,401			692,763
Deferred income taxes	159,001			351,854
Depreciation and amortization on premises and equipment	70,931			66,274
Amortization of deferred revenues	(154,008		)	(191,290		)
Other depreciation and amortization	(102,927		)	(35,346		)
(Gain) loss on investments	(28		)	3,622
Loss on equity method and other investments	8,061			—
(Gain) loss on premises and equipment	(494		)	3,242
Loss on sale of other assets	314			—
(Gain) on origination and sale of loans	(48,541		)	(6,154		)
Stock-based compensation expense	36,108			33,690
(Gain) on purchase of business	—			(15,917		)
Proceeds from sale of mortgage loans originated for sale	550,815			—
Net principal disbursed on mortgage loans originated for sale	(782,677		)	—
Changes in assets and liabilities:
(Increase) decrease in other assets	(129,661		)	32,339
Increase in accrued expenses and other liabilities	247,626			106,908
Net cash provided by operating activities	2,159,204			2,756,114
Cash flows from investing activities
Maturities of other short-term investments	—			375,000
Purchases of other short-term investments	(250		)	—
Maturities and sales of available-for-sale investment securities	1,558,449			786,463
Purchases of available-for-sale investment securities	(1,708,935		)	(1,627,215		)
Maturities of held-to-maturity investment securities	9,101			17,466
Purchases of held-to-maturity investment securities	(51,285		)	(550		)
Proceeds from sale of student loans held for sale	270,020			21,859
Net principal disbursed on loans originated for investment	(2,532,687		)	(3,040,152		)
Purchase of loan receivables	(390,075		)	(596,163		)
Purchase of net assets of a business	(48,886		)	—
Purchase of business, net of cash acquired	—			(401,158		)
Purchase of other investments	(27,168		)	(15,000		)
Decrease in restricted cash	985,338			623,794
Proceeds from sale of premises and equipment	515			13
Purchases of premises and equipment	(104,685		)	(70,053		)
Net cash used for investing activities	(2,040,548		)	(3,925,696		)
Cash flows from financing activities
Net increase in short-term borrowings	200,139			100,000
Proceeds from issuance of securitized debt	5,099,617			2,500,000
Maturities and repayment of securitized debt	(3,648,040		)	(5,114,986		)
Repayment of long-term borrowings and bank notes	(12,681		)	(345,048		)
Premium paid on debt exchange	(114,493		)	—
Proceeds from issuance of common stock	16,231			17,928
Purchases of treasury stock	(813,896		)	(207,560		)
Net increase in deposits	2,701,115			3,147,752
Dividends paid on common stock	(158,881		)	(69,712		)
Net cash provided by financing activities	3,269,111			28,374
Net increase (decrease) in cash and cash equivalents	3,387,767			(1,141,208		)
Cash and cash equivalents, at beginning of period	2,849,843			5,098,733
Cash and cash equivalents, at end of period	$	6,237,610		$	3,957,525
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the period for:
Interest expense	$	898,126		$	1,045,370
Income taxes, net of income tax refunds	$	967,774		$	635,360
Non-cash transactions:
Initial fair value of contingent consideration to be paid for purchase of net assets of a business	$	8,541		$	—
Assumption of debt by buyer related to loans sold	$	424,993		$	—
Assumption of SLC debt	$	—		$	2,921,372

See Notes to the Condensed Consolidated Financial Statements.

5

Notes to the Condensed Consolidated Financial Statements

(unaudited)

1. Background and Basis of Presentation

Description of Business. Discover Financial Services (“DFS” or the “Company”) is a direct banking and payment services company. The Company is a bank holding company under the Bank Holding Company Act of 1956 as well as a financial holding company under the Gramm-Leach-Bliley Act and therefore is subject to oversight, regulation and examination by the Board of Governors of the Federal Reserve System (the “Federal Reserve”). Through its Discover Bank subsidiary, a Delaware state-chartered bank, the Company offers its customers credit card loans, private student loans, personal loans, and deposit products. Through its Discover Home Loans, Inc. subsidiary, the Company offers its customers home loans. The majority of the Direct Banking revenues relate to interest income earned on each of its loan products. Through its DFS Services LLC subsidiary and its subsidiaries, the Company operates the Discover Network, the PULSE Network (“PULSE”), and Diners Club International (“Diners Club”). The Discover Network is a payment card transaction processing network for Discover card-branded and third-party issued credit, debit and prepaid cards. PULSE operates an electronic funds transfer network, providing financial institutions issuing debit cards on the PULSE network with access to ATMs domestically and internationally, as well as point of sale terminals at retail locations throughout the U.S. for debit card transactions. Diners Club is a global payments network of licensees, which are generally financial institutions, that issue Diners Club branded credit cards and/or provide card acceptance services.

The Company’s business segments are Direct Banking and Payment Services. The Direct Banking segment includes consumer banking and lending products which includes Discover card-branded credit cards issued to individuals and small businesses on the Discover Network and other consumer products and services, including home loans, personal loans, private student loans, prepaid cards and other consumer lending and deposit products. The Payment Services segment includes PULSE, Diners Club and the Company’s third-party issuing business, which includes credit, debit and prepaid cards issued on the Discover Network by third parties.

Basis of Presentation. The accompanying condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States (“GAAP”) for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by GAAP for complete consolidated financial statements. In the opinion of management, the financial statements reflect all adjustments which are necessary for a fair presentation of the results for the quarter. All such adjustments are of a normal, recurring nature. The preparation of financial statements in conformity with GAAP requires the Company to make estimates and assumptions that affect the amounts reported in the condensed consolidated financial statements and related disclosures. These estimates are based on information available as of the date of the condensed consolidated financial statements. The Company believes that the estimates used in the preparation of the condensed consolidated financial statements are reasonable. Actual results could differ from these estimates. These interim condensed consolidated financial statements should be read in conjunction with the Company’s 2011 audited consolidated financial statements filed with the Company’s annual report on Form 10-K for the fiscal year ended November 30, 2011.

Recently Issued Accounting Pronouncements. In July 2012, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update ("ASU") No. 2012-02, Intangibles-Goodwill and Other (Topic 350): Testing Indefinite-Lived Intangible Assets for Impairment. ASU 2012-02 applies to long-lived intangible assets, other than goodwill, that are not subject to amortization on the basis that they have indefinite useful lives. This standard is intended to simplify impairment testing by adding a qualitative review step to assess whether the required quantitative impairment analysis that exists today is necessary. Under the new standard, a company will not be required to calculate the fair value of the intangible asset unless it concludes, based on the qualitative assessment, that it is more likely than not that the fair value of that asset is less than its book value. If such a decline in fair value is deemed more likely than not to have occurred, then the quantitative impairment test that exists under current GAAP must be completed; otherwise, the asset is deemed to be not impaired and no further testing is required until the next annual test date (or sooner if conditions or events before that date raise concerns of potential impairment of the asset). The amended impairment guidance does not affect the manner in which fair value is determined. The new guidance is effective for annual and interim impairment tests performed for fiscal years beginning after September 15, 2012, with early adoption permitted. The Company's non-amortizable intangibles consist of $155 million in acquired trade names and other assets associated with Diners Club. The value of those assets will not be affected by the adoption of this standard.

6

In December 2011, the FASB issued ASU No. 2011-11, Balance Sheet (Topic 210): Disclosures about Offsetting Assets and Liabilities. ASU 2011-11 adds certain additional disclosure requirements about financial instruments and derivatives instruments that are subject to netting arrangements. The Company has master netting arrangements pertaining to collateral posting requirements with its interest rate swap counterparties, as more fully discussed in Note 15: Derivatives and Hedging Activities. Additional details about these positions and how they are reported will be disclosed. The new disclosures are required for annual reporting periods beginning on or after January 1, 2013, and interim periods within those periods. Because this amendment impacts disclosures only, it will have no effect on the Company's financial condition, results of operations or cash flows.

In September 2011, the FASB issued ASU No. 2011-08, Intangibles-Goodwill and Other (Topic 350): Testing Goodwill for Impairment. ASU 2011-08 is intended to simplify goodwill impairment testing by adding a qualitative review step to assess whether the required quantitative impairment analysis that exists today is necessary.Under the amended rule, a company will not be required to calculate the fair value of a business that contains recorded goodwill unless it concludes, based on the qualitative assessment, that it is more likely than not that the fair value of that business is less than its book value. If such a decline in fair value is deemed more likely than not to have occurred, then the quantitative goodwill impairment test that exists under current GAAP must be completed; otherwise, goodwill is deemed to be not impaired and no further testing is required until the next annual test date (or sooner if conditions or events before that date raise concerns of potential impairment in the business). The amended goodwill impairment guidance does not affect the manner in which a company estimates fair value. The new standard is effective for annual and interim goodwill impairment tests performed for fiscal years beginning after December 15, 2011, with early adoption permitted. The Company has $287 million in goodwill, which is associated with its PULSE Network and Discover Home Loans, Inc. The value of that goodwill will not be affected by the adoption of this standard.

In June 2011, the FASB issued ASU No. 2011-05, Comprehensive Income (Topic 220): Presentation of Comprehensive Income. This ASU will require companies to present the components of net income and other comprehensive income either as one continuous statement or as two consecutive statements. It eliminates the option to present components of other comprehensive income as part of the statement of changes in stockholders' equity. The standard does not change the items which must be reported in other comprehensive income, how such items are measured or when they must be reclassified to net income. The FASB subsequently deferred the effective date of certain provisions of this standard pertaining to the reclassification of items out of accumulated other comprehensive income, pending the issuance of further guidance on that matter. Because this ASU impacts presentation only, it had no effect on the Company's financial condition, results of operations or cash flows.

In May 2011, the FASB issued ASU No. 2011-04, Fair Value Measurement (Topic 820): Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRSs. This ASU is intended to result in convergence between U.S. GAAP and International Financial Reporting Standards (“IFRS”) requirements for measurement of and disclosures about fair value. The amendments are not expected to have a significant impact on companies applying U.S. GAAP. Key provisions of the amendment include: a prohibition on grouping financial instruments for purposes of determining fair value, except when an entity manages market and credit risks on the basis of the entity’s net exposure to the group; an extension of the prohibition against the use of a blockage factor to all fair value measurements (that prohibition previously applied only to financial instruments with quoted prices in active markets); and a requirement that for recurring Level 3 fair value measurements, entities disclose quantitative information about unobservable inputs, a description of the valuation process used and qualitative details about the sensitivity of the measurements. In addition, for items not carried at fair value but for which fair value is disclosed, entities will be required to disclose the level within the fair value hierarchy that applies to the fair value measurement disclosed. The adoption of this ASU did not have a significant impact on the Company’s fair value measurements, financial condition, results of operations or cash flows.

In April 2011, the FASB issued ASU No. 2011-03, Transfers and Servicing (Topic 860): Reconsideration of Effective Control for Repurchase Agreements. This ASU amends the sale accounting requirement concerning a transferor’s ability to repurchase transferred financial assets even in the event of default by the transferee, which typically is facilitated in a repurchase agreement by the presence of a collateral maintenance provision. Specifically, the level of cash collateral received by a transferor will no longer be relevant in determining whether a repurchase agreement constitutes a sale. As a result of this amendment, more repurchase agreements will be treated as secured financings rather than sales. This ASU became effective for the Company on March 1, 2012. Because essentially all repurchase agreements entered into by the Company have historically been deemed to constitute secured financing transactions, this amendment did not have an impact on the Company’s characterization of such transactions or on the Company's financial condition, results of operations or cash flows.

7

2. Business Combinations

Acquisition of the net assets of the Home Loan Center, Inc. On June 6, 2012, through its Discover Home Loans, Inc. subsidiary, the Company acquired substantially all of the operating and related assets and certain liabilities of Home Loan Center, Inc. ("Home Loan Center"), a subsidiary of Tree.com, Inc., adding a residential mortgage lending component to the Company's direct banking business. In exchange for the net assets acquired, the Company paid an aggregate of $48.9 million, including payments made prior to the closing that were applied to the closing price. A portion of such amount is being held in escrow pending the Home Loan Center's ability to discharge certain contingent liabilities related to loans previously sold to secondary market investors. These contingent liabilities were not assumed by the Company. An additional $10.0 million of purchase price will be due from the Company on the first anniversary of the closing, subject to certain conditions being satisfied. The Company is finalizing its valuation analysis of assets acquired and liabilities assumed. The acquisition did not have a significant impact for the three or nine months ended August 31, 2012 on the Company's consolidated financial condition, results of operations or cash flows or on the Direct Banking reportable segment in which it is included.

Acquisition of The Student Loan Corporation. On December 31, 2010, the Company acquired The Student Loan Corporation (“SLC”), which is now a wholly-owned subsidiary of Discover Bank and included in the Company’s Direct Banking segment. The Company acquired SLC’s ongoing private student loan business, which includes certain private student loans held in three securitization trusts and other assets, and assumed SLC’s asset-backed securitization debt incurred by those trusts and other liabilities. The acquired loans are considered to be purchased credit-impaired ("PCI") loans for accounting purposes, the details of which are discussed further in Note 4: Loan Receivables. The acquisition significantly increased the size of the Company’s private student loan portfolio. In addition, the acquisition has provided the Company with a developed student loan business platform, additional school relationships and SLC’s website. Since the acquisition date, the results of operations and cash flows of SLC have been included in the Company’s condensed consolidated results of operations and cash flows. Pro forma data is not provided as the impact of the SLC acquisition was not significant to the Company’s condensed consolidated results of operations or cash flows.

Net cash consideration paid. The following table provides a calculation of the amount paid by the Company for SLC based on the net assets of the SLC securitization trusts acquired after applying an 8.5% discount to the trust assets (the “Trust Certificate Purchase Price”) (dollars in millions):
	Actual
Gross trust assets	$	3,977
Less: 8.5% discount	(338		)
Net trust assets	3,639
Less: Principal amount of and accrued interest on trust debt	(3,193		)
Trust Certificate Purchase Price	$	446

8

Although the Company paid SLC shareholders $600 million for the acquisition of SLC (“Aggregate Merger Consideration”), the Company received a purchase price adjustment from Citibank, N.A. (“Citibank”) equivalent to the amount by which the Aggregate Merger Consideration exceeded the value of the Trust Certificate Purchase Price. In addition, Citibank agreed to adjust the cash consideration paid by the Company to compensate it for (i) agreeing to commute certain insurance policies covering certain of the loans acquired and (ii) the value of non-trust related liabilities assumed by the Company. The following table provides a summary of total consideration paid by Discover including post-closing adjustments (dollars in millions):
	Actual
Aggregate Merger Consideration	$	600
Less: Purchase price adjustment	(154		)
Trust Certificate Purchase Price	446
Less: Further adjustments provided for by Citibank
Cash received for consent to insurance commutation	(16		)
Cash received related to reimbursable liabilities	(29		)
Net cash consideration paid	$	401

Net assets acquired. The Company acquired net assets (including $155 million of cash) with an aggregate fair value of $563 million in exchange for cash consideration of $556 million, resulting in the recognition of a bargain purchase gain of approximately $7 million. The bargain purchase gain primarily resulted from Citibank’s adjustment of the cash consideration to be paid by the Company in exchange for the Company’s consent to permit SLC to commute, immediately prior to the acquisition, certain student loan insurance policies covering loans in one of the three trusts. The bargain purchase gain is recorded in other income on the Company’s condensed consolidated statement of income. During the fourth quarter of 2011, the Company finalized its purchase accounting, which resulted in a decrease of $27 million in the indemnification asset and a $19 million increase in student loan receivables. In addition, there were immaterial changes made to the other assets purchased and liabilities assumed. These adjustments reflect the Company's finalized cash flow projections related to the student loans acquired. The offset to these adjustments resulted in a $9 million reduction in the originally estimated bargain purchase gain of $16 million.

The following table summarizes the fair values of the assets acquired and liabilities assumed at the date of the SLC acquisition (dollars in thousands):
	At December 31, 2010
Student loan receivables	$	3,070,042
Cash	155,347
Indemnification asset	74,571
Student relationships intangible	2,400
Trade name intangible	3,800
Total intangible assets	6,200
Other assets	217,441
Total assets acquired	3,523,601
Securitized debt	2,921,372
Other liabilities	38,889
Total liabilities assumed	2,960,261
Net assets acquired	$	563,340

The Company acquired $6.2 million in identifiable intangible assets. These intangible assets consist of student relationships and trade name intangibles. Acquired student relationships consist of those relationships in existence between SLC and the numerous students that carry student loan balances. This intangible asset is deemed to have a finite useful life of 5 years and will be amortized over this period. Trade name intangibles relate to trademarks, trade names and internet domains and content. This intangible asset is deemed to have an indefinite useful life and therefore is not subject to amortization.

9

The Company also recorded a $75 million indemnification asset. This asset reflects the discounted present value of payments expected to be received under Citibank’s indemnification of student loan credit losses that would have been recoverable under certain student loan insurance policies which, as noted above, were commuted pursuant to an agreement entered into by SLC with the Company’s consent immediately prior to the acquisition. The indemnification pertains only to loans in one of the three SLC securitization trusts that the Company acquired, namely the SLC Private Student Loan Trust 2010-A (“SLC 2010-A”). The SLC 2010-A trust included loans with an aggregate outstanding principal balance of $1.2 billion at the time of acquisition; outstanding loans in that trust totaled $1 billion as of August 31, 2012. The initial value of the indemnification asset was based on the amount of projected credit losses expected to be reimbursed by Citibank. Under the terms of the indemnification agreement with Citibank, indemnification payments related to student loan credit losses are subject to an overall cap of $166.8 million, consistent with the terms of the insurance policies which the indemnification serves to replace.

The subsequent accounting for the indemnification asset will generally reflect the manner in which the indemnified loans are subsequently measured. The value of the indemnification asset will increase or decrease as expected credit losses on the PCI student loans increase or decrease, respectively. An increase in expected losses on PCI student loans that results in the immediate recognition of an allowance for loan losses will result in an immediate increase in the indemnification asset. A decrease in expected losses that results in an immediate reversal of a previously recognized loan loss allowance will result in the immediate reduction of the indemnification asset. Recognition of an allowance for loan losses on PCI student loans is discussed in more detail within Note 4: Loan Receivables under “Purchased Credit-Impaired Loans.” To the extent that a decrease in expected losses results in a prospective increase in the accretable yield on PCI student loans rather than an immediate reduction of the loan loss allowance, the value of the indemnification asset will be adjusted prospectively through a reduction in the rate of amortization. Amortization and valuation adjustments to the indemnification asset are recorded through other income on the condensed consolidated statement of income.

3. Investments

The Company’s investment securities consist of the following (dollars in thousands):
	August 31, 2012		November 30, 2011
U.S. Treasury securities	$	2,471,448	$	2,563,800
U.S. government agency securities	2,319,285		2,795,223
States and political subdivisions of states	35,242		40,936
Other securities:
Credit card asset-backed securities of other issuers	164,294		299,889
Corporate debt securities(1)	145,529		449,469
To-be-announced investment securities	—		50,254
Residential mortgage-backed securities - Agency (2)	1,331,709		6,482
Total other securities	1,641,532		806,094
Total investment securities	$	6,467,507	$	6,206,053

____________________

(1) Amount represents corporate debt obligations issued under the Temporary Liquidity Guarantee Program (TLGP) that are guaranteed by the Federal Deposit Insurance Corporation (FDIC).

(2) Consists of residential mortgage-backed securities issued by Fannie Mae, Freddie Mac and Ginnie Mae.

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The amortized cost, gross unrealized gains and losses, and fair value of available-for-sale and held-to-maturity investment securities are as follows (dollars in thousands):
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
At August 31, 2012
Available-for-Sale Investment Securities(1)
U.S. Treasury securities	$	2,417,773	$	53,125	$	—		$	2,470,898
U.S. government agency securities	2,267,348		51,937		—			2,319,285
Credit card asset-backed securities of other issuers	161,386		2,908		—			164,294
Corporate debt securities	145,396		133		—			145,529
Residential mortgage-backed securities - Agency	1,258,223		19,273		—			1,277,496
Total available-for-sale investment securities	$	6,250,126	$	127,376	$	—		$	6,377,502
Held-to-Maturity Investment Securities(2)
U.S. Treasury securities(3)	$	550	$	—	$	—		$	550
States and political subdivisions of states	35,242		234		(302		)	35,174
Residential mortgage-backed securities - Agency (4)	54,213		2,331		—			56,544
Total held-to-maturity investment securities	$	90,005	$	2,565	$	(302	)	$	92,268
At November 30, 2011
Available-for-Sale Investment Securities(1)
U.S. Treasury securities	$	2,516,008	$	47,242	$	—		$	2,563,250
U.S. government agency securities	2,762,265		34,166		(1,208		)	2,795,223
Credit card asset-backed securities of other issuers	293,231		6,658		—			299,889
Corporate debt securities	448,423		1,066		(20		)	449,469
Total available-for-sale investment securities	$	6,019,927	$	89,132	$	(1,228	)	$	6,107,831
Held-to-Maturity Investment Securities(2)
U.S. Treasury securities(3)	$	550	$	—	$	—		$	550
States and political subdivisions of states	40,936		197		(2,823		)	38,310
Residential mortgage-backed securities - Agency (4)	6,482		650		—			7,132
To-be-announced investment securities	50,254		—		(204		)	50,050
Total held-to-maturity investment securities	$	98,222	$	847	$	(3,027	)	$	96,042

_________________________

(1) Available-for-sale investment securities are reported at fair value.

(2) Held-to-maturity investment securities are reported at amortized cost.

(3) Amount represents securities pledged as collateral to a government-related merchant for which transaction settlement occurs beyond the normal 24-hour period.

(4) Amounts represent residential mortgage-backed securities that were classified as held-to-maturity as they were entered into as a part of the Company's community reinvestment initiatives.

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The following table provides information about investment securities with aggregate gross unrealized losses and the length of time that individual investment securities have been in a continuous unrealized loss position as of August 31, 2012 and November 30, 2011 (dollars in thousands):
	Number of Securities in a Loss Position	Less than 12 months				More than 12 months
		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses
At August 31, 2012
Held-to-Maturity Investment Securities
State and political subdivisions of states	3	$	—	$	—	$	13,183	$	302
At November 30, 2011
Available-for-Sale Investment Securities
U.S. government agency securities	2	$	242,898	$	1,208	$	—	$	—
Corporate debt securities	3	$	100,041	$	20	$	—	$	—
Held-to-Maturity Investment Securities
State and political subdivisions of states	6	$	2,689	$	46	$	27,768	$	2,777
To-be-announced investment securities	2	$	50,050	$	204	$	—	$	—

During the three and nine months ended August 31, 2012, the Company received $473.7 million and $1.6 billion of proceeds related to maturities, redemptions, or liquidation of investment securities, as compared to $170.5 million and $803.9 million for the three and nine months ended August 31, 2011.

During the three and nine months ended August 31, 2012, and during the three months ended August 31, 2011, there were no sales of securities. During the nine months ended August 31, 2011, the Company received $161 thousand of proceeds and recorded $146 thousand of gross realized gains relating primarily to the sale of equity securities.

The Company records unrealized gains and losses on its available-for-sale investment securities in other comprehensive income. For the three and nine months ended August 31, 2012, the Company recorded net unrealized gains of $15.9 million ($9.9 million after tax) and $39.5 million ($24.6 million after tax), respectively, in other comprehensive income. For the three and nine months ended August 31, 2011, the Company recorded net unrealized gains of $61.0 million ($38.2 million after tax) and $87.7 million ($54.9 million after tax), respectively, in other comprehensive income.

At August 31, 2012 and November 30, 2011, the Company had $302 thousand and $2.8 million, respectively, of gross unrealized losses in a continuous loss position for more than 12 months on its held-to-maturity investment securities in states and political subdivisions of states. The Company believes the unrealized loss on these investments is the result of changes in interest rates subsequent to the Company’s acquisitions of these securities and that the reduction in value is temporary. The Company does not intend to sell these investments nor does it expect to be required to sell these investments before recovery of their amortized cost basis, as they were entered into as a part of the Company's community reinvestment initiatives. The Company expects to collect all amounts due according to the contractual terms of these securities.

12

Contractual maturities of available-for-sale debt securities and held-to-maturity debt securities at August 31, 2012 are provided in the table below (dollars in thousands):
	One Year or Less		After One Year Through Five Years		After Five Years Through Ten Years		After Ten Years		Total
Available-for-sale—Amortized Cost (1)
U.S. Treasury securities	$	175,393	$	2,242,380	$	—	$	—	$	2,417,773
U.S. government agency securities	567,952		1,699,396		—		—		2,267,348
Credit card asset-backed securities of other issuers	142,855		18,531		—		—		161,386
Corporate debt securities	145,396		—		—		—		145,396
Residential mortgage-backed securities - Agency	—		—		326,189		932,034		1,258,223
Total available-for-sale investment securities	$	1,031,596	$	3,960,307	$	326,189	$	932,034	$	6,250,126
Held-to-maturity—Amortized Cost (2)
U.S. Treasury securities	$	550	$	—	$	—	$	—	$	550
State and political subdivisions of states	1,385		3,285		—		30,572		35,242
Residential mortgage-backed securities - Agency(3)	—		—		—		54,213		54,213
Total held-to-maturity investment securities	$	1,935	$	3,285	$	—	$	84,785	$	90,005
Available-for-sale—Fair Values (1)
U.S. Treasury securities	$	175,949	$	2,294,949	$	—	$	—	$	2,470,898
U.S. government agency securities	570,147		1,749,138		—		—		2,319,285
Credit card asset-backed securities of other issuers	144,788		19,506		—		—		164,294
Corporate debt securities	145,529		—		—		—		145,529
Residential mortgage-backed securities - Agency	—		—		329,418		948,078		1,277,496
Total available-for-sale investment securities	$	1,036,413	$	4,063,593	$	329,418	$	948,078	$	6,377,502
Held-to-maturity—Fair Values (2)
U.S. Treasury securities	$	550	$	—	$	—	$	—	$	550
State and political subdivisions of states	1,387		3,350		—		30,437		35,174
Residential mortgage-backed securities - Agency(3)	—		—		—		56,544		56,544
Total held-to-maturity investment securities	$	1,937	$	3,350	$	—	$	86,981	$	92,268

____________________

(1) Available-for-sale investment securities are reported at fair value.

(2) Held-to-maturity investment securities are reported at amortized cost.

(3) Amounts represent residential mortgage-backed securities that were classified as held-to-maturity as they were entered into as a part of the Company's community reinvestment initiatives.

Other Investments.As a part of the Company's community reinvestment initiatives, the Company has made equity investments in certain limited partnerships and limited liability companies that finance the construction and rehabilitation of affordable rental housing, as well as stimulate economic development in low to moderate income communities. These investments are accounted for using the equity method of accounting, and are recorded within other assets, and the related commitment for future investments is recorded in other liabilities within the statement of financial condition. The portion of each investment's operating results allocable to the Company is recorded in other expense within the condensed consolidated statement of income. The Company earns a return primarily through the receipt of tax credits allocated to the affordable housing projects and the community revitalization projects. These investments are not consolidated as the Company does not have a controlling financial interest in the entities. As of August 31, 2012 and November 30, 2011, the Company had outstanding investments of $194.8 million and $137.9 million, respectively, in these entities, and the related contingent liability was $52.6 million and $6.3 million, respectively.

13

4. Loan Receivables

The Company has three portfolio segments: credit card loans, other loans and PCI student loans acquired in the SLC transaction (See Note 2: Business Combinations) and in a separate portfolio acquisition from Citibank. Within these portfolio segments, the Company has classes of receivables which are depicted in the table below (dollars in thousands):

	August 31, 2012			November 30, 2011
Student loans held for sale(1)	$	—		$	714,180
Mortgage loans held for sale(2)	272,082			—
Loan portfolio:
Credit card loans:
Discover card(3)	47,915,177			46,419,544
Discover business card	209,291			219,081
Total credit card loans	48,124,468			46,638,625
Other loans:
Personal loans	3,114,408			2,648,051
Private student loans	2,752,715			2,069,001
Other	26,829			16,690
Total other loans	5,893,952			4,733,742
PCI student loans(4)	4,867,010			5,250,388
Total loan portfolio	58,885,430			56,622,755
Total loan receivables	59,157,512			57,336,935
Allowance for loan losses	(1,687,664		)	(2,205,196		)
Net loan receivables	$	57,469,848		$	55,131,739

____________________________

(1) Amount represents federal student loans. At November 30, 2011, $446.6 million of federal student loan receivables were pledged as collateral against a long-term borrowing. During first quarter 2012, Discover Bank sold these loans and recorded a loss of $518 thousand. As a part of this transaction, the related borrowings were assumed by the purchaser.

(2) All mortgage loans held for sale are pledged as collateral against the warehouse line of credit used to fund consumer residential loans. See Note 7: Borrowings.

(3) Amounts include $19.9 billion and $18.5 billion underlying investors’ interest in trust debt at August 31, 2012 and November 30, 2011, respectively, and $13.6 billion and $15.4 billion in seller’s interest at August 31, 2012 and November 30, 2011, respectively. See Note 5: Credit Card and Student Loan Securitization Activities for further information.

(4) Amounts include $2.6 billion and $2.8 billion of loans pledged as collateral against the notes issued from the SLC securitization trusts at August 31, 2012 and November 30, 2011, respectively. See Note 5: Credit Card and Student Loan Securitization Activities. Of the remaining $2.3 billion and $2.5 billion at August 31, 2012 and November 30, 2011, respectively, that were not pledged as collateral, approximately $14.7 million and $12.8 million represent loans eligible for reimbursement through an indemnification claim. Discover Bank must purchase such loans from the trust before a claim may be filed.

14

Credit Quality Indicators. The Company regularly reviews its collection experience (including delinquencies and net charge-offs) in determining its allowance for loan losses. Credit card and closed-end consumer loan receivables are placed on nonaccrual status upon receipt of notification of the bankruptcy or death of a customer or suspected fraudulent activity on an account. Upon completion of the fraud investigation, loan receivables may resume accruing interest.

Information related to the delinquencies and net charge-offs in the Company’s loan portfolio, which excludes loans held for sale, is shown below by each class of loan receivables except for PCI student loans, which is shown under the heading “Purchased Credit-Impaired Loans” (dollars in thousands):

Delinquent and Non-Accruing Loans:
	30-89 Days Delinquent		90 or More Days Delinquent		Total Past Due		90 or More Days Delinquent and Accruing		Total Non-accruing(2)
At August 31, 2012
Credit card loans:
Discover card(1)	$	441,545	$	424,514	$	866,059	$	374,035	$	179,716
Discover business card	1,803		2,483		4,286		2,377		489
Total credit card loans	443,348		426,997		870,345		376,412		180,205
Other loans:
Personal loans	16,395		6,784		23,179		6,021		4,229
Private student loans (excluding PCI)	29,314		5,876		35,190		4,832		1,237
Other	502		1,637		2,139		—		1,889
Total other loans (excluding PCI)	46,211		14,297		60,508		10,853		7,355
Total loan receivables (excluding PCI)	$	489,559	$	441,294	$	930,853	$	387,265	$	187,560
At November 30, 2011
Credit card loans:
Discover card(1)	$	554,354	$	556,126	$	1,110,480	$	498,305	$	200,208
Discover business card	2,823		3,548		6,371		3,335		860
Total credit card loans	557,177		559,674		1,116,851		501,640		201,068
Other loans:
Personal loans	15,604		7,362		22,966		6,636		3,628
Private student loans (excluding PCI)	10,073		2,992		13,065		2,883		125
Other	507		2,091		2,598		—		2,317
Total other loans (excluding PCI)	26,184		12,445		38,629		9,519		6,070
Total loan receivables (excluding PCI)	$	583,361	$	572,119	$	1,155,480	$	511,159	$	207,138

______________________ 

(1) Consumer credit card loans that are 90 or more days delinquent and accruing interest include $31.8 million and $37.9 million of loans accounted for as troubled debt restructurings at August 31, 2012 and November 30, 2011, respectively.

(2) The Company estimates that the gross interest income that would have been recorded in accordance with the original terms of these credit card loans was $7.8 million and $24.5 million for the three and nine months ended August 31, 2012, respectively. The Company does not separately track the amount of gross interest income that would have been recorded in accordance with the original terms of loans. These amounts were estimated based on customers' current balances and most recent rates.

15

Net Charge-offs. The Company's net charge-offs include the principal amount of losses charged off less principal recoveries and exclude charged-off interest and fees, recoveries of interest and fees and fraud losses. Charged-off and recovered interest and fees are recorded in interest and loan fee income, respectively, which is effectively a reclassification of the loan loss provision, while fraud losses are recorded in other expense. Credit card loan receivables are charged off at the end of the month during which an account becomes 180 days contractually past due. Closed-end consumer loan receivables are generally charged off at the end of the month during which an account becomes 120 days contractually past due. Generally, customer bankruptcies and probate accounts are charged off at the end of the month 60 days following the receipt of notification of the bankruptcy or death but not later than the 180-day or 120-day contractual time frame.

Net Charge-Offs:	For the Three Months Ended August 31,
	2012					2011
	Net Charge-offs			Net Charge-off Rate		Net Charge-offs		Net Charge-off Rate
Credit card loans:
Discover card	$	285,345		2.42	%	$	436,242	3.84	%
Discover business card	1,741			3.34	%	3,506		6.01	%
Total credit card loans	287,086			2.43	%	439,748		3.85	%
Other loans:
Personal loans	16,214			2.14	%	16,000		2.73	%
Private student loans (excluding PCI)	4,674			0.73	%	2,618		0.62	%
Other	(97		)	(0.26	)%	410		13.41	%
Total other loans (excluding PCI)	20,791			1.45	%	19,028		0.98	%
Net charge-offs as a percentage of total loans (excluding PCI)	$	307,877		2.32	%	$	458,776	3.63	%
Net charge-offs as a percentage of total loans (including PCI)	$	307,877		2.12	%	$	458,776	3.43	%
	For the Nine Months Ended August 31,
	2012					2011
	Net Charge-offs			Net Charge-off Rate		Net Charge-offs		Net Charge-off Rate
Credit card loans:
Discover card	$	960,403		2.76	%	$	1,651,311	4.91	%
Discover business card	5,941			3.75	%	14,937		8.26	%
Total credit card loans	966,344			2.76	%	1,666,248		4.93	%
Other loans:
Personal loans	49,869			2.32	%	50,980		3.19	%
Private student loans (excluding PCI)	11,650			0.64	%	5,573		0.49	%
Other	70			0.14	%	1,022		10.35	%
Total other loans (excluding PCI)	61,589			1.48	%	57,575		1.09	%
Net charge-offs as a percentage of total loans (excluding PCI)	$	1,027,933		2.63	%	$	1,723,823	4.64	%
Net charge-offs as a percentage of total loans (including PCI)	$	1,027,933		2.39	%	$	1,723,823	4.41	%

16

As part of credit risk management activities, on an ongoing basis the Company reviews information related to the performance of a customer’s account with the Company as well as information from credit bureaus, such as a FICO or other credit scores, relating to the customer’s broader credit performance. Credit scores are generally obtained at origination of the account and are refreshed monthly or quarterly thereafter to assist in predicting customer behavior.  Historically, the Company has noted that a significant proportion of delinquent accounts have FICO scores below 660. The following table provides FICO scores available for the Company’s customers as a percentage of each class of loan receivables:
	August 31, 2012				November 30, 2011
	660 and Above		Less than 660 or No Score		660 and Above		Less than 660 or No Score
Discover card	83	%	17	%	81	%	19	%
Discover business card	91	%	9	%	89	%	11	%
Personal loans	97	%	3	%	97	%	3	%
Private student loans (excluding PCI)(1)	95	%	5	%	95	%	5	%

____________________

(1) PCI loans are discussed under the heading "Purchased Credit-Impaired Loans."

For private student loans, additional credit risk management activities include monitoring the amount of loans in forbearance. Forbearance allows borrowers experiencing temporary financial difficulties and willing to make payments the ability to temporarily suspend payments. Eligible borrowers have a lifetime cap on forbearance of 12 months. At August 31, 2012 and November 30, 2011, there were $105.5 million and $75.9 million of loans in forbearance, respectively. In addition, at August 31, 2012 and November 30, 2011, there were 2.0% and 1.5% of private student loans in forbearance as a percentage of student loans in repayment and forbearance.

Allowance for Loan Losses. The Company maintains an allowance for loan losses at an appropriate level to absorb probable losses inherent in the loan portfolio. The Company considers the collectibility of all amounts contractually due on its loan receivables, including those components representing interest and fees. Accordingly, the allowance for loan losses represents the estimated uncollectible principal, interest and fee components of loan receivables. The allowance is evaluated monthly and is maintained through an adjustment to the provision for loan losses. Charge-offs of principal amounts of loans outstanding are deducted from the allowance and subsequent recoveries of such amounts increase the allowance. Charge-offs of loan balances representing unpaid interest and fees result in a reversal of interest and fee income, respectively, which is effectively a reclassification of provision for loan losses.

The Company bases its allowance for loan losses on several analyses that help estimate incurred losses as of the balance sheet date. While the Company’s estimation process includes historical data and analysis, there is a significant amount of judgment applied in selecting inputs and analyzing the results produced by the models to determine the allowance. The Company uses a migration analysis to estimate the likelihood that a loan will progress through the various stages of delinquency. The loan balances used in the migration analysis represent all amounts contractually due and, as a result, the migration analysis captures principal, interest and fee components in estimating uncollectible accounts. The Company uses other analyses to estimate losses incurred on non-delinquent accounts. The considerations in these analyses include past performance, risk management techniques applied to various accounts, historical behavior of different account vintages, current economic conditions, recent trends in delinquencies, bankruptcy filings, account collection management, policy changes, account seasoning, loan volume and amounts, payment rates, and forecasting uncertainties. The Company does not evaluate loans for impairment on an individual basis, but instead estimates its allowance for loan losses on a pooled basis, which includes loans that are delinquent and/or no longer accruing interest and/or certain loans that have defaulted from a loan modification program, as discussed below under the section entitled "Impaired Loans and Troubled Debt Restructurings."

17

The following table provides changes in the Company’s allowance for loan losses for the three and nine months ended August 31, 2012 and 2011 (dollars in thousands):

	For the Three Months Ended August 31,						For the Nine Months Ended August 31,
	2012			2011			2012			2011
Balance at beginning of period	$	1,869,253		$	2,632,320		$	2,205,196		$	3,304,118
Additions:
Provision for loan losses	126,288			99,514			510,401			692,763
Deductions:
Charge-offs:
Discover card	(428,935		)	(584,534		)	(1,400,273		)	(2,085,452		)
Discover business card	(2,623		)	(4,416		)	(8,540		)	(17,672		)
Total credit card loans	(431,558		)	(588,950		)	(1,408,813		)	(2,103,124		)
Personal loans	(17,341		)	(16,458		)	(52,474		)	(52,438		)
Private student loans	(4,793		)	(2,663		)	(11,956		)	(5,646		)
Other	(22		)	(411		)	(194		)	(1,025		)
Total other loans	(22,156		)	(19,532		)	(64,624		)	(59,109		)
Total charge-offs	(453,714		)	(608,482		)	(1,473,437		)	(2,162,233		)
Recoveries:
Discover card	143,590			148,292			439,870			434,141
Discover business card	882			910			2,599			2,735
Total credit card loans	144,472			149,202			442,469			436,876
Personal loans	1,127			458			2,605			1,458
Private student loans	119			45			306			73
Other	119			1			124			3
Total other loans	1,365			504			3,035			1,534
Total recoveries	145,837			149,706			445,504			438,410
Net charge-offs	(307,877		)	(458,776		)	(1,027,933		)	(1,723,823		)
Balance at end of period	$	1,687,664		$	2,273,058		$	1,687,664		$	2,273,058

Net charge-offs of principal are recorded against the allowance for loan losses, as shown in the table above. Information regarding net charge-offs of interest and fee revenues on credit card and other loans is as follows (dollars in thousands):
	For the Three Months Ended August 31,				For the Nine Months Ended August 31,
	2012		2011		2012		2011
Interest accrued subsequently charged off, net of recoveries (recorded as a reduction of interest income)	$	76,942	$	128,329	$	272,345	$	480,044
Fees accrued subsequently charged off, net of recoveries (recorded as a reduction to other income)	$	14,845	$	22,807	$	52,503	$	86,762

18

The following table provides additional detail of the Company’s allowance for loan losses and recorded investment in its loan portfolio (which excludes loans held for sale) by impairment methodology (dollars in thousands):

	Credit Card		Personal Loans		Student Loans		Other Loans		Total
At August 31, 2012
Allowance for loans evaluated for impairment as:
Collectively evaluated for impairment(1)	$	1,331,282	$	92,069	$	65,203	$	783	$	1,489,337
Troubled debt restructurings(2)	190,981		4,287		3,059		—		198,327
Purchased credit-impaired(3)	—		—		—		—		—
Total allowance for loan losses	$	1,522,263	$	96,356	$	68,262	$	783	$	1,687,664
Recorded investment in loans evaluated for impairment as:
Collectively evaluated for impairment(1)	$	47,007,109	$	3,098,013	$	2,740,212	$	26,829	$	52,872,163
Troubled debt restructurings(2)	1,117,359		16,395		12,503		—		1,146,257
Purchased credit-impaired(3)	—		—		4,867,010		—		4,867,010
Total recorded investment	$	48,124,468	$	3,114,408	$	7,619,725	$	26,829	$	58,885,430
At November 30, 2011
Allowance for loans evaluated for impairment as:
Collectively evaluated for impairment(1)	$	1,865,797	$	81,838	$	52,601	$	220	$	2,000,456
Troubled debt restructurings(2)	204,364		237		139		—		204,740
Purchased credit-impaired(3)	—		—		—		—		—
Total allowance for loan losses	$	2,070,161	$	82,075	$	52,740	$	220	$	2,205,196
Recorded investment in loans evaluated for impairment as:
Collectively evaluated for impairment(1)	$	45,421,887	$	2,640,416	$	2,063,562	$	16,690	$	50,142,555
Troubled debt restructurings(2)	1,216,738		7,635		5,439		—		1,229,812
Purchased credit-impaired(3)	—		—		5,250,388		—		5,250,388
Total recorded investment	$	46,638,625	$	2,648,051	$	7,319,389	$	16,690	$	56,622,755

 ____________________

(1) Represents loans evaluated for impairment in accordance with ASC 450-20, Loss Contingencies.

(2) Represents loans evaluated for impairment in accordance with ASC 310-40, Receivables, which consists of modified loans accounted for as troubled debt restructurings. The unpaid principal balance of credit card loans was $955.4 million and $1.0 billion at August 31, 2012 and November 30, 2011 respectively. The unpaid principal balance of personal loans was $16.1 million and $7.5 million at August 31, 2012 and November 30, 2011, respectively. The unpaid principal balance of student loans was $11.7 million and $5.4 million at August 31, 2012 and November 30, 2011, respectively. All loans accounted for as troubled debt restructurings have a related allowance for loan losses.

(3) Represents loans evaluated for impairment in accordance with ASC 310-30, Receivables-Loans and Debt Securities Acquired with Deteriorated Credit Quality.

Impaired Loans and Troubled Debt Restructurings. Permanent and certain temporary modifications on credit card loans, certain grants of student loan forbearance and certain modifications to personal loans are considered troubled debt restructurings and are accounted for in accordance with ASC 310-40, Troubled Debt Restructurings by Creditors. Generally loans included in a loan modification program are considered to be individually impaired and are accounted for as troubled debt restructurings. The Company has both internal and external loan modification programs that provide relief to credit card and personal loan borrowers who are experiencing financial hardship. The internal loan modification programs include both temporary and permanent programs.

For our credit card customers, the temporary hardship program primarily consists of a reduced minimum payment and an interest rate reduction, both lasting for a period no longer than 12 months. The permanent workout program involves changing the structure of the loan to a fixed payment loan with a maturity no longer than 60 months and reducing the interest rate on the loan. The permanent program does not normally provide for the forgiveness of unpaid principal, but may allow for the reversal of certain unpaid interest or fee assessments. The Company also makes loan modifications for customers who request financial assistance through external sources, such as a consumer credit counseling agency program (referred to here as external programs). These loans typically receive a reduced interest rate but continue to be subject to the original minimum payment terms and do not normally include waiver of unpaid principal, interest or fees.

19

To assist student loan borrowers who are experiencing temporary financial difficulties and are willing to resume making payments, the Company may offer forbearance periods of up to 12 months over the life of the loan. The Company does not anticipate significant shortfalls in the contractual amount due for borrowers using a first forbearance period as the historical performance of these borrowers is not significantly different from the overall portfolio. However, when a delinquent borrower is granted a second forbearance period, the forbearance is considered a troubled debt restructuring.

For our personal loan customers, the temporary programs normally consist of a reduction of the minimum payment for a period of no longer than 12 months with a final balloon payment required at the end of the loan term. The permanent program involves changing the terms of the loan in order to pay off the outstanding balance over the new term for a period no longer than four years. The total term generally does not exceed nine years. The Company also allows loan modifications for personal loan customers who request financial assistance through external sources, similar to our credit card customers discussed above. Payments are modified based on the new terms agreed upon with the credit counseling agency. Personal loans modified through temporary and permanent internal programs are accounted for as troubled debt restructurings.

Loans classified as troubled debt restructurings are recorded at their present value with impairment measured as the difference between the loan balance and the discounted present value of cash flows expected to be collected. Consistent with the Company’s measurement of impairment of modified loans on a pooled basis, the discount rate used for credit card loans in internal programs is the average current annual percentage rate it applies to non-impaired credit card loans, which approximates what would have applied to the pool of modified loans prior to impairment. The discount rate used for credit card loans in external programs reflects a rate that is consistent with rates offered to lower risk cardmembers. For private student and personal loans, the discount rate used is the average contractual rate prior to modification.

Interest income from loans accounted for as troubled debt restructurings is accounted for in the same manner as other accruing loans. Cash collections on these loans are allocated according to the same payment hierarchy methodology applied to loans that are not in such programs. Additional information about modified loans is shown below (dollars in thousands):
	Average recorded investment in loans		Interest income recognized on impaired loans(1)		Gross interest income that would have been recorded with original terms(2)
For the Three Months Ended August 31, 2012
Credit card loans
Modified credit card loans that have reverted to pre-modification payment terms(3)	$	240,895	$	12,350	N/A
Internal programs	$	560,327	$	4,168	$	18,388
External programs	$	586,547	$	12,694	$	2,035
Personal loans(4)	$	15,370	$	454	N/A
Student loans(4)	$	11,058	$	204	N/A
For the Three Months Ended August 31, 2011
Credit card loans
Internal programs	$	519,884	$	4,518	$	16,411
External programs	$	709,211	$	15,391	$	2,467

20

	Average recorded investment in loans		Interest income recognized on impaired loans(1)		Gross interest income that would have been recorded with original terms(2)
For the Nine Months Ended August 31, 2012
Credit card loans
Modified credit card loans that have reverted to pre-modification payment terms(3)	$	248,118	$	35,456	N/A
Internal programs	$	564,650	$	13,162	$	54,922
External programs	$	618,120	$	39,905	$	6,396
Personal loans(4)	$	13,349	$	1,222	N/A
Student loans(4)	$	8,563	$	469	N/A
For the Nine Months Ended August 31, 2011
Credit card loans
Internal programs	$	534,479	$	16,660	$	47,950
External programs	$	727,113	$	46,974	$	7,535

____________________

(1) The Company does not separately track interest income on all of its loans modification programs. Amounts shown are estimated by applying an average interest rate to the average loans in the various modification programs.

(2) The Company does not separately track the amount of gross interest income that would have been recorded if the loans in modification programs had not been restructured and interest had instead been recorded in accordance with the original terms. Amounts shown are estimated by applying the difference between the average interest rate earned on non-impaired credit card loans and the average interest rate earned on loans in the modification programs to the average loans in the modification programs.

(3) This balance is considered impaired, but is excluded from the internal and external program amounts reflected in this table. Represents credit card loans that were modified in troubled debt restructurings but that have subsequently reverted back to the loans' pre-modification payment terms either due to noncompliance with the terms of the modification or successful completion of a temporary modification program.

(4) As interest rates for personal loan customers in modification programs and student loan customers that have been granted forbearance periods are rarely modified, gross interest income that would have been recorded with original terms is not significant.

In order to evaluate the primary financial effects which resulted from loans entering into a loan modification program during the three and nine months ended August 31, 2012 and 2011, the Company quantified the amount by which interest and fees were reduced during the period. During the three and nine months ended August 31, 2012, the Company forgave approximately $10.2 million and $34.5 million, respectively, of interest and fees as a result of accounts entering into a loan modification program. During the three and nine months ended August 31, 2011, the Company forgave approximately $15.0 million and $49.1 million, respectively, of interest and fees as a result of accounts entering into a loan modification program.

21

The following table provides information on loans that entered a loan modification program during the period (dollars in thousands):
	For the Three Months Ended August 31,
	2012			2011
	Number of Accounts	Balances		Number of Accounts	Balances
Accounts that entered a loan modification program during the period:
Credit card:
Internal programs	11,781	$	78,607	16,680	$	115,301
External programs	9,781	$	54,133	12,951	$	73,734
Personal loans	489	$	6,282	287	$	3,641
Student loans	130	$	3,351	78	$	1,461
	For the Nine Months Ended August 31,
	2012			2011
	Number of Accounts	Balances		Number of Accounts	Balances
Accounts that entered a loan modification program during the period:
Credit card:
Internal programs	41,279	$	283,126	50,011	$	351,968
External programs	30,596	$	173,585	39,046	$	230,720
Personal loans	1,047	$	13,383	595	$	7,337
Student loans	352	$	8,164	167	$	3,234

The following table presents the carrying value of loans that experienced a payment default during the three and nine months ended August 31, 2012 and 2011 that had been modified in a troubled debt restructuring during the 15 months preceding the end of each period (dollars in thousands):
	For the Three Months Ended August 31,
	2012			2011
	Number of Accounts	Aggregated Outstanding Balances Upon Default		Number of Accounts	Aggregated Outstanding Balances Upon Default
Troubled debt restructurings that subsequently defaulted:
Credit card (1)(2)(3):
Internal programs	3,721	$	24,761	4,027	$	28,191
External programs	2,509	$	11,551	2,763	$	13,912
Personal loans	77	$	882	37	$	468
Student loans	28	$	691	1	$	13
	For the Nine Months Ended August 31,
	2012			2011
	Number of Accounts	Aggregated Outstanding Balances Upon Default		Number of Accounts	Aggregated Outstanding Balances Upon Default
Troubled debt restructurings that subsequently defaulted:
Credit card (1)(2)(3):
Internal programs	12,331	$	83,859	14,233	$	102,113
External programs	6,122	$	29,253	9,558	$	49,956
Personal loans	228	$	2,770	86	$	1,083
Student loans	63	$	1,459	6	$	118

____________________

(1) The outstanding balance upon default is the loan balance at the end of the month prior to default.

(2) A customer defaults from a modification program after two consecutive missed payments.

(3) Terms revert back to the pre-modification terms for customers who default from a temporary program and charging privileges remain revoked.

22

Of the account balances that defaulted as shown above for the three and nine months ended August 31, 2012, approximately 45% and 47%, respectively, of the total balances charged off at the end of the month in which they defaulted. Of the account balances that defaulted as shown above for the three and nine months ended August 31, 2011, approximately 42% and 39%, respectively, of the total balances charged off at the end of the month in which they defaulted. For accounts that have defaulted from a loan modification program and that have not subsequently charged off, the balances are included in the allowance for loan loss analysis discussed above under the section entitled "Allowance for Loan Losses."

Purchased Credit-Impaired Loans. Purchased loans with evidence of credit deterioration since origination for which it is probable that not all contractually required payments will be collected are considered impaired at acquisition and are reported as PCI loans. The private student loans acquired in the SLC transaction as well as the additional private student loan portfolio acquired from Citibank comprise the Company’s only PCI loans at August 31, 2012 and November 30, 2011. Total PCI student loans had an outstanding balance of $5.4 billion and $5.7 billion, including accrued interest, and a related carrying amount of $4.9 billion and $5.3 billion, as of August 31, 2012 and November 30, 2011, respectively.

Management concluded it is probable that the Company will be unable to collect all contractually required payments due but the Company is unable to specifically identify which loans the Company will be unable to collect. Therefore, the Company has elected to apply ASC 310-30, Receivables-Loans and Debt Securities Acquired with Deteriorated Credit Quality by analogy to the entire pool of acquired loans.

At the time of acquisition, these loans were recorded at fair value. The Company estimated the initial fair value of the acquired loans based on the cash flows expected to be collected, discounted at a market rate of interest. Expected cash flows used in the initial fair value measurements reflect the effect of expected losses and prepayments as well as anticipated changes in the interest rate indices applicable to these variable rate loans.

As of the acquisition date of December 31, 2010, the PCI student loans acquired in the SLC transaction had an aggregate outstanding balance of approximately $3.8 billion, including accrued interest, and a fair value (initial carrying value) of approximately $3.1 billion. Of the $3.8 billion aggregate outstanding balance of loans acquired, loans with an aggregate outstanding balance of approximately $31 million were non-accruing as of the acquisition date.

As of the acquisition date of September 30, 2011, the private student loans acquired from Citibank had an aggregate outstanding balance and an estimated fair value of approximately $2.4 billion. These loans were acquired at a discount which reflects a decline in the credit quality of the loans after their origination. The discount is partially offset by a premium which reflects the value in certain loans that carry interest rates above prevailing market rates at the acquisition date. Of the $2.4 billion aggregate outstanding balance of loans acquired, loans with an outstanding balance of approximately $16 million were non-performing as of the acquisition date. There has not been any significant incremental credit deterioration on either portfolio since the respective acquisition dates and, therefore, no allowance has been established for the PCI student loans at August 31, 2012.

Certain PCI student loans in one of the three SLC securitization trusts are covered by an indemnification agreement with Citibank for credit losses. The indemnified loans are presented along with all other PCI student loans and the related indemnification asset is recognized as a separate asset on the Company’s condensed consolidated statement of financial condition. See Note 2: Business Combinations for a description of the indemnification asset.

The following table shows contractually required payments receivable, cash flows expected to be collected and fair value of loans acquired as of the acquisition date (dollars in millions):
	At December 31, 2010
Contractually required payments receivable (1)	$	5,673
Less: Non-accretable difference (2)	(683		)
Cash flows expected to be collected	4,990
Less: Accretable yield (3)	(1,920		)
Fair value of loans acquired	$	3,070

 ____________________

(1) Amount represents principal and interest payments, both currently due and due in the future, adjusted for the effect of estimated prepayments.

(2) Charge-offs on acquired loans will be written off against non-accretable difference.

(3) Amount accreted into interest income over the estimated lives of the acquired loans.

23

The following table shows contractually required payments receivable, cash flows expected to be collected and fair value of the additional private student loans acquired from Citibank for the loans acquired as of September 30, 2011 (dollars in millions):
	At September 30, 2011
Contractually required payments receivable (1)	$	3,861
Less: Non-accretable difference (2)	(573		)
Cash flows expected to be collected	3,288
Less: Accretable yield (3)	(855		)
Fair value of loans acquired	$	2,433

____________________

(1) Amount represents principal and interest payments, both currently due and due in the future, adjusted for the effect of estimated prepayments.

(2) Charge-offs on acquired loans will be written off against non-accretable difference.

(3) Amount to be accreted into interest income over the estimated lives of the acquired loans.

The following table provides changes in accretable yield for the acquired loans for the three and nine month periods ended August 31, 2012 and 2011 (dollars in millions):
	For the Three Months Ended August 31,						For the Nine Months Ended August 31,
	2012			2011			2012			2011
Balance at beginning of period	$	2,313		$	1,772		$	2,580		$	—
Acquisition of The Student Loan Corporation	—			—			—			1,776
Accretion into interest income	(75		)	(54		)	(229		)	(149		)
Other changes in expected cash flows	(13		)	—			(126		)	91
Balance at end of period	$	2,225		$	1,718		$	2,225		$	1,718

During the three and nine months ended August 31, 2012, the Company adjusted accretable yield by $13 million and $126 million, respectively, because of a decrease in expected cash flows. These decreases related primarily to changes in borrower prepayments, and were not a result of credit deterioration. During the nine months ended August 31, 2011, the Company adjusted accretable yield by $91 million because of an increase in expected cash flows based on a change in prepayment assumptions. These amounts will be recognized prospectively as an adjustment to yield over the remaining life of the pools.

At August 31, 2012, the 30 or more days delinquency and 90 or more days delinquency rates on PCI student loans (which includes loans not yet in repayment) were 2.63% and 0.69%, respectively. At August 31, 2011, the 30 or more days delinquency and 90 or more days delinquency rates on PCI student loans (which includes loans not yet in repayment) were 2.60% and 0.83%, respectively. These rates include private student loans that are greater than 120 days delinquent that are covered by an indemnification agreement or insurance arrangements through which the Company expects to recover a substantial portion of the loan. The net charge-off rate on PCI student loans for the three and nine months ended August 31, 2012 was 1.13% and 1.32%, respectively. The net charge-off rate on PCI student loans for the three and nine months ended August 31, 2011 was 1.23% and 1.22%, respectively.

Mortgage loans held for sale. The Company originates all of its residential real estate loans with the intent to sell them in the secondary market. Loans held for sale consist primarily of residential first mortgage loans that are secured by residential real estate throughout the United States. Mortgage loans are funded through a warehouse line of credit and are recorded at fair value. Changes in the fair value of mortgage loans are recorded through revenue prior to the sale of the loans to investors. The gain or loss on the sale of loans is recognized on the date the loans are sold and is based on the difference between the sale proceeds received and the fair value of the loans, adjusted for the impact of the related hedges (see Note 15: Derivatives and Hedging Activities for further discussion of the mortgage loan related hedging activities). The Company sells its loans on a servicing released basis in which the Company gives up the right to service the loans.

24

The following table provides a summary of the initial unpaid principal balance of mortgage loans sold by type of loan for the quarter ended August 31, 2012 (dollars in millions):
	For the Three Months Ended August 31, 2012
	Amount		%
Conforming(1)	$	396.5	75.09	%
FHA(2)	131.5		24.91	%
Total	$	528.0	100.00	%

____________________

(1) Conforming loans are loans that conform to Government Sponsored Enterprises guidelines.

(2) FHA loans are loans that are insured by the Federal Housing Administration typically for borrowers with low down payments and loan amounts meeting certain limits.

The following table represents the loans held for sale by type of loan as of August 31, 2012 (dollars in thousands):
	At August 31, 2012
	Amount		%
Conforming(1)	$	183,666	67.50	%
FHA(2)	88,416		32.50	%
Total	$	272,082	100.00	%

____________________

(1) Conforming loans are loans that conform to Government Sponsored Enterprises guidelines.

(2) FHA loans are loans that are insured by the Federal Housing Administration typically for borrowers with low down payments and loan amounts meeting certain limits.

5. Credit Card and Student Loan Securitization Activities

Credit Card Securitization Activities

The Company accesses the term asset securitization market through the Discover Card Master Trust I (“DCMT”) and the Discover Card Execution Note Trust (“DCENT”), which are trusts into which credit card loan receivables are transferred (or, in the case of DCENT, into which beneficial interests in DCMT are transferred) and from which beneficial interests are issued to investors.

The DCMT structure consists of Class A, triple-A rated certificates and Class B, single-A rated certificates held by third parties. Credit enhancement is provided by the subordinated Class B certificates, cash collateral accounts, and more subordinated Series 2009-CE certificates that are held by a wholly-owned subsidiary of Discover Bank. The DCENT debt structure consists of four classes of securities (DiscoverSeries Class A, B, C and D notes), with the most senior class generally receiving a triple-A rating. In this structure, in order to issue senior, higher rated classes of notes, it is necessary to obtain the appropriate amount of credit enhancement, generally through the issuance of junior, lower rated or more highly subordinated classes of notes. The majority of these more highly subordinated classes of notes are held by subsidiaries of Discover Bank. In addition, during the nine months ended August 31, 2012, there was another outstanding series of certificates (Series 2009-SD), issued by DCMT, that provided increased excess spread levels to all other outstanding securities of the trusts. The Series 2009-SD certificates were held by a wholly-owned subsidiary of Discover Bank. The Series 2009-SD balance of $346.4 million matured on January 17, 2012, automatically triggering a higher required level of the Class D (2009-1) note. Accordingly, the size of the Class D (2009-1) note was increased by $241.7 million. The credit-related risk of loss associated with trust assets as of the balance sheet date to which the Company is exposed through the retention of these subordinated interests is fully captured in the allowance for loan losses recorded by the Company.

The Company’s credit card securitizations are accounted for as secured borrowings and the trusts are treated as consolidated subsidiaries of the Company. The Company’s retained interests in the assets of the trusts, principally consisting of investments in DCMT certificates and DCENT notes held by subsidiaries of Discover Bank, constitute intercompany positions which are eliminated in the preparation of the Company’s consolidated statement of financial condition.

25

Upon transfer of credit card loan receivables to the trust, the receivables and certain cash flows derived from them become restricted for use in meeting obligations to the trusts’ creditors. The trusts have ownership of cash balances that also have restrictions, the amounts of which are reported in restricted cash. Investment of trust cash balances is limited to investments that are permitted under the governing documents of the trusts and which have maturities no later than the related date on which funds must be made available for distribution to trust investors. With the exception of the seller’s interest in trust receivables, the Company’s interests in trust assets are generally subordinate to the interests of third-party investors and, as such, may not be realized by the Company if needed to absorb deficiencies in cash flows that are allocated to the investors in the trusts’ debt. The carrying values of these restricted assets, which are presented on the Company’s condensed consolidated statement of financial condition as relating to securitization activities, are shown in the table below (dollars in thousands):
	August 31, 2012			November 30, 2011
Cash collateral accounts	$	147,632		$	187,105
Collections and interest funding accounts	63,140			977,195
Restricted cash	210,772			1,164,300
Investors’ interests held by third-party investors	15,068,423			13,294,739
Investors’ interests held by wholly owned subsidiaries of Discover Bank	4,805,402			5,157,536
Seller’s interest	13,643,757			15,363,585
Loan receivables (1)	33,517,582			33,815,860
Allowance for loan losses allocated to securitized loan receivables (1)	(1,074,058		)	(1,510,730		)
Net loan receivables	32,443,524			32,305,130
Other	33,123			26,506
Carrying value of assets of consolidated variable interest entities	$	32,687,419		$	33,495,936

 ____________________

(1) The Company maintains its allowance for loan losses at an amount sufficient to absorb probable losses inherent in all loan receivables, which includes all loan receivables in the trusts. Therefore, credit risk associated with the transferred receivables is fully reflected on the Company’s balance sheet in accordance with GAAP.

The debt securities issued by the consolidated VIEs are subject to credit, payment and interest rate risks on the transferred credit card loan receivables. To protect investors, the securitization structures include certain features that could result in earlier-than-expected repayment of the securities. The primary investor protection feature relates to the availability and adequacy of cash flows in the securitized pool of receivables to meet contractual requirements. Insufficient cash flows would trigger the early repayment of the securities. This is referred to as the “economic early amortization” feature.

Investors are allocated cash flows derived from activities related to the accounts comprising the securitized pool of receivables, the amounts of which reflect finance charges billed, certain fee assessments, allocations of merchant discount and interchange, and recoveries on charged-off accounts. From these cash flows, investors are reimbursed for charge-offs occurring within the securitized pool of receivables and receive a contractual rate of return and Discover Bank is paid a servicing fee as servicer. Any cash flows remaining in excess of these requirements are reported to investors as excess spread. An excess spread rate of less than 0% for a contractually specified period, generally a three-month average, would trigger an economic early amortization event. In such an event, the Company would be required to seek immediate sources of replacement funding. Apart from the restricted assets related to securitization activities, the investors and the securitization trusts have no recourse to the Company’s other assets or the Company's general credit for a shortage in cash flows.

The Company is required to maintain a contractual minimum level of receivables in the trust in excess of the face value of outstanding investors’ interests. This excess is referred to as the minimum seller’s interest requirement. The required minimum seller’s interest in the pool of trust receivables, which is included in credit card loan receivables restricted for securitization investors, is set at approximately 7% in excess of the total investors’ interests (which includes interests held by third parties as well as those certificated interests held by the Company). If the level of receivables in the trust was to fall below the required minimum, the Company would be required to add receivables from the unrestricted pool of receivables, which would increase the amount of credit card loan receivables restricted for securitization investors. A decline in the amount of the excess seller’s interest could occur if balance repayments and charge-offs exceeded new lending on the securitized accounts or as a result of changes in total outstanding investors’ interests. If the Company could not add enough receivables to satisfy the requirement, an early amortization (or repayment) of investors’ interests would be triggered. We retain significant exposure to the performance of trust assets through holdings of the seller's interest and subordinated security classes of DCMT and DCENT.

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Another feature of the Company’s credit card securitization structure that is designed to protect investors’ interests from loss, which is applicable only to the notes issued from DCENT, is a reserve account funding requirement in which excess cash flows generated by the transferred loan receivables are held at the trust. This funding requirement is triggered when DCENT’s three-month average excess spread rate decreases to below 4.5%, with increasing funding requirements as excess spread levels decline below preset levels to 0%.

In addition to performance measures associated with the transferred credit card loan receivables or the inability to add receivable to satisfy the seller's interest requirement, there are other events or conditions which could trigger an early amortization event., such as non-payment of principal at expected maturity. As of August 31, 2012, no economic or other early amortization events have occurred.

The tables below provide information concerning investors’ interests and related excess spreads at August 31, 2012 (dollars in thousands):
	Investors’ Interests(1)		# of Series Outstanding
Discover Card Master Trust I	$	2,288,598	4
Discover Card Execution Note Trust (DiscoverSeries notes)	17,585,227		37
Total investors’ interests	$	19,873,825	41

____________________ 

(1) Investors’ interests include third-party interests and subordinated interests held by wholly-owned subsidiaries of Discover Bank.

	3-Month Rolling Average Excess Spread(1)
Group excess spread percentage	13.41	%
DiscoverSeries excess spread percentage	13.32	%

 ____________________

(1) DCMT certificates refer to the higher of the Group excess spread or their applicable series excess spread (not shown) and DiscoverSeries notes refer to the higher of the Group or DiscoverSeries excess spread in assessing whether an economic early amortization has been triggered.

The Company continues to own and service the accounts that generate the loan receivables held by the trusts. Discover Bank receives servicing fees from the trusts based on a percentage of the monthly investor principal balance outstanding. Although the fee income to Discover Bank offsets the fee expense to the trusts and thus is eliminated in consolidation, failure to service the transferred loan receivables in accordance with contractual requirements could lead to a termination of the servicing rights and the loss of future servicing income, net of related expenses.

Student Loan Securitization Activities

The Company’s student loan securitizations are accounted for as secured borrowings and the trusts are treated as consolidated subsidiaries of the Company. Trust receivables underlying third-party investors’ interests are recorded in purchased credit-impaired loans, and the related debt issued by the trusts is reported in long-term borrowings. The assets of the Company’s consolidated VIEs are restricted from being sold or pledged as collateral for other borrowings and the cash flows from these restricted assets may be used only to pay obligations of the trust.

Currently there are three trusts from which securities were issued to investors. Principal payments on the long-term secured borrowings are made as cash is collected on the underlying loans that are used as collateral on the secured borrowings. The Company does not have access to cash collected by the securitization trusts until cash is released in accordance with the trust indenture agreements and, for certain securitizations, no cash will be released to the Company until all outstanding trust borrowings have been repaid. Similar to the credit card securitizations, the Company continues to own and service the accounts that generate the student loan receivables held by the trusts and receives servicing fees from the trusts based on either a percentage of the principal balance outstanding or a flat fee per borrower. Although the servicing fee income offsets the fee expense related to the trusts, failure to service the transferred loan receivables in accordance with contractual requirements could lead to a termination of the servicing rights and the loss of future servicing income.

Under terms of all the trust arrangements, the Company has the option, but not the obligation, to provide financial support to the trusts, but has never provided such support. A substantial portion of the credit risk associated with the securitized loans has been transferred to third parties under private credit insurance or indemnification arrangements. See Note 2: Business Combinations.

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The carrying values of these restricted assets, which are presented on the Company’s condensed consolidated statement of financial condition as relating to securitization activities, are shown in the table below (dollars in thousands):
	August 31, 2012		November 30, 2011
Restricted cash	$	84,667	$	109,875
Student loan receivables	2,631,970		2,839,871
Other assets	515		7,218
Carrying value of assets of consolidated variable interest entities	$	2,717,152	$	2,956,964

6. Deposits

The Company offers its deposit products, including certificates of deposit, money market accounts, online savings accounts and Individual Retirement Account (IRA) certificates of deposit to customers through two channels: (i) directly through marketing, internet origination and affinity relationships (“direct-to-consumer deposits”); and (ii) indirectly through contractual arrangements with securities brokerage firms (“brokered deposits”). As of August 31, 2012 and November 30, 2011, the Company had approximately $27.7 billion and $26.2 billion, respectively, of direct-to-consumer deposits and approximately $14.5 billion and $13.3 billion, respectively, of brokered deposits.

A summary of interest-bearing deposit accounts is as follows (dollars in thousands):
	August 31, 2012			November 30, 2011
Certificates of deposit in amounts less than $100,000(1)	$	21,301,782		$	20,114,121
Certificates of deposit from amounts of $100,000(1)to less than $250,000(1)	5,352,917			5,290,405
Certificates of deposit in amounts of $250,000(1)or greater	1,216,105			1,189,779
Savings deposits, including money market deposit accounts	14,304,228			12,869,582
Total interest-bearing deposits	$	42,175,032		$	39,463,887
Average annual interest rate	2.00		%	2.57		%

____________________

(1) $100,000 represents the basic insurance amount previously covered by the FDIC. Effective July 21, 2010, the basic insurance per depositor was permanently increased to $250,000.

At August 31, 2012, certificates of deposit maturing during the remainder of 2012, over each of the next four years, and thereafter were as follows (dollars in thousands):
Year	Amount
2012	$	3,367,953
2013	$	11,499,477
2014	$	5,454,427
2015	$	3,292,971
2016	$	1,825,914
Thereafter	$	2,430,062

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7. Borrowings

Long-term borrowings consist of borrowings and capital leases having original maturities of one year or more. The following table provides a summary of the Company’s long-term borrowings and weighted average interest rates on balances outstanding at period end (dollars in thousands):
	August 31, 2012				November 30, 2011
	Outstanding		Interest Rate		Outstanding		Interest Rate		Interest Rate Terms	Maturity
Securitized Debt
Fixed rate asset-backed securities
Principal value (including discount of $1,344)	$	4,548,656	2.87	%	$	1,748,742	5.65	%	Various fixed rates	Various June 2013— July 2019
Fair value adjustment(1)	7,965				—
Book value	4,556,621				1,748,742
Floating rate asset-backed securities	9,018,423		0.51	%	10,044,739		0.81	%	1-month LIBOR(2) + 8 to 65 basis points	Various December 2012— May 2017
Floating rate asset-backed securities	1,250,000		0.81	%	1,250,000		0.69	%	3-month LIBOR(2) + 34 basis points	December 2012
Floating rate asset-backed securities and other borrowings	250,000		0.91	%	250,000		0.91	%	Commercial Paper rate + 70 basis points	April 2013
Total Discover Card Master Trust I and Discover Card Execution Note Trust	15,075,044				13,293,481
Floating rate asset-backed securities (including discount of $188,798)	1,243,672		0.67	%	1,390,066		0.60	%	3-month LIBOR(2) + 12 to 45 basis points	Various January 2019— July 2036(3)
Floating rate asset-backed securities (including discount of $3,136)	558,316		4.25	%	627,072		4.25	%	Prime rate +100 basis points	June 2031(3)
Floating rate asset-backed securities (including premium of $2,139)	135,024		4.00	%	157,338		4.00	%	Prime rate + 75 basis points	July 2042(3)
Floating rate asset-backed securities (including premium of $5,162)	325,858		3.74	%	374,555		3.75	%	1-month LIBOR(2) + 350 basis points	July 2042(3)
Total SLC Private Student Loan Trusts	2,262,870				2,549,031
Total Long-Term Borrowings—owed to securitization investors	17,337,914				15,842,512
Discover Financial Services (Parent Company)
Fixed rate senior notes due 2017
Principal value (including discount of $390)	399,610		6.45	%	399,549		6.45	%	Fixed	June 2017
Fair value adjustment(1)	23,167				9,855
Book value	422,777				409,404
Fixed rate senior notes due 2019(4)	78,484		10.25	%	400,000		10.25	%	Fixed	July 2019
Fixed rate senior notes due 2022 (including discount of $112,303)(4)	209,213		5.20	%	—		—	%	Fixed	April 2022
Discover Bank
Subordinated bank notes due 2019 (including discount of $1,302)	698,698		8.70	%	698,563		8.70	%	Fixed	November 2019
Subordinated bank notes due 2020 (including discount of $2,641)	497,359		7.00	%	497,099		7.00	%	Fixed	April 2020
Floating rate secured borrowings(5)	—		—	%	437,613		0.70	%	Commercial Paper rate + 50 basis points	February 2012
Capital lease obligations	1,668		4.51	%	1,987		4.51	%	Fixed	April 2016
Total long-term borrowings	$	19,246,113			$	18,287,178

___________________

(1) The Company uses interest rate swaps to hedge portions of these long-term borrowings against changes in fair value attributable to changes in LIBOR. See Note 15: Derivatives and Hedging Activities.

(2) London Interbank Offered Rate (“LIBOR”).

(3) Repayment of this debt is dependent upon the timing of principal and interest payments on the underlying student loans. The dates shown represent final maturity dates.

(4) During second quarter 2012, the Company exchanged $321.5 million outstanding aggregate principal amount of 10.25% Senior Notes due 2019 for the same aggregate principal amount of new 5.20% Senior Notes due 2022 and a cash premium. The new 5.20% Senior Notes due 2022 are carried at a discount as a result of the cash premium paid.

(5) Under a program established by the U.S. Department of Education, this loan facility was entered into to fund certain federal student loans, which were held for sale at November 30, 2011. Upon sale of the loans during the first quarter 2012, this loan facility was assumed by the buyer.

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Maturities. Long-term borrowings had the following maturities at August 31, 2012 (dollars in thousands):

Year	Amount
Due in 2012	$	109
Due in 2013	5,179,286
Due in 2014	3,789,941
Due in 2015	3,058,178
Due in 2016	400,177
Thereafter	6,818,422
Total	$	19,246,113

During the second quarter, the Company completed a private exchange offer, resulting in the exchange of $321.5 million outstanding aggregate principal amount of 10.25% Senior Notes due 2019 for the same aggregate principal amount of new 5.20% Senior Notes due 2022 and a cash premium paid of $114.5 million. On April 27, 2012, the Company issued $307.5 million aggregate principal amount and, on May 8, 2012, the Company issued $14 million aggregate principal amount, respectively, of the 5.20% Senior Notes due 2022. The Company entered into a registration rights agreement with respect to the new notes. During the three and nine months ended August 31, 2012, $1.6 million and $2.2 million of the premium paid was amortized and included in interest expense on the condensed consolidated statement of income.

The Company has access to committed undrawn capacity through private securitizations to support the funding of its credit card loan receivables. As of August 31, 2012, the total commitment of secured credit facilities through private providers was $7.5 billion, of which $250 million had been used and was included in long-term borrowings at August 31, 2012. Access to the unused portions of the secured credit facilities is dependent upon the agreement with each of the providers which have various expirations in fiscal years 2013, 2014 and 2015. Borrowings outstanding under each facility bear interest at a margin above LIBOR or the asset-backed commercial paper costs of each individual conduit provider. The terms of each agreement provide for a commitment fee to be paid on the unused capacity, and include various affirmative and negative covenants, including performance metrics and legal requirements similar to those required to issue any term securitization transaction.

Short-Term Borrowings. Short-term borrowings typically consist of overnight Federal Fundspurchased with original maturities less than one year and a warehouse line of credit. There were no outstanding Federal Funds at August 31, 2012, or at any time during the three month period. In conjunction with business activities relating to the acquisition of the assets of the Home Loan Center, the Company has a $300.0 million warehouse line of credit used to fund residential loans that are held for sale and will be secured by such loans. The term of the warehouse line of credit agreement is through May 24, 2013. The terms of the agreement includes various affirmative and negative covenants. The total outstanding borrowings on the warehouse line of credit at August 31, 2012 were$250.1 million.The weighted-average interest rate on short term borrowings was 1.13% and 1.04% for the three and nine months ended August 31, 2012. At November 30, 2011, the short-term borrowing balance outstanding was $50 million. The weighted-average interest rate on short term borrowings was 0.06% and 0.11% for the three and nine months ended August 31, 2011, respectively.

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8. Accumulated Other Comprehensive Income

Changes in each component of accumulated other comprehensive income (loss) were as follows (dollars in thousands):

	Net Unrealized Gains on securities		Derivatives			Adjustments Related to Pension and Other Post Retirement Benefits			Accumulated Other Comprehensive Income (Loss)
For the Three Months Ended August 31, 2012
Balance at May 31, 2012	$	69,583	$	4,749		$	(115,348	)	$	(41,016	)
Unrealized gain on available-for-sale investment securities, net of tax expense of $5,988	9,931		—			—			9,931
Unrealized (loss) on cash flow hedges, net of tax benefit of $142	—		(241		)	—			(241		)
Balance at August 31, 2012	$	79,514	$	4,508		$	(115,348	)	$	(31,326	)
For the Three Months Ended August 31, 2011
Balance at May 31, 2011	$	24,648	$	1,647		$	(92,653	)	$	(66,358	)
Unrealized gain on available-for-sale investment securities, net of tax expense of $22,810	38,170		—			—			38,170
Unrealized gain on cash flow hedges, net of tax expense of $4,905	—		8,208			—			8,208
Unrealized pension and post retirement benefit (loss)	$	—	$	—		$	1		$	1
Balance at August 31, 2011	$	62,818	$	9,855		$	(92,652	)	$	(19,979	)
For the Nine Months Ended August 31, 2012
Balance at November 30, 2011	$	54,888	$	7,005		$	(113,572	)	$	(51,679	)
Unrealized gain on available-for-sale investment securities, net of tax expense of $14,849	24,626		—			—			24,626
Unrealized (loss) on cash flow hedges, net of tax benefit of $1,506	—		(2,497		)	—			(2,497		)
Unrealized pension and post retirement benefit (loss), net of tax benefit of $1,920	—		—			(1,776		)	(1,776		)
Balance at August 31, 2012	$	79,514	$	4,508		$	(115,348	)	$	(31,326	)
For the Nine Months Ended August 31, 2011
Balance at November 30, 2010	$	7,921	$	2,525		$	(92,994	)	$	(82,548	)
Unrealized gain on available-for-sale investment securities, net of tax expense of $32,806	54,897		—			—			54,897
Unrealized gain on cash flow hedges, net of tax expense of $4,381	—		7,330			—			7,330
Unrealized pension and post retirement benefit gain, net of tax expense of $202	—		—			342			342
Balance at August 31, 2011	$	62,818	$	9,855		$	(92,652	)	$	(19,979	)

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9. Income Taxes

Income tax expense consisted of the following (dollars in thousands):
	For the Three Months Ended August 31,				For the Nine Months Ended August 31,
	2012		2011		2012			2011
Current:
U.S. federal	$	306,999	$	213,765	$	815,833		$	550,250
U.S. state and local	43,698		38,576		120,844			74,292
International	984		747		3,166			3,018
Total	351,681		253,088		939,843			627,560
Deferred:
U.S. federal	30,578		135,145		146,795			332,965
U.S. state and local	2,759		10,024		12,215			18,882
International	10		6		(9		)	7
Total	33,347		145,175		159,001			351,854
Income tax expense	$	385,028	$	398,263	$	1,098,844		$	979,414

The following table reconciles the Company’s effective tax rate to the U.S. federal statutory income tax rate:
	For the Three Months Ended August 31,				For the Nine Months Ended August 31,
	2012		2011		2012		2011
U.S. federal statutory income tax rate	35.0	%	35.0	%	35.0	%	35.0	%
U.S. state, local and other income taxes, net of U.S. federal income tax benefits	3.2		3.4		3.2		2.6
Valuation allowance - capital loss	—		—		—		(0.8	)
Other	(0.1	)	(0.4	)	(0.2	)	(0.4	)
Effective income tax rate	38.1	%	38.0	%	38.0	%	36.4	%

The Company is subject to examination by the IRS and the tax authorities in various states. The tax years under examination vary by jurisdiction. The Company is pursuing an administrative appeal of the IRS’s proposed assessment for the years 1999 through 2005, when Discover was a subsidiary of Morgan Stanley. With respect to the issues still pending on appeal for the years 1999 through 2005, the ultimate outcome remains uncertain. It is reasonably possible that a settlement related to these timing issues may be made within twelve months of the reporting date. At this time, the Company believes it is reasonably possible that a reduction in the amount of unrecognized tax benefits of $85 million could be recognized as a result of such settlement.

The IRS is currently examining 2006 through June 20, 2007. This period is also part of a Morgan Stanley audit. A separate post-spin examination covers the years 2008 through 2010. The Company regularly assesses the likelihood of additional assessments or settlements in each of the taxing jurisdictions resulting from these and subsequent years' examinations. The Company believes that its reserves are sufficient to cover any tax, penalties and interest that could result from such examinations.

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10. Earnings Per Share

The following table presents the calculation of basic and diluted earnings per share ("EPS") (in thousands, except per share amounts):
	For the Three Months Ended August 31,						For the Nine Months Ended August 31,
	2012			2011			2012			2011
Numerator:
Net income	$	626,686		$	648,818		$	1,794,283		$	1,714,129
Income allocated to participating securities	(5,916		)	(7,046		)	(17,513		)	(19,493		)
Net income allocated to common stockholders	$	620,770		$	641,772		$	1,776,770		$	1,694,636
Denominator:
Weighted average shares of common stock outstanding	512,793			544,438			523,462			544,997
Effect of dilutive common stock equivalents	1,169			743			1,181			701
Weighted average shares of common stock outstanding and common stock equivalents	513,962			545,181			524,643			545,698
Basic earnings per share	$	1.21		$	1.18		$	3.39		$	3.11
Diluted earnings per share	$	1.21		$	1.18		$	3.39		$	3.11

The following securities were considered anti-dilutive and therefore were excluded from the denominator in the computation of diluted EPS (shares in thousands):
	For the Three Months Ended August 31,		For the Nine Months Ended August 31,
	2012	2011	2012	2011
Unexercised stock options	—	348	2	374

11. Capital Adequacy

The Company is subject to capital adequacy guidelines of the Federal Reserve, and Discover Bank (the “Bank”), the Company’s main banking subsidiary, is subject to various regulatory capital requirements as administered by the Federal Deposit Insurance Corporation (the “FDIC”). Failure to meet minimum capital requirements can result in the initiation of certain mandatory and possibly additional discretionary actions by regulators that, if undertaken, could have a direct material effect on the financial position and results of the Company and the Bank. Under capital adequacy guidelines and the regulatory framework for prompt corrective action, the Company and the Bank must meet specific capital guidelines that involve quantitative measures of assets, liabilities, and certain off-balance sheet items, as calculated under regulatory accounting practices. Capital amounts and classification are also subject to qualitative judgments by the regulators about components, risk weightings and other factors.

Quantitative measures established by regulation to ensure capital adequacy require the Company and the Bank to maintain minimum amounts and ratios (as defined in the regulations) of total risk-based capital and Tier 1 capital to risk-weighted assets, and of Tier 1 capital to average assets. As of August 31, 2012, the Company and the Bank met all capital adequacy requirements to which they were subject.

Under regulatory capital requirements, the Company and the Bank must maintain minimum levels of capital that are dependent upon the risk-weighted amount or average level of the financial institution’s assets, specifically (a) 8% to 10% of total risk-based capital to risk-weighted assets (“total risk-based capital ratio”), (b) 4% to 6% of Tier 1 capital to risk-weighted assets (“Tier 1 risk-based capital ratio”) and (c) 4% to 5% of Tier 1 capital to average assets (“Tier 1 leverage ratio”). To be categorized as “well-capitalized,” the Company and the Bank must maintain minimum total risk-based, Tier 1 risk-based, and Tier 1 leverage ratios as set forth in the table below. As of August 31, 2012, the Company and the Bank met the requirements for well-capitalized status and there have been no conditions or events that management believes have changed the Company’s or the Bank’s category.

33

The following table shows the actual capital amounts and ratios of the Company and the Bank as of August 31, 2012 and November 30, 2011 and comparisons of each to the regulatory minimum and “well-capitalized” requirements (dollars in thousands):
	Actual				Minimum Capital Requirements			Capital Requirements To Be Classified as Well-Capitalized
	Amount		Ratio		Amount		Ratio	Amount		Ratio
August 31, 2012
Total capital (to risk-weighted assets)
Discover Financial Services	$	10,686,110	17.1	%	$	4,997,394	≥8.0%	$	6,246,742	≥10.0%
Discover Bank	$	9,311,085	15.2	%	$	4,905,887	≥8.0%	$	6,132,358	≥10.0%
Tier 1 capital (to risk-weighted assets)
Discover Financial Services	$	8,698,015	13.9	%	$	2,498,697	≥4.0%	$	3,748,045	≥6.0%
Discover Bank	$	7,337,118	12.0	%	$	2,452,943	≥4.0%	$	3,679,415	≥6.0%
Tier 1 capital (to average assets)
Discover Financial Services	$	8,698,015	11.9	%	$	2,933,514	≥4.0%	$	3,666,893	≥5.0%
Discover Bank	$	7,337,118	10.2	%	$	2,886,498	≥4.0%	$	3,608,122	≥5.0%
November 30, 2011
Total capital (to risk-weighted assets)
Discover Financial Services	$	9,808,660	16.5	%	$	4,764,887	≥8.0%	$	5,956,109	≥10.0%
Discover Bank	$	8,671,391	14.8	%	$	4,693,645	≥8.0%	$	5,867,056	≥10.0%
Tier 1 capital (to risk-weighted assets)
Discover Financial Services	$	7,850,451	13.2	%	$	2,382,444	≥4.0%	$	3,573,665	≥6.0%
Discover Bank	$	6,724,176	11.5	%	$	2,346,822	≥4.0%	$	3,520,234	≥6.0%
Tier 1 capital (to average assets)
Discover Financial Services	$	7,850,451	11.5	%	$	2,729,480	≥4.0%	$	3,411,851	≥5.0%
Discover Bank	$	6,724,176	10.0	%	$	2,690,135	≥4.0%	$	3,362,668	≥5.0%

12. Commitments, Contingencies and Guarantees

Lease commitments. The Company leases various office space and equipment under capital and non-cancelable operating leases which expire at various dates through 2022. At August 31, 2012, future minimum payments on leases with original terms in excess of one year consist of the following (dollars in thousands):
	Capitalized Leases		Operating Leases
2012	$	127	$	4,093
2013	508		14,906
2014	508		13,088
2015	489		9,316
2016	178		8,348
Thereafter	—		16,642
Total minimum lease payments	1,810		$	66,393
Less: Amount representing interest	142
Present value of net minimum least payments	$	1,668

Unused commitments to extend credit. At August 31, 2012, the Company had unused commitments to extend credit for consumer loans and commercial loans of approximately $162.3 billion. Such commitments arise primarily from agreements with customers for unused lines of credit on certain credit cards and certain other consumer loan products, provided there is no violation of conditions in the related agreement. These commitments, substantially all of which the Company can terminate at any time and which do not necessarily represent future cash requirements, are periodically reviewed based on account usage, customer creditworthiness and loan qualification.

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Commitments to purchase private student loans. On December 31, 2010, Discover Bank entered into an agreement with Citibank to purchase any private student loans originated subsequent to the contract date including a premium equal to 0.125%. Discover Bank completed the first purchase of loan participations under this agreement on January 3, 2011. The agreement has been amended to extend to December 31, 2012, effective upon the closing of Discover Bank's purchase of private student loans from Citibank on September 30, 2011. Although the agreement does not set forth a minimum or maximum amount of loans to be purchased, Discover Bank must purchase all eligible loans originated by Citibank, which the Company estimates to be $250.0 million to $300.0 million over the remaining life of the agreement, as amended. As of August 31, 2012, Discover Bank had an outstanding commitment to purchase $71.8 million of loans under this agreement. For the loans purchased under the agreement, the Company has limited involvement with respect to the underwriting and setting credit terms. The underwriting standards for these loans are based on Citibank's credit policy, and those standards are not substantially different than the Company's own underwriting criteria.  Based on this and by virtue of the fact that the loans are newly originated at the time that the Company acquires them, the loans are not considered purchased credit-impaired.

Securitizations Representations and Warranties. As part of the Company’s financing activities, the Company provides representations and warranties that certain assets pledged as collateral in secured borrowing arrangements conform to specified guidelines. Due diligence is performed by the Company which is intended to ensure that asset guideline qualifications are met. If the assets pledged as collateral do not meet certain conforming guidelines, the Company may be required to replace, repurchase or sell such assets. In its credit card securitization activities, the Company would replace nonconforming receivables through the allocation of excess seller’s interest or from additional transfers from the unrestricted pool of receivables. If the Company could not add enough receivables to satisfy the requirement, an early amortization (or repayment) of investors’ interests would be triggered. In its student loan securitizations, the Company would generally repurchase the loans from the trust at the outstanding principal amount plus interest.

The maximum potential amount of future payments the Company could be required to make would be equal to the current outstanding balances of third-party investor interests in credit card asset-backed securities plus the principal amount of any other outstanding secured borrowings. The Company has recorded substantially all of the maximum potential amount of future payments in long-term borrowings on the Company’s statement of financial condition. The Company has not recorded any incremental contingent liability associated with its secured borrowing representations and warranties. Management believes that the probability of having to replace, repurchase or sell assets pledged as collateral under secured borrowing arrangements, including an early amortization event, is low.

Mortgage Loans Representations and Warranties. The Company sells loans it originates to investors on a servicing released basis and the risk of loss or default by the borrower is generally transferred to the investor. However, the Company is required by these investors to make certain representations relating to credit information, loan documentation and collateral. These representations and warranties may extend through the contractual life of the mortgage loan. Subsequent to the sale, if underwriting deficiencies, borrower fraud or documentation defects are discovered in individual mortgage loans, the Companymay beobligated to repurchase the respective mortgage loan or indemnify the investors for any losses from borrower defaults if such deficiency or defect cannot be cured within the specified period following discovery. The Company has established a repurchase reserve based on expected losses. At August 31, 2012, this amount was not material and was included in other income on the condensed consolidated statements of income.

Guarantees. The Company has obligations under certain guarantee arrangements, including contracts and indemnification agreements, which contingently require the Company to make payments to the guaranteed party based on changes in an underlying asset, liability or equity security of a guaranteed party, rate or index. Also included as guarantees are contracts that contingently require the Company to make payments to a guaranteed party based on another entity’s failure to perform under an agreement. The Company’s use of guarantees is disclosed below by type of guarantee.

Counterparty Settlement Guarantees. Diners Club and DFS Services LLC, on behalf of PULSE, have various counterparty exposures, which are listed below.

• Merchant Guarantee. Diners Club has entered into contractual relationships with certain international merchants, which generally include travel-related businesses, for the benefit of all Diners Club licensees. The licensees hold the primary liability to settle the transactions of their customers with these merchants. However, Diners Club retains a counterparty exposure if a licensee fails to meet its financial payment obligation to one of these merchants.

• ATM Guarantee. PULSE entered into contractual relationships with certain international ATM acquirers in which DFS Services LLC retains counterparty exposure if an issuer fails to fulfill its settlement obligation.

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The maximum potential amount of future payments related to such contingent obligations is dependent upon the transaction volume processed between the time a counterparty defaults on its settlement and the time at which the Company disables the settlement of any further transactions for the defaulting party, which could be up to one month depending on the type of guarantee/counterparty. However, there is no limitation on the maximum amount the Company may be liable to pay. The actual amount of the potential exposure cannot be quantified as the Company cannot determine whether particular counterparties will fail to meet their settlement obligations. While the Company has some contractual remedies to offset these counterparty settlement exposures (such as letters of credit or pledged deposits), in the event that all licensees and/or issuers were to become unable to settle their transactions, the Company estimates its maximum potential counterparty exposures to these settlement guarantees, based on historical transaction volume of up to one month, would be as follows:
	August 31, 2012
Diners Club:
Merchant guarantee (in millions)	$	262
PULSE:
ATM guarantee (in thousands)	$	1,045

With regard to the counterparty settlement guarantees discussed above, the Company believes that the estimated amounts of maximum potential future payments are not representative of the Company’s actual potential loss exposure given Diners Club’s and PULSE’s insignificant historical losses from these counterparty exposures. As of August 31, 2012, the Company had not recorded any contingent liability in the condensed consolidated financial statements for these counterparty exposures, and management believes that the probability of any payments under these arrangements is low.

The Company also retains counterparty exposure for the obligations of Diners Club licensees that participate in the Citishare network, an electronic funds processing network. Through the Citishare network, Diners Club customers are able to access certain ATMs directly connected to the Citishare network. The Company’s maximum potential future payment under this counterparty exposure is limited to $15 million, subject to annual adjustment based on actual transaction experience. However, as of August 31, 2012, the Company had not recorded any contingent liability in the condensed consolidated financial statements related to this counterparty exposure, and management believes that the probability of any payments under this arrangement is low.

Merchant Chargeback Guarantees. The Company issues and permits third parties to issue payment cards and owns and operates the Discover Network. The Company is contingently liable for certain transactions processed on the Discover Network in the event of a dispute between the payment card customer and a merchant. The contingent liability arises if the disputed transaction involves a merchant or merchant acquirer with whom the Discover Network has a direct relationship. If a dispute is resolved in the customer’s favor, the Discover Network will credit or refund the disputed amount to the Discover Network card issuer, who in turn credits its customer’s account. The Discover Network will then charge back the disputed amount of the payment card transaction to the merchant or merchant acquirer, where permitted by the applicable agreement, to seek recovery of amounts already paid to the merchant for payment card transactions. If the Discover Network is unable to collect the amount subject to dispute from the merchant or merchant acquirer (e.g., in the event of merchant default or dissolution) or after expiration of the time period for chargebacks in the applicable agreement, the Discover Network will bear the loss for the amount credited or refunded to the customer. In most instances, a loss by the Discover Network is unlikely to arise in connection with payments on card transactions because most products or services are delivered when purchased, and credits are issued by merchants on returned items in a timely fashion, thus minimizing the likelihood of cardholder disputes with respect to amounts paid by the Discover Network. However, where the product or service is not scheduled to be provided to the customer until a later date following the purchase, the likelihood of a contingent payment obligation by the Discover Network increases.

The maximum potential amount of obligations of the Discover Network arising as a result of such contingent obligations is estimated to be the portion of the total Discover Network transaction volume processed to date for which timely and valid disputes may be raised under applicable law and relevant issuer and customer agreements. There is no limitation on the maximum amount the Company may be liable to pay to issuers. However, the Company believes that such amount is not representative of the Company’s actual potential loss exposure based on the Company’s historical experience. The actual amount of the potential exposure cannot be quantified as the Company cannot determine whether the current or cumulative transaction volumes may include or result in disputed transactions.

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The table below summarizes certain information regarding merchant chargeback guarantees:
	For the Three Months Ended August 31,					For the Nine Months Ended August 31,
	2012			2011		2012			2011
Losses related to merchant chargebacks (in thousands)(1)	$	(166	)	$	291	$	(65	)	$	1,625
Aggregate sales transaction volume (in millions)(2)	$	29,592		$	28,416	$	85,816		$	81,051

____________________

(1) Gain in three and nine months ended 2012 is due to recoveries in the current quarter which offset losses.

(2) Represents period transactions processed on the Discover Network for which a potential liability exists that, in aggregate, can differ from credit card sales volume.

The Company has not recorded any contingent liability in the condensed consolidated financial statements for merchant chargeback guarantees on August 31, 2012 and November 30, 2011. The Company mitigates the risk of potential loss exposure by withholding settlement from merchants, obtaining third-party guarantees, or obtaining escrow deposits or letters of credit from certain merchant acquirers or merchants that are considered higher risk due to various factors such as time delays in the delivery of products or services. The table below provides information regarding settlement withholdings and escrow deposits, which are recorded in interest-bearing deposit accounts, and accrued expenses and other liabilities on the Company’s condensed consolidated statements of financial condition (dollars in thousands):
	August 31, 2012		November 30, 2011
Settlement withholdings and escrow deposits	$	21,084	$	24,297

13. Litigation and Regulatory Matters

In the normal course of business, from time to time, the Company has been named as a defendant in various legal actions, including arbitrations, class actions, and other litigation, arising in connection with its activities. Certain of the actual or threatened legal actions include claims for substantial compensatory and/or punitive damages or claims for indeterminate amounts of damages. The Company contests liability and/or the amount of damages as appropriate in each pending matter.

The Company has historically relied on the arbitration clause in its cardmember agreements, which has in some instances limited the costs of, and the Company’s exposure to, litigation, but there can be no assurance that the Company will continue to be successful in enforcing its arbitration clause in the future. Legal challenges to the enforceability of these clauses have led most card issuers and may cause the Company to discontinue their use. In addition, there are bills pending in Congress to directly or indirectly prohibit the use of pre-dispute arbitration clauses, and the 2010 Dodd-Frank Wall Street Reform and Consumer Protection Act authorized the Consumer Financial Protection Bureau (the "CFPB") to limit or ban pre-dispute arbitration clauses. Further, the Company is involved in pending legal actions challenging its arbitration clause.

The Company is also involved, from time to time, in other reviews, investigations and proceedings (both formal and informal) by governmental agencies regarding the Company’s business including, among other matters, accounting, tax and operational matters, some of which may result in significant adverse judgments, settlements, fines, penalties, injunctions, decreases in regulatory ratings or other relief, which could materially impact the Company's financial statements, increase its cost of operations, or limit its ability to execute its business strategies and engage in certain business activities. Such matters related to the IRS are discussed in Note 9: Income Taxes.

In accordance with applicable accounting guidance, the Company establishes an accrued liability for legal and regulatory matters when those matters present loss contingencies which are both probable and estimable. Litigation-related expense of $96.2 million and $212 million was recognized for the three and nine months ended August 31, 2012, compared to $1.9 million and $22.6 million for the same periods in 2011.

There may be an exposure to loss in excess of any amounts accrued. The Company believes the estimate of the aggregate range of reasonably possible losses (meaning those losses the likelihood of which is more than remote but less than likely) in excess of the amounts that the Company has accrued for legal and regulatory proceedings is up to $100 million. This estimated range of reasonably possible losses is based upon currently available information for those proceedings in which the Company is involved, takes into account the Company’s best estimate of such losses for those matters for which an estimate can be made, and does not represent the Company’s maximum potential loss exposure. Various aspects of the legal proceedings underlying the estimated range will change from time to time and actual results may vary significantly from the estimate.

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The Company’s estimated range above involves significant judgment, given the varying stages of the proceedings, the existence of numerous yet to be resolved issues, the breadth of the claims (often spanning multiple years and, in some cases, a wide range of business activities), unspecified damages and/or the novelty of the legal issues presented. The outcome of pending matters could be material to the Company’s consolidated financial condition, operating results and cash flows for a particular future period, depending on, among other things, the level of the Company’s income for such period, and could adversely affect the Company’s reputation.

On August 16, 2011, the Attorney General of West Virginia filed a lawsuit against the Company in the Circuit Court of Mason County, West Virginia (West Virginia v. Discover Financial Services, Inc., Discover Bank, DFS Services LLC et al.). The lawsuit asserts various claims related to the Company's marketing and administration of various protection products under West Virginia law. The relief sought in the lawsuit includes an injunction prohibiting the Company from engaging in the alleged violations, restitution and disgorgement of monies received from the complained of practices, civil penalties and costs. The Company will seek to vigorously defend all claims asserted against it in this matter.

On August 26, 2011, the Attorney General of Missouri issued a request for information to the Company in connection with an investigation to determine whether the Company has engaged in conduct that violates Missouri law in the marketing of its payment protection product to its credit card customers. The Company is cooperating with the Attorney General in the investigation.

On November 30, 2011, a class action lawsuit was filed against the Company by a cardmember in the U.S. District Court for the Northern District of California (Walter Bradley, et al. v. Discover Financial Services). The plaintiff alleges that the Company contacted him, and members of the class he seeks to represent, on their cellular telephones without their express consent in violation of the Telephone Consumer Protection Act (“TCPA”). Plaintiff seeks statutory damages for alleged negligent and willful violations of the TCPA, attorneys' fees, costs and injunctive relief. The TCPA provides for statutory damages of $500 for each violation ($1,500 for willful violations). The Company will seek to vigorously defend against all claims asserted by the plaintiff.

On March 6, 2012, a class action lawsuit was filed against the Company by a cardmember in the U.S. District Court for the Northern District of California (Andrew Steinfeld, et al. v. Discover Financial Services, et al.). The plaintiff alleges that the Company contacted him, and members of the class he seeks to represent, on their cellular telephones without their express consent in violation of the TCPA. Plaintiff seeks statutory damages for alleged negligent and willful violations of the TCPA, attorneys' fees, costs and injunctive relief. The TCPA provides for statutory damages of $500 for each violation ($1,500 for willful violations). The Company will seek to vigorously defend against all claims asserted by the plaintiff.

On April 12, 2012, the Attorney General of Hawaii filed a lawsuit against the Company in the Circuit Court of the First Circuit, Hawaii (Hawaii v. Discover Financial Services, Inc., Discover Bank, DFS Services LLC et al.). The lawsuit asserts various claims related to the Company's marketing and administration of various protection products under Hawaii law. The relief sought in the lawsuit includes an injunction prohibiting named parties from engaging in the alleged violations, restitution and disgorgement of monies received from the complained of practices, civil penalties and costs. The Company will seek to vigorously defend against all claims asserted against it.

On June 28, 2012, the Attorney General of Mississippi filed a lawsuit against the Company in the Chancery Court of the First Judicial District of Hinds County, Mississippi (Mississippi v. Discover Financial Services, Inc., Discover Bank, DFS Services LLC et al.). The lawsuit asserts various claims related to the Company's marketing and administration of various protection products under Mississippi law. The relief sought in the lawsuit includes an injunction prohibiting the Company from engaging in the alleged violations, restitution and disgorgement of monies received from the complained-of practices, civil penalties and costs. The Company will seek to vigorously defend all claims asserted against it.

On July 5, 2012, the Antitrust Division of the United States Department of Justice (the “Division”) issued a Civil Investigative Demand (“CID”) to the Company seeking information regarding an investigation related to potential violations of Sections 1 and 2 of the Sherman Act, 15 U.S.C. §§1-2 by an unidentified party other than Discover. The CID seeks documents, data and narrative responses to several interrogatories and document requests, related to the debit card market. A CID is a request for information in the course of a civil investigation and does not constitute the commencement of legal proceedings. The Division is permitted by statute to issue a CID to anyone whom it believes may have information relevant to an investigation. The receipt of a CID does not presuppose that there is probable cause to believe that a violation of the antitrust laws has occurred or that a formal complaint ultimately will be filed. The Company is cooperating with the Division in connection with the CID.

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On August 14, 2012, a purported shareholder, James Groen, filed a shareholder derivative action in the U.S. District Court for the Northern District of Illinois (Groen v. Nelms et al.) against the Company’s board of directors, certain current and former officers and directors, and the Company as nominal defendant. On August 27, 2012, a second purported shareholder, the Charter Township of Clinton Police and Fire Retirement System, filed a substantially identical shareholder derivative action in the same court against the same parties (Charter Township of Clinton Police and Fire Retirement System v. Nelms et al.). The complaints in both actions assert claims against the board of directors and certain current and former officers and directors for alleged breach of fiduciary duty, corporate waste, and unjust enrichment arising out of the Company’s alleged violations of the law in connection with the marketing and sale of its protection products. The relief sought in both actions includes changes to the Company’s corporate governance procedures; unspecified damages, injunctive relief, restitution, and disgorgement from the individual defendants; and attorneys’ fees.

On September 24, 2012, Discover Bank entered into a consent order with the FDIC and the CFPB for resolution of the agencies' joint investigation with respect to the marketing of the Bank's protection products. The order requires the Bank to provide refunds of approximately $200 million to eligible customers who purchased certain protection products between December 1, 2007 and August 31, 2011. In addition, the Bank agreed to pay a $14 million civil monetary penalty to the agencies. Adequate provision has been made to cover these costs in the financial statements as of August 31, 2012. The Bank also agreed to make further enhancements to its quality control and other processes related to the marketing, sale and administration of its protection products. The Bank agreed to enter into the consent order for the purpose of resolving this matter and, in doing so, did not admit or deny the findings of fact, conclusions of law, or any violations of law or regulation, set forth in the order.

14. Fair Value Disclosures

Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. ASC 820, fair value accounting guidance, provides a three-level hierarchy for classifying financial instruments, the hierarchy of which is based on whether the inputs to the valuation techniques used to measure the fair value of each financial instrument are observable or unobservable. ASC 820 defines fair value, establishes a fair value hierarchy that distinguishes between valuations that are based on observable inputs from those based on unobservable inputs, and requires certain disclosures about those measurements. The three level valuation hierarchy is as follows:

• Level 1: Fair values determined by Level 1 inputs are defined as those that utilize quoted prices (unadjusted) in active markets for identical assets or liabilities that the Company has the ability to access.

• Level 2: Fair values determined by Level 2 inputs are those that utilize inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly or indirectly. Level 2 inputs include quoted prices for similar assets and liabilities in active or inactive markets, quoted prices for the identical assets in an inactive market, and inputs other than quoted prices that are observable for the asset or liability, such as interest rates and yield curves that are observable at commonly quoted intervals. The Company evaluates factors such as the frequency of transactions, the size of the bid-ask spread and the significance of adjustments made when considering transactions involving similar assets or liabilities to assess the relevance of those observed prices. If relevant and observable prices are available, the fair values of the related assets or liabilities would be classified as Level 2.

• Level 3: Fair values determined by Level 3 inputs are those based on unobservable inputs, and include situations where there is little, if any, market activity for the asset or liability being valued. In instances in which the inputs used to measure fair value may fall into different levels of the fair value hierarchy, the level in the fair value hierarchy within which the fair value measurement in its entirety is classified is based on the lowest level input that is significant to the fair value measurement in its entirety. The Company may utilize both observable and unobservable inputs in determining the fair values of financial instruments classified within the Level 3 category.

The determination of classification of its financial instruments within the fair value hierarchy is performed at least quarterly by the Company. For transfers in and out of the levels of the fair value hierarchy, the Company discloses the fair value measurement based on the value immediately preceding the transfer.

The Company's assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment, and involves consideration of factors specific to the asset or liability. Furthermore, certain techniques used to measure fair value involve some degree of judgment and, as a result, are not necessarily indicative of the amounts the Company would realize in a current market exchange.

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During the three and nine ended August 31, 2012, there were no changes to the Company valuation techniques that had, or are expected to have, a material impact on its condensed consolidated financial position or results of operations.

Assets and Liabilities Measured at Fair Value on a Recurring Basis.

Assets and liabilities measured at fair value on a recurring basis are as follows (dollars in thousands):
	Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Total
Balance at August 31, 2012
Assets
U.S Treasury securities	$	2,470,898	$	—	$	—	$	2,470,898
U.S government agency securities	2,319,285		—		—		2,319,285
Credit card asset-backed securities of other issuers	—		164,294		—		164,294
Corporate debt securities	—		145,529		—		145,529
Residential mortgage-backed securities - Agency	—		1,277,496		—		1,277,496
Available-for-sale investment securities	$	4,790,183	$	1,587,319	$	—	$	6,377,502
Mortgage loans held for sale	$	—	$	272,082	$	—	$	272,082
Interest rate lock commitments	$	—	$	—	$	17,448	$	17,448
Forward delivery contracts	—		984		95		1,079
Other derivative financial instruments	—		117,681		—		117,681
Derivative financial instruments	$	—	$	118,665	$	17,543	$	136,208
Liabilities
Interest rate lock commitments	$	—	$	—	$	34	$	34
Forward delivery contracts	—		4,668		6		4,674
Other derivative financial instruments	—		68		—		68
Derivative financial instruments	$	—	$	4,736	$	40	$	4,776
Balance at November 30, 2011
Assets
U.S Treasury securities	$	2,563,250	$	—	$	—	$	2,563,250
U.S government agency securities	2,795,223		—		—		2,795,223
Credit card asset-backed securities of other issuers	—		299,889		—		299,889
Corporate debt securities	—		449,469		—		449,469
Available-for-sale investment securities	$	5,358,473	$	749,358	$	—	$	6,107,831
Derivative financial instruments	$	—	$	63,576	$	—	$	63,576
Liabilities
Derivative financial instruments	$	—	$	448	$	—	$	448

There were no transfers between Levels 1 and 2 within the fair value hierarchy for the three and nine months ended August 31, 2012 and August 31, 2011.

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Available-for-sale investment securities. Investment securities classified as available-for-sale consist of U.S. Treasury and government agency securities, residential mortgage-backed securities, corporate debt and credit card asset-back securities issued by other financial institutions. The fair value estimates of investment securities classified as Level 1, consisting of U.S. Treasury and government agency securities, are determined based on quoted market prices for the same or similar securities. The Company classifies all other available-for-sale investment securities as Level 2, the fair value estimates of which are primarily obtained from pricing services, where fair values are estimated using pricing models based on observable market inputs or recent trades of similar securities. The fair value estimates of mortgage-backed and credit card asset-backed securities are based on the best information available. This data may consist of observed market prices, broker quotes or discounted cash flow models that incorporate assumptions such as benchmark yields, issuer spreads, prepayment speeds, credit ratings and losses, the priority of which may vary based on availability of information. The fair value estimates for corporate debt obligations issued under the Temporary Liquidity Guarantee Program (“TLGP”) are derived utilizing a spread relative to an underlying benchmark curve which reflects the terms and conditions of specific instruments being valued.

The Company validates the fair value estimates provided by the pricing services primarily by comparison to valuations obtained through other pricing sources. The Company evaluates pricing variances amongst different pricing sources to ensure that the valuations utilized are reasonable. The Company also corroborates the reasonableness of the fair value estimates with analysis of trends of significant inputs, such as market interest rate curves. The Company further performs due diligence in understanding the procedures and techniques performed by the pricing services to derive fair value estimates.

At August 31, 2012, amounts reported in credit card asset-backed securities issued by other institutions reflected senior-rated Class A securities having a par value of $139 million and more junior-rated Class B and Class C securities with par values of $22 million and $4 million, respectively. The Class A securities had a weighted-average coupon of 0.46% and a weighted-average remaining maturity of 8 months; the Class B, 0.55% and 8 months, respectively; and the Class C, 0.64% and 7 months, respectively. The assets underlying these securities are predominantly prime general-purpose credit card loan receivables. Amounts reported in corporate debt securities reflect government-rated corporate debt obligations issued under TLGP that are guaranteed by the FDIC with a par value of $145 million, a weighted-average coupon of 2.11% and a weighted-average remaining maturity of 2 months. Amounts reported in residential mortgage-backed securities reflect government-rated obligations issued by the Federal National Mortgage Association with a par value of $1.2 billion, a weighted-average coupon of 2.85% and a weighted-average remaining maturity of 4 years.

Mortgage loans held for sale and related derivative instruments. The Company enters into commitments with consumers to originate mortgage loans at a specified interest rate, known as interest rate lock commitments (“IRLCs”). The Company reports IRLCs as derivative instruments at fair value with changes in fair value being recorded in other income and other expense. IRLCs and mortgage loans held for sale under certain loan programs are hedged in aggregate using “to be announced mortgage-backed securities” (“TBA MBS”). IRLCs and mortgage loans held for sale under loan programs that generally have lower volume are hedged on an individual loan level using best-efforts forward delivery contracts.

Fair values for each of these instruments are determined using quantitative risk models. The Company has various monitoring processes in place to validate these valuations, including valuations of Level 3 assets. Valuation results are reviewed in comparison to expected results, recent activity, and historical trends. Any significant or unusual fluctuations in value are analyzed.

•Mortgage loans held for sale. Valuations of mortgage loans held for sale are based on the loan amount, note rate, loan program, expected sale date of the loan and, most significantly, investor pricing tables stratified by product, note rate and term, adjusted for current market conditions. Mortgage loans held for sale are classified as Level 2 as the investor pricing tables used to value them are an observable input. The Company recognizes interest income separately from changes in fair value.

•Interest rate lock commitments. IRLCs for loans to be sold to investors using a mandatory or assignment of trade method derive their base value from an underlying loan type with similar characteristics using the TBA MBS market, which is actively quoted and easily validated through external sources. The data inputs used in this valuation include, but are not limited to, loan type, underlying loan amount, note rate, loan program, and expected sale date of the loan. IRLCs for loans to be sold to investors on a best-efforts basis derive their base value from the value of the underlying loans using investor pricing tables stratified by product, note rate and term, adjusted for current market conditions. These valuations are adjusted at the loan level to consider the servicing release premium and loan pricing adjustments specific to each loan. For all IRLCs, this base value is then adjusted for the anticipated loan funding probability, or pull through rate. The anticipated loan funding probability is an unobservable input based on historical experience, which results in classification of IRLCs as Level 3.

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•Forward delivery contracts.Under the Company's risk management policy, the Company economically hedges the changes in fair value of IRLCs and mortgage loans held for sale caused by changes in interest rates by using TBA MBS and entering into best-efforts forward delivery contracts. These hedging instruments are recorded at fair value with changes in fair value recorded in other income. TBA MBS used to hedge both IRLCs and loans held for sale are valued based primarily on observable inputs related to characteristics of the underlying MBS stratified by product, coupon and settlement date. Therefore, these derivatives are classified as Level 2. Best-efforts forward delivery contracts are valued based on investor pricing tables, which are observable inputs, stratified by product, note rate, and term, adjusted for current market conditions. An anticipated loan funding probability is applied to value best-efforts contracts hedging IRLCs, which results in the classification of these contracts as Level 3. The current base loan price and, for best-efforts contracts hedging IRLCs, the anticipated loan funding probability, are the most significant assumptions affecting the value of the best-efforts contracts. The best-efforts forward delivery contracts hedging loans held for sale are classified as Level 2, so such contracts are transferred from Level 3 to Level 2 at the time the underlying loan is originated. For the purposes of the tables below, we refer to TBA MBA and best-efforts forward delivery contracts as “Forward delivery contracts”.

Other derivative financial instruments. The Company's other derivative financial instruments consist of interest rate swaps and foreign currency forward contracts. The fair value of these instruments is estimated by a third-party valuation service that uses proprietary pricing models, where certain inputs to those models are readily observable market-based inputs, including interest rate curves and option volatility. In determining fair values, the pricing models use widely accepted valuation techniques including discounted cash flow analysis on the expected cash flows of each derivative. This analysis reflects the contractual terms of the derivatives, including the period to maturity and uses observable market-based inputs. The fair values of the interest rate swaps are determined using the market standard methodology of netting the discounted future fixed cash receipts (or payments) and the discounted expected variable cash payments (or receipts). The variable cash payments are based on an expectation of future interest rates derived from observable market interest rate curves. The Company considers collateral and legally enforceable master netting agreements that mitigate credit exposure to counterparties in determining the counterparty credit risk valuation adjustment.

The Company validates the fair value estimates of interest rate swaps primarily through comparison to the fair value estimates computed by the counterparty's to each the derivative transactions. The Company evaluates pricing variances amongst different pricing sources to ensure that the valuations utilized are reasonable. The Company also corroborates the reasonableness of the fair value estimates with analysis of trends of significant inputs, such as market interest rate curves. The Company performs due diligence in understanding the impact to any changes to the valuation techniques performed by proprietary pricing models prior to implementation, working closely with the third-party valuation service, and reviews the control objectives of the service at least annually. The Company corroborates the fair value of foreign currency forward contracts through independent calculation of the fair value estimates.

Assets and liabilities under the fair value option. Beginning in June 2012, the Company elected to account for mortgage loans held for sale at fair value. Electing the fair value option allows a better offset of the changes in fair values of the loans and the forward delivery contracts used to economically hedge them without the burden of complying with the requirements for hedge accounting. At August 31, 2012, the aggregate unpaid principal balance of loans held for sale for which the fair value option had been elected was $259.9 million. The same loans had a fair value of $272.1 million at August 31, 2012.

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Level 3 Financial Instruments Only

The following tables provide changes in the Company’s Level 3 assets and liabilities measured at fair value on a recurring basis. There were no Level 3 assets or liabilities measured at fair value on a recurring basis at any point during the three months ended August 31, 2011.
Changes in Level 3 Assets and Liabilities Measured at Fair Value on a Recurring Basis (dollars in thousands)
For the Three Months Ended August 31, 2012
	Balance at May 31, 2012		Transfers into Level 3		Transfers out of Level 3			Total net gains (losses) included in earnings		Purchases		Sales			Settlements			Transfers of IRLCs to closed loans			Balance at August 31, 2012
Interest rate lock commitments	$	—	$	—	$	—		$	49,437	$	4,757	$	—		$	(202	)	$	(36,578	)	$	17,414
Forward delivery contracts	$	—	$	—	$	(734	)	$	802	$	21	$	—		$	—		$	—		$	89
For the Nine Months Ended August 31, 2012
	Balance at November 30, 2011		Transfers into Level 3		Transfers out of Level 3			Total net gains (losses) included in earnings		Purchases		Sales			Settlements			Transfers of IRLCs to closed loans			Balance at August 31, 2012
Interest rate lock commitments	$	—	$	—	$	—		$	49,437	$	4,757	$	—		$	(202	)	$	(36,578	)	$	17,414
Forward delivery contracts	$	—	$	—	$	(734	)	$	802	$	21	$	—		$	—		$	—		$	89
For the Nine Months Ended August 31, 2011
	Balance at November 30, 2010		Transfers into Level 3		Transfers out of Level 3			Total net gains (losses) included in earnings		Purchases		Sales			Settlements			Transfers of IRLCs to closed loans			Balance at August 31, 2011
Equity securities	$	17	$	—	$	—		$	144	$	—	$	(161	)	$	—		$	—		$	—

Unobservable inputs and sensitivities

The following table presents information about significant unobservable inputs related to the Company's Level 3 financial assets and liabilities measured at fair value on a recurring and non-recurring basis as of August 31, 2012.
	Fair Value		Valuation Technique	Significant Unobservable Input	Ranges of Inputs
					Low		High
Interest rate lock commitments	$	17,414	Quantitative risk models	Loan funding probability	20	%	95	%
Forward delivery contracts	$	89	Quantitative risk models	Loan funding probability	28	%	99	%

The anticipated loan funding probability represents the Company's expectation regarding the percentage of IRLCs that will ultimately be funded. Generally, an increase in the anticipated loan funding probability would result in an increase in the magnitude of fair value measurements.

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Assets and Liabilities Measured at Fair Value on a Non-Recurring Basis. The Company also has assets that under certain conditions are subject to measurement at fair value on a non-recurring basis. These assets include those associated with acquired businesses, including goodwill and other intangible assets. For these assets, measurement at fair value in periods subsequent to their initial recognition is applicable if one or more is determined to be impaired. During the three and nine months ended August 31, 2012 and August 31, 2011, the Company had no impairments related to these assets. Fair value adjustments for student loans held for sale were periodically recorded in other income in the consolidated statements of income. There were no gains or losses related to student loans held for sale during the three months ended August 31, 2012. During the nine months ended August 31, 2012, the Company recorded a loss of $518 thousand related to the sale of student loans held for sale. During the three and nine months ended August 31, 2011, the Company recorded gains related to student loans held for sale of $0.1 million and $6.2 million, respectively.

Financial Instruments Measured at Other Than Fair Value

The following table discloses the estimated fair value of the Company's financial assets and financial liabilities that are not required to be carried at fair value, as of August 31, 2012 (dollars in thousands):
	Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Total		Carrying Value
Balance at August 31, 2012
Assets
U.S Treasury securities	$	550	$	—	$	—	$	550	$	550
States and political subdivisions of states	—		35,174		—		35,174		35,242
Residential mortgage-backed securities - Agency	—		56,544		—		56,544		54,213
Held-to-maturity investment securities	$	550	$	91,718	$	—	$	92,268	$	90,005
Cash and cash equivalents	$	6,237,610	$	—	$	—	$	6,237,610	$	6,237,610
Restricted cash	$	301,349	$	—	$	—	$	301,349	$	301,349
Net loan receivables	$	—	$	—	$	59,047,925	$	59,047,925	$	57,469,848
Accrued interest receivables	$	—	$	486,798	$	—	$	486,798	$	486,798
Liabilities
Deposits	$	—	$	42,854,843	$	—	$	42,854,843	$	42,318,312
Short-term borrowings	$	—	$	250,139	$	—	$	250,139	$	250,139
Long-term borrowings - owed to securitization investors	$	—	$	15,365,667	$	2,405,139	$	17,770,806	$	17,337,914
Other long-term borrowings	$	—	$	2,358,219	$	1,797	$	2,360,016	$	1,908,199
Accrued interest payables	$	—	$	164,080	$	—	$	164,080	$	164,080

The fair values of these financial assets and liabilities, which are not carried at fair value on the condensed consolidated statements of financial condition, were determined applying the fair value provisions discussed herein. The use of different assumptions or estimation techniques may have a material effect on these estimated fair value amounts. The following describes the valuation techniques of these financial instruments measured at other than fair values.

Cash and cash equivalents. The carrying value of cash and cash equivalents approximates fair value due to the low level of risk these assets present to the Company as well as the relatively liquid nature of these assets, particularly given their short maturities.

Restricted cash. The carrying value of restricted cash approximates fair value due to the low level of risk these assets present to the Company as well as relatively liquid nature of these assets, particularly given their short maturities.

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Held-to-maturity investment securities. Held-to-maturity investment securities consist of residential mortgage-backed securities issued by agencies and municipal bonds. The fair value of residential mortgage-backed securities included in the held-to-maturity portfolio is estimated similarly to residential mortgage-backed securities carried at fair value on a recurring basis discussed herein. Municipal bonds are valued based on quoted market prices for the same or similar securities.

Total loan portfolio. The Company's loan receivables are comprised of credit card and installment loans, including the PCI student loans. Fair value estimates are derived utilizing discounted cash flow analyses, the calculations of which are performed on groupings of loan receivables that are similar in terms of loan type and characteristics. Inputs to the cash flow analysis of each grouping consider recent pre-payment and interest accrual trends and leverage forecasted loss estimates. The expected future cash flows of each grouping are discounted at rates at which similar loans within each grouping could be made under current market conditions. Significant inputs to the fair value measurement of the loan portfolio are unobservable, and as such are classified as Level 3.

Accrued interest receivable. For the Company's accrued interest receivable, which is included in other assets on the statement of financial condition, the carrying value approximates fair value as it is short-term in nature and is due in less than one year.

Deposits. The carrying values of money market deposits, savings deposits and demand deposits approximate fair value due to the potentially liquid nature of these deposits. For time deposits for which readily available market rates do not exist, fair values are estimated by discounting expected future cash flows using market rates currently offered for deposits with similar remaining maturities.

Short-term borrowings. The carrying values of short-term borrowings approximate fair value as they are short term in nature and have maturities of less than one year.

Long-term borrowings-owed to securitization investors. Fair values of long-term borrowings owed to credit card securitization investors are determined utilizing quoted market prices of the same transactions, and as such are classified as Level 2. Fair values of long-term borrowings owed to student loan securitization investors are calculated by discounting cash flows using estimated assumptions including, among other things, maturity and market discount rates. Significant inputs to these fair value measurements are unobservable, and as such, are classified as Level 3.

Other long-term borrowings. Fair values of other long-term borrowings, consisting of subordinated debt and unsecured debt, are determined utilizing current observable market prices for those transactions, and as such are classified as Level 2. Fair values of other long-term borrowing for which there are no observable market transactions, namely capitalized leases, are determined by discounting cash flows of future interest accruals at market rates currently offered for borrowings with similar credit risks, remaining maturities and repricing terms. As the significant inputs to these fair value measurements are unobservable, they are classified as Level 3.

Accrued interest payable. The Company's accrued interest payable, which is included in other liabilities on the statement of financial condition, carrying value approximates fair value as it is short term in nature and is payable in less than one year.

15. Derivatives and Hedging Activities

The Company uses derivatives to manage its exposure to various financial risks. The Company does not enter into derivatives for trading or speculative purposes. Certain derivatives used to manage the Company’s exposure to interest rate movements and other identified risks are not designated as hedges and do not qualify for hedge accounting. All derivatives are recorded in other assets at their gross positive fair values and in accrued expenses and other liabilities at their gross negative fair values.

Derivatives may give rise to counterparty credit risk, which generally is addressed through collateral arrangements as described under the sub-heading "Collateral Requirements and Credit-Risk Related Contingency Features." The Company enters into derivative transactions with established dealers that meet minimum credit criteria established by the Company. All counterparties must be pre-approved prior to engaging in any transaction with the Company. Counterparties are monitored on a regular basis by the Company to ensure compliance with the Company’s risk policies and limits.In determining the counterparty credit risk valuation adjustment for the fair values of derivatives, the Company considers collateral and legally enforceable master netting agreements that mitigate credit exposure to counterparties.

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Derivatives Designated as Hedges

Derivatives designated and qualifying as a hedge of the exposure to variability in expected future cash flows, or other types of forecasted transactions, are considered cash flow hedges. Derivatives designated and qualifying as a hedge of the exposure to changes in the fair value of an asset, liability, or firm commitment attributable to a particular risk, such as interest rate risk, are considered fair value hedges.

Cash Flow Hedges. The Company uses interest rate swaps to manage its exposure to changes in interest rates related to future cash flows resulting from credit card loan receivables. The Company's current cash flow hedges are for a maximum period of three years. The derivatives are designated as a hedge of the risk of overall changes in cash flows on the Company’s portfolios of prime-based interest receipts and qualify for hedge accounting in accordance with ASC Topic 815, Derivatives and Hedging (“ASC 815”).

The effective portion of the change in the fair value of derivatives designated as cash flow hedges is recorded in other comprehensive income and is subsequently reclassified into earnings in the period that the hedged forecasted cash flows affect earnings. The ineffective portion of the change in fair value of the derivative, if any, is recognized directly in earnings. Amounts reported in accumulated other comprehensive income related to derivatives at August 31, 2012 will be reclassified to interest income as interest payments are received on certain of the Company's floating rate credit card loan receivables. During the next 12 months, the Company estimates it will reclassify to earnings $7.2 million of pretax gains related to its derivatives designated as cash flow hedges.

Fair Value Hedges. The Company is exposed to changes in fair value of certain of its fixed rate debt obligations due to changes in interest rates. During the three and nine months ended August 31, 2012, the Company used interest rate swaps to manage its exposure to changes in fair value of certain fixed rate senior notes, securitized debt and interest-bearing brokered deposits attributable to changes in LIBOR, a benchmark interest rate as defined by ASC 815. The interest rate swaps involve the receipt of fixed rate amounts from the respective counterparties in exchange for the Company making payments of variable rate amounts over the life of the agreements without exchange of the underlying notional amounts. These interest rate swaps qualify as fair value hedges in accordance with ASC 815. Changes in both (i) the fair values of the derivatives and (ii) the hedged fixed rate senior notes, securitized debt and interest-bearing brokered deposits relating to the risk being hedged were recorded in interest expense. The changes provided substantial offset to one another. Ineffectiveness related to these fair value hedges was recorded in interest expense. Any basis differences between the fair value and the carrying amount of the hedged fixed rate senior notes, securitized debt and interest-bearing brokered deposits at the inception of the hedging relationship is amortized and recorded in interest expense.

Derivatives Not Designated as Hedges

Interest rate lock commitments. The Company enters into commitments with consumers to originate loans at a specified interest rate. The Company reports IRLCs as derivative instruments at fair value with changes in fair value being recorded in other income.

Forward delivery contracts. The Company economically hedges the changes in fair value of IRLCs and mortgage loans held for sale caused by changes in interest rates by using TBA MBS and entering into best efforts forward delivery commitments. These hedging instruments are recorded at fair value with changes in fair value recorded in other income.

Interest rate swaps. The Company also may have from time to time interest rate swap agreements that are not designated as hedges. As part of its acquisition of SLC, the Company also acquired an interest rate swap related to the securitized debt assumed in the SLC transaction. Such agreements are not speculative and are also used to manage interest rate risk but are not designated for hedge accounting. Changes in the fair value of these contracts are recorded in other income.

Foreign exchange forward contracts. The Company has foreign exchange forward contracts that are economic hedges and are not designated as hedges for accounting purposes. The Company enters into foreign exchange forward contracts to manage foreign currency risk. Foreign exchange forward contracts involve the purchase or sale of a designated currency at an agreed upon rate for settlement on a specified date. Changes in the fair value of these contracts are recorded in other income.

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The following table summarizes the fair value (including accrued interest) and related outstanding notional amounts of derivative instruments and indicates where within the statement of financial condition each is reported as of August 31, 2012 and November 30, 2011. See Note 14: Fair Value Disclosures for a description of the valuation methodologies of derivatives. (Dollars in thousands):
	August 31, 2012							November 30, 2011
				Balance Sheet Location						Balance Sheet Location
	Notional Amount		Number of Transactions	Other Assets (At Fair Value)		Accrued Expenses and Other Liabilities (At Fair Value)		Notional Amount		Other Assets (At Fair Value)		Accrued Expenses  and Other Liabilities (At Fair Value)
Derivatives designated as hedges:
Interest rate swaps—cash flow hedge	$	2,000,000	8	$	8,229	$	—	$	2,000,000	$	12,191	$	—
Interest rate swaps—fair value hedge	$	7,468,200	258	$	108,948	$	—	$	2,338,276	$	44,171	$	279
Derivatives not designated as hedges:
Foreign exchange forward contracts(1)	$	26,375	5	$	—	$	68	$	21,453	$	—	$	169
Interest rate swap	$	1,090,378	1	$	504	$	—	$	1,294,932	$	7,214	$	—
Forward delivery contracts	$	593,036	495	$	1,079	$	4,674	$	—	$	—	$	—
Interest rate lock commitments	$	622,153	3,013	$	17,448	$	34	$	—	$	—	$	—

____________________

(1) The foreign exchange forward contracts have notional amounts of EUR 17.7 million, GBP 1.9 million and SGD 1.5 million as of August 31, 2012 and EUR 14.0 million and GBP 1.7 million as of November 30, 2011.

The following table summarizes the impact of the derivative instruments on income, and indicates where within the condensed consolidated statements of income such impact is reported for the three and nine months ended August 31, 2012 and 2011 (dollars in thousands):
		For the Three Months Ended August 31,						For the Nine Months Ended August 31,
	Location	2012			2011			2012			2011
Derivatives designated as hedges:
Interest rate swaps—cash flow hedges:
Total (losses) gains recognized in other comprehensive income after amounts reclassified into earnings, pre-tax	Other Comprehensive Income	$	(383	)	$	13,113		$	(4,003	)	$	11,711
Total (losses) gains recognized in other comprehensive income		$	(383	)	$	13,113		$	(4,003	)	$	11,711
Amount reclassified from other comprehensive income into income	Interest Income	$	1,892		$	1,892		$	5,656		$	5,636
Interest rate swaps—fair value hedges:
Interest expense—ineffectiveness		35,303			34,715			60,452			38,924
Interest expense—other		8,479			4,087			20,333			8,090
Gain on interest rate swaps	Interest Expense	43,782			38,802			80,785			47,014
Interest expense—ineffectiveness		(33,880		)	(32,575		)	(56,394		)	(34,064		)
Interest expense—other		(1,524		)	(1,608		)	(4,619		)	(4,853		)
Loss on hedged item	Interest Expense	(35,404		)	(34,183		)	(61,013		)	(38,917		)
Total gains recognized in income		$	10,270		$	6,511		$	25,428		$	13,733
Derivatives not designated as hedges:
Gain (loss) on forward contracts	Other Income	$	(468	)	$	30		$	1,179		$	(703	)
Gain (loss) on interest rate swaps	Other Income	(3,375		)	(2,037		)	(6,348		)	(7,518		)
Gain on forward delivery contracts	Other Income	(2,375		)	—			(2,375		)	—
Gain on interest rate lock commitments	Other Income	49,437			—			49,437			—
Total gains (losses) on derivatives not designated as hedges recognized in income		$	43,219		$	(2,007	)	$	41,893		$	(8,221	)

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Collateral Requirements and Credit-Risk Related Contingency Features. For its interest rate swaps, the Company has master netting arrangements and minimum collateral posting thresholds with its counterparties. Collateral is required by either the Company or the counterparty depending on the net fair value position of all interest rate swaps held with that counterparty. The Company may also be required to post collateral with a counterparty depending on the credit rating it or Discover Bank receives from specified major credit rating agencies. Collateral amounts recorded in the condensed consolidated statement of financial condition are based on the net collateral receivable or payable position for each counterparty. Collateral receivable or payable amounts are not offset against the fair value of the interest rate swap, but are recorded separately in other assets or deposits.

As of August 31, 2012, DFS had a right to reclaim $4.0 million of cash collateral that had been posted (net of amounts required to be posted by the counterparty) because the credit rating of DFS did not meet specified thresholds. At August 31, 2012, Discover Bank’s credit rating met specified thresholds set by its counterparties. However, if Discover Bank’s credit rating is reduced by one ratings notch, Discover Bank would be required to post additional collateral, which would have been $112.1 million as of August 31, 2012. The Company had an obligation to return $99.9 million cash collateral deposited with the Company (net of $4.0 million referenced above) as of August 31, 2012.

As of August 31, 2012, the Company had interest rate swaps in a net asset position with all of its counterparties, inclusive of accrued interest. If the Company had breached any provisions of the derivative agreements, there would have been no obligation to settle termination values since none of the derivative agreements were in net liability positions as of August 31, 2012.

The Company also has agreements with certain of its derivative counterparties that contain a provision where if the Company defaults on any of its indebtedness, including default where repayment of the indebtedness has not been accelerated by the lender, then the Company could also be declared in default on its derivative obligations.

16. Segment Disclosures

The Company’s business activities are managed in two segments: Direct Banking and Payment Services.

• Direct Banking. The Direct Banking segment includes Discover card-branded credit cards issued to individuals and small businesses and other consumer products and services, including home loans, personal loans, private student loans, prepaid cards and other consumer lending and deposit products. The majority of the Direct Banking revenues relate to interest income earned on each of its loan products. Additionally, the Company’s credit card products generate substantially all of the Company’s revenues related to discount and interchange, protection products (previously referred to as "fee products") and loan fee income.

• Payment Services. The Payment Services segment includes PULSE, an automated teller machine, debit and electronic funds transfer network; Diners Club, a global payments network; and the Company’s third-party issuing business, which includes credit, debit and prepaid cards issued on the Discover Network by third parties. The majority of the Payment Services revenues relate to transaction processing revenue from PULSE and royalty and licensee revenue (included in other income) from Diners Club.

The business segment reporting provided to and used by the Company’s chief operating decision maker is prepared using the following principles and allocation conventions:

• Corporate overhead is not allocated between segments; all corporate overhead is included in the Direct Banking segment.

• Through its operation of the Discover Network, the Direct Banking segment incurs fixed marketing, servicing and infrastructure costs that are not specifically allocated among the segments.

• The assets of the Company are not allocated among the operating segments in the information reviewed by the Company’s chief operating decision maker.

• The revenues of each segment are derived from external sources. The segments do not earn revenue from intercompany sources.

• Income taxes are not specifically allocated among the operating segments in the information reviewed by the Company’s chief operating decision maker.

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The following table presents segment data for the three months ended August 31, 2012 and 2011 (dollars in thousands):
For the Three Months Ended	Direct Banking		Payment Services			Total
August 31, 2012
Interest income
Credit card	$	1,451,836	$	—		$	1,451,836
Private student loans	46,964		—			46,964
PCI student loans	75,243		—			75,243
Personal loans	93,912		—			93,912
Other	27,014		—			27,014
Total interest income	1,694,969		—			1,694,969
Interest expense	325,310		—			325,310
Net interest income (expense)	1,369,659		—			1,369,659
Provision for loan losses	126,288		—			126,288
Other income	505,960		88,290			594,250
Other expense	786,900		39,007			825,907
Income before income tax expense	$	962,431	$	49,283		$	1,011,714
August 31, 2011
Interest income
Credit card	$	1,423,496	$	—		$	1,423,496
Private student loans	30,014		—			30,014
PCI student loans	54,304		—			54,304
Personal loans	70,052		—			70,052
Other	21,209		17			21,226
Total interest income	1,599,075		17			1,599,092
Interest expense	362,017		36			362,053
Net interest income (expense)	1,237,058		(19		)	1,237,039
Provision for loan losses	99,514		—			99,514
Other income	481,134		70,829			551,963
Other expense	609,202		33,205			642,407
Income before income tax expense	$	1,009,476	$	37,605		$	1,047,081

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The following table presents segment data for the nine months ended August 31, 2012 and 2011 (dollars in thousands):
For the Nine Months Ended	Direct Banking		Payment Services			Total
August 31, 2012
Interest income
Credit card	$	4,296,757	$	—		$	4,296,757
Private student loans	132,028		—			132,028
PCI student loans	229,678		—			229,678
Personal loans	264,882		—			264,882
Other	73,797		4			73,801
Total interest income	4,997,142		4			4,997,146
Interest expense	1,019,057		52			1,019,109
Net interest income (expense)	3,978,085		(48		)	3,978,037
Provision for loan losses	510,401		—			510,401
Other income	1,419,046		257,847			1,676,893
Other expense	2,141,892		109,510			2,251,402
Income before income tax expense	$	2,744,838	$	148,289		$	2,893,127
August 31, 2011
Interest income
Credit card	$	4,243,803	$	—		$	4,243,803
Private student loans	80,473		—			80,473
PCI student loans	149,460		—			149,460
Personal loans	189,525		—			189,525
Other	62,044		29			62,073
Total interest income	4,725,305		29			4,725,334
Interest expense	1,124,597		163			1,124,760
Net interest income (expense)	3,600,708		(134		)	3,600,574
Provision for loan losses	692,763		—			692,763
Other income	1,436,764		221,667			1,658,431
Other expense	1,774,915		97,784			1,872,699
Income before income tax expense	$	2,569,794	$	123,749		$	2,693,543

17. Subsequent Events

Cash Dividend. On September 20, 2012, the Company announced a cash dividend of $0.10 per share of common stock, payable on October 18, 2012, to stockholders of record at the close of business on October 4, 2012.

Consent Order with the FDIC and the CFPB. On September 24, 2012, Discover Bank entered into a consent order with the FDIC and the CFPB for resolution of the agencies' joint investigation with respect to the marketing of the Bank's protection products. The order requires the Bank to provide refunds of approximately $200 million to eligible customers who purchased certain protection products between December 1, 2007 and August 31, 2011. In addition, the Bank agreed to pay a $14 million civil monetary penalty to the agencies. Adequate provision has been made to cover these costs in the financial statements as of August 31, 2012.

Long-Term Borrowings. On September 27, 2012, DCENT issued $500 million of credit card asset-backed securities through a private conduit provider.

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our condensed consolidated financial statements and related notes included elsewhere in this quarterly report. This quarterly report contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Such statements, which speak to our expected business and financial performance, among other matters, contain words such as “believe,” “expect,” “anticipate,” “intend,” “plan,” “aim,” “will,” “may,” “should,” “could,” “would,” “likely,” and similar expressions. Such statements are based upon the current beliefs and expectations of our management and are subject to significant risks and uncertainties. Actual results may differ materially from those set forth in the forward-looking statements. These forward-looking statements speak only as of the date of this quarterly report, and there is no undertaking to update or revise them as more information becomes available.

The following factors, among others, could cause actual results to differ materially from those set forth in the forward-looking statements: changes in economic variables, such as the availability of consumer credit, the housing market, energy costs, the number and size of personal bankruptcy filings, the rate of unemployment and the levels of consumer confidence and consumer debt, and investor sentiment; the impact of current, pending and future legislation, regulation, supervisory guidance, and regulatory and legal actions, including those related to financial regulatory reform, consumer financial services practices, and funding, capital and liquidity; the actions and initiatives of current and potential competitors; our ability to manage our expenses; our ability to successfully achieve card acceptance across our networks and maintain relationships with network participants; our ability to sustain and grow our private student loan portfolio; our ability to manage our credit risk, market risk, liquidity risk, operational risk, legal and compliance risk, and strategic risk; the availability and cost of funding and capital; access to deposit, securitization, equity, debt and credit markets; the impact of rating agency actions; the level and volatility of equity prices, commodity prices and interest rates, currency values, investments, other market fluctuations and other market indices; losses in our investment portfolio; limits on our ability to pay dividends and repurchase our common stock; fraudulent activities or material security breaches of key systems; our ability to increase or sustain Discover card usage or attract new customers; our ability to attract new merchants and maintain relationships with current merchants; the effect of political, economic and market conditions, geopolitical events and unforeseen or catastrophic events; our ability to introduce new products and services; our ability to manage our relationships with third-party vendors; our ability to maintain current technology and integrate new and acquired systems; our ability to collect amounts for disputed transactions from merchants and merchant acquirers; our ability to attract and retain employees; our ability to protect our reputation and our intellectual property; difficulty obtaining regulatory approval for, financing, transitioning, integrating or managing the expenses of acquisitions of or investments in new businesses, products or technologies; and new lawsuits, investigations or similar matters or unanticipated developments related to current matters. We routinely evaluate and may pursue acquisitions of or investments in businesses, products, technologies, loan portfolios or deposits, which may involve payment in cash or our debt or equity securities.

Additional factors that could cause our results to differ materially from those described below can be found in this section and in "Risk Factors" in our quarterly report on Form 10-Q for the quarter ended May 31, 2012, and in “Risk Factors,” “Business—Competition,” “Business—Supervision and Regulation” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our annual report on Form 10-K for the year ended November 30, 2011, filed with the SEC and available at the SEC’s internet site (http://www.sec.gov).

Introduction and Overview

Discover Financial Services is a direct banking and payment services company. Through our Discover Bank subsidiary, we offer our customers credit card loans, private student loans, personal loans and deposit products. Through our Discover Home Loans, Inc. subsidiary, we offer our customers home loans. Through our DFS Services LLC subsidiary and its subsidiaries, we operate the Discover Network, the PULSE Network (“PULSE”) and Diners Club International (“Diners Club”). The Discover Network is a payment card transaction processing network for Discover card-branded and third-party issued credit, debit and prepaid cards. PULSE operates an electronic funds transfer network, providing financial institutions issuing debit cards on the PULSE Network with access to ATMs domestically and internationally, as well as point of sale terminals at retail locations throughout the U.S. for debit card transactions. Diners Club is a global payments network of licensees, which are generally financial institutions, that issue Diners Club branded credit cards and/or provide card acceptance services. Our fiscal year ends on November 30 of each year.

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Our primary revenues consist of interest income earned on loan receivables and fees earned from customers, merchants and issuers. The primary expenses required to operate our business include funding costs (interest expense), loan loss provisions, customer rewards, and expenses incurred to grow, manage and service our loan receivables and networks. Our business activities are funded primarily through consumer deposits, securitization of loan receivables and the issuance of unsecured debt.

Quarter Highlights

• Net income for the third quarter of 2012 was $627 million, compared to $649 million for the third quarter of 2011.

• Credit card loans grew $1.9 billion to $48.1 billion and Discover card sales volume increased 4% from the prior year.

• Credit card loan delinquencies and net charge-offs reached historic lows with a delinquency rate for loans over 30 days past due of 1.81% and a net charge-off rate of 2.43%.

• Payment services pretax income was up 31% from the prior year to $49 million. Transaction volume for the segment was $50.3 billion in the quarter, an increase of 13% from the prior year.

• We repurchased approximately ten million shares of our common stock for $350 million, reducing our number of shares outstanding by 1.9%.

• We issued $3.1 billion of credit card asset-backed securities in registered public offerings through a securitization trust.

• We began offering residential mortgage loans through Discover Home Loans, Inc., following our acquisition in June of substantially all of the operating and related assets of Home Loan Center, Inc., a subsidiary of Tree.com, Inc.

Recent Developments

• On September 20, 2012, we announced a cash dividend of $0.10 per share of common stock, payable on October 18, 2012, to stockholders of record at the close of business on October 4, 2012.

• On September 24, 2012, Discover Bank entered into a consent order with the Federal Deposit Insurance Corporation (“FDIC”) and the Consumer Financial Protection Bureau ("CFPB") for resolution of the agencies' joint investigation with respect to the marketing of the Bank's protection products. The order requires the Bank to provide refunds of approximately $200 million to eligible customers who purchased certain protection products between December 1, 2007 and August 31, 2011. In addition, the Bank agreed to pay a $14 million civil monetary penalty to the agencies. Adequate provision has been made to cover these costs in the financial statements as of August 31, 2012.

• On September 27, 2012, we issued $500 million of credit card asset-backed securities through a private conduit provider.

Outlook

    Credit performance continued to improve in the third quarter, and favorable delinquency rates contributed to reserve releases. As our loan portfolio continues to grow and credit begins to normalize, we would expect to build reserves. We continue to focus on card receivables growth through new accounts and wallet share gains as we enhance our brand through expanded partnerships, promotional offers, advertising and rewards while reducing our marketing efforts around protection products. We are also targeting profitable growth in our private student loan and personal loan portfolios. The expansion of our direct banking product offerings remains a priority as we recently launched Discover Home Loans and look forward to introducing online checking.

We anticipate total yield compression in 2012 due to the continuing effects of the Credit Card Accountability Responsibility and Disclosure Act of 2009 (the "CARD Act") implementation, an increase in promotional offers and expected growth in other loan products, which tend to carry lower interest rates. This yield compression should continue to be offset by funding cost improvements over the next year as we benefit from the interest rate environment and replace higher-priced time deposits with lower-priced deposits and borrowings. Net interest margin is expected to remain elevated through the end of this year. We intend to maintain our strong capital levels as we consider investments for future growth and return capital to shareholders through share repurchases and quarterly dividends.

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In our payments business, we continue to explore opportunities to leverage our network infrastructure, such as the services arrangement we entered into recently with PayPal to utilize our network relationships to obtain access to the point-of-sale at millions of retail locations of participating merchants, which is targeted for launch in the second quarter of 2013. We also continue to invest in global brand awareness and acceptance through support of our Diners Club network and arrangements with other banks, networks and merchant acquirers. For example, we recently expanded our relationship with Russian Standard Bank to allow for the issuance, acceptance and promotion of Discover card-branded credit cards in Russia. Also, we have entered into an agreement with the Industrial and Commercial Bank of China to operate a new Diners Club franchise in China.

We continue to monitor the political and economic situation in Europe and work with our local Diners Club licensees with regard to their ability to maintain financing sufficient to support business operations. The inability of certain licensees to maintain operating financing could adversely impact our payment services segment. From time to time we provide financial assistance to licensees when we deem it beneficial to our global payments strategy.

Regulatory Environment and Developments

Overview

The 2010 Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Reform Act”) contains a comprehensive set of provisions designed to govern the practices and oversight of financial institutions and other participants in the financial markets. The Reform Act addresses risks to the economy and the payments system, especially those posed by large systemically significant financial firms. Bank holding companies with $50 billion or more in total consolidated assets, including Discover, are considered systemically significant under the Reform Act and are subject to heightened prudential standards to be established by the Federal Reserve. Certain provisions of the Reform Act that may have a significant impact on us are described in more detail in “Management's Discussion and Analysis of Financial Condition and Results of Operations - Regulatory Environment and Developments” and “Risk Factors” in our annual report on Form 10-K for the year ended November 30, 2011, and recent developments are discussed below.

Our banking regulators have introduced and continue to introduce new regulations and supervisory guidance and practices as required by the Reform Act and in response to the heightened Congressional and regulatory focus on consumer financial services generally, increasing their scrutiny over us and the industry. Also, additional legislative or regulatory action that may impact our businesses may result from the multiple studies mandated under the Reform Act, such as the study of private student loans referenced below. While we do not expect the current Congress to enact legislation significantly impacting our businesses, we are unable to predict whether changes to statutes or regulations affecting the consumer financial services industry will occur in the future and what impact they will have.

The effect of the Reform Act and other initiatives on our business and operations could be significant, depending upon final implementing regulations, the actions of our competitors and the behavior of consumers and other marketplace participants. The Reform Act, other legislative and regulatory changes, and enhanced scrutiny by our regulators could have a significant impact on us by, for example, requiring us to limit or change our business practices, limiting our ability to pursue business opportunities, requiring us to invest significant management time and resources in compliance efforts, imposing additional costs on us, limiting fees we can charge for services, requiring us to meet more stringent capital, liquidity and leverage ratio requirements (including those under Basel III), increasing our cost or restricting our ability to access the securitization markets for our funding, impacting the value of our assets, or otherwise adversely affecting our businesses.

Consumer Financial Services

The Reform Act established the CFPB, which regulates consumer financial products and services provided by certain financial services providers, including Discover. The CFPB is authorized to prevent “unfair, deceptive or abusive acts or practices” and ensure consistent enforcement of laws so that all consumers have access to markets for consumer financial products and services that are fair, transparent and competitive. The CFPB has rulemaking and interpretive authority under the Reform Act and other federal consumer financial services laws, as well as broad supervisory, examination and enforcement authority over large providers of consumer financial products and services, such as Discover. In addition, the CFPB has an online complaint system that allows consumers to log complaints with respect to credit cards, mortgages, personal loans, student loans and deposits. The system, which is used by the CFPB to track responses to complaints, could inform future agency decisions with respect to regulatory, enforcement or examination focus. Although the CFPB has begun to implement its regulatory, supervisory, examination and enforcement authority, there continues to be significant uncertainty as to how the agency's strategies and priorities will impact our businesses. The agency's actions could have a material adverse impact on Discover.

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Credit Cards. On July 18, 2012, the CFPB issued Bulletin 2012-06, Marketing of Credit Card Add-on Products, providing guidance on the CFPB's expectations related to the marketing and sale of credit card “add-on” products, which includes the protection products offered by Discover. We are assessing our current practices relative to this guidance. On September 24, 2012, Discover Bank entered into a consent order with the FDIC and the CFPB for resolution of the agencies' joint investigation with respect to the marketing of the Bank's protection products. See Note 13: Litigation and Regulatory Matters to our condensed consolidated financial statements for additional information.

Student Loans. There has been increased Congressional, regulatory and media focus on the growing costs of post-secondary education and the debts incurred by families to finance educational expenses. Legislation and regulatory proposals have focused on enhancing families' ability to understand and compare college costs, financial aid and government and private loans.

On July 20, 2012, the CFPB and the Department of Education (“DOE”) issued their report on private education loans and private educational lenders required under the Reform Act, which was prepared based on information provided by student loan lenders and other industry participants. The report examines, among other things, the private education loan market; underwriting criteria used by lenders; loan terms, conditions and pricing; consumer protections available to borrowers; fair lending considerations; and recommendations for legislative changes. The report acknowledges that private student loans have a role in financing higher education, but that, as compared to federal student loans, private student loans often lack the repayment flexibility that is attractive to borrowers who are struggling financially.

The report recommends that Congress re-assess the current bankruptcy law exemption for private student loans. There is currently a proposed bill in Congress that would make it easier to discharge private student loan debt in bankruptcy, by repealing the current requirement that this relief is available only to those for whom repaying such loans would be an “undue hardship.” This legislation has been proposed in past Congresses without success and is unlikely to pass this year. Even if such legislation passed Congress, we believe our underwriting practices and the high percentage of our loans that have cosigners reduce potential risk to our business.

Home Loans. As a result of our recent mortgage business acquisition, we are subject to additional laws and regulations affecting mortgage lenders. We conduct our mortgage lending business through our Discover Home Loans, Inc. subsidiary, which is a state-licensed mortgage lender. Federal, state and, in some instances, local laws regulate mortgage lending activities. These laws generally regulate the manner in which lending and lending-related activities are marketed or made available, including advertising and other consumer disclosures, payments for services and recordkeeping requirements. These laws include the Real Estate Settlement Procedures Act ("RESPA"), the Fair Credit Reporting Act, the Truth in Lending Act ("TILA"), the Equal Credit Opportunity Act ("ECOA"), the Fair Housing Act, the Home Mortgage Disclosure Act and various state laws. State laws often restrict the amount of interest and fees that may be charged by a mortgage lender, or otherwise regulate the manner in which mortgage lenders operate or advertise.

The CFPB has indicated that the mortgage industry is an area of supervisory focus and that it will concentrate its examination and rulemaking efforts on the variety of mortgage-related topics required under the Reform Act, including the steering of consumers to less-favorable products, discrimination, abusive or unfair lending practices, predatory lending, origination disclosures, minimum mortgage underwriting standards, mortgage loan originator compensation and servicing practices. The CFPB has published proposed regulations on several of these topics, including minimum mortgage underwriting standards (ability to repay), integrated mortgage disclosures under RESPA and TILA, new appraisal requirements under ECOA, and new mortgage loan originator compensation guidelines. The CFPB has also proposed amendments to TILA and RESPA to implement provisions of the Reform Act related to expanding coverage of the Home Owners Equity Protection Act provisions of TILA and requiring increased homeownership counseling disclosures and required counseling under RESPA. In addition, the Federal Reserve and other federal agencies have issued a proposed rule under the Reform Act that would exempt “qualified residential mortgages” from the securitization risk retention requirements of the Reform Act. The final definition of what constitutes a “qualified residential mortgage” may impact the pricing and depth of the secondary market into which we intend to sell mortgages we originate. At this time, we cannot predict the content of final CFPB and other federal agency regulations or the impacts they might have on our business practices or financial results.

Most states require licenses for non-bank lenders, such as Discover Home Loans, Inc., to solicit or make loans, and require the licensure or registration of certain individual employees engaged in mortgage loan origination activities. In 2008, Congress mandated that all states adopt certain minimum standards for the licensing of individuals involved in mortgage lending, and all state legislatures and state agencies have adopted and are implementing additional licensing, continuing education, and similar requirements on mortgage lenders and their employees. Compliance with existing and any new requirements may render it more difficult to operate or may raise our internal costs. As noted above, Discover Home Loans, Inc. is subject to examination and supervision by state mortgage regulatory agencies, as well as the CFPB and the Federal Reserve, and may incur substantial cost in preparing for and responding to regulatory examinations and investigations.

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Future regulatory initiatives that could significantly affect the mortgage industry include proposals to reform the housing finance market in the United States. These proposals, among other things, consider winding down the government-sponsored enterprises, Fannie Mae and Freddie Mac (collectively, the “GSEs”). The extent and timing of any regulatory reform or the adoption of any legislation regarding the GSEs and/or the home mortgage market, as well as any effect on our business and financial results, are uncertain at this time.

Payment Networks

Following enactment of the Reform Act and related Federal Reserve regulations related to debit routing and fees, large competing networks have implemented new merchant and acquirer pricing and transaction routing strategies, including through changes to their operating rules, which may result in a reconfiguration of how credit and debit transaction volume is routed. We are closely monitoring the implementation of these strategies in order to assess their impact on our business and on competition in the marketplace. The U.S. Department of Justice has begun an examination of these competitor pricing strategies. While we are still assessing all of our options for responding to these developments, they may adversely impact PULSE's ability to compete for issuer participation and merchant and acquirer routing.

Capital

On June 7, 2012, the Federal Reserve approved proposed rules that would substantially amend the regulatory risk-based capital rules applicable to us and Discover Bank. The Federal Deposit Insurance Corporation ("FDIC") and the Office of the Comptroller of the Currency ("OCC") subsequently approved these proposed rules on June 12, 2012. The proposed rules implement Basel III regulatory capital reforms and changes required by the Reform Act. "Basel III" refers to two consultative documents released by the Basel Committee on Banking Supervision in December 2009, the rules text released in December 2010 and loss absorbency rules issued in January 2011, which include significant changes to bank capital, leverage and liquidity requirements. The proposed rules are in a comment period through October 22, 2012.

The proposed rules include new risk-based capital and leverage ratios, which would be phased in from 2013 to 2019, and would refine the definition of what constitutes “capital” for purposes of calculating those ratios. The proposed new minimum capital level requirements applicable to us and Discover Bank under the proposals would be: (i) a new common equity Tier 1 capital ratio of 4.5%; (ii) a Tier 1 capital ratio of 6% (increased from 4%); (iii) a total capital ratio of 8% (unchanged from current rules); and (iv) a Tier 1 leverage ratio of 4% for all institutions. The proposed rules would also establish a “capital conservation buffer” of 2.5% above the new regulatory minimum capital requirements, which must consist entirely of common equity Tier 1 capital and would result in the following minimum ratios: (i) a common equity Tier 1 capital ratio of 7.0%, (ii) a Tier 1 capital ratio of 8.5%, and (iii) a total capital ratio of 10.5%. The new capital conservation buffer requirement would be phased in beginning in January 2016 at 0.625% of risk-weighted assets and would increase by that amount each year until fully implemented in January 2019. An institution would be subject to limitations on paying dividends, engaging in share repurchases and paying discretionary bonuses if its capital level falls below the buffer amount. These limitations would establish a maximum percentage of eligible retained income that could be utilized for such actions.

Basel III provided discretion for regulators to impose an additional buffer, the “countercyclical buffer,” of up to 2.5% of common equity Tier 1 capital to take into account the macro-financial environment and periods of excessive credit growth. However, the proposed rules permit the countercyclical buffer to be applied only to “advanced approach banks” (i.e., banks with $250 billion or more in total assets or $10 billion or more in total foreign exposures), which currently excludes us and Discover Bank. The proposed rules also implement revisions and clarifications consistent with Basel III regarding the various components of Tier 1 capital, including common equity, unrealized gains and losses, as well as certain instruments that will no longer qualify as Tier 1 capital, some of which would be phased out over time.

The agencies also proposed revisions to the prompt corrective action framework, which is designed to place restrictions on insured depository institutions, including Discover Bank, if their capital levels begin to show signs of weakness. These revisions would take effect January 1, 2015. Under the prompt corrective action requirements, which are designed to complement the capital conservation buffer, insured depository institutions would be required to meet the following increased capital level requirements in order to qualify as “well-capitalized:” (i) a new common equity Tier 1 capital ratio of 6.5%; (ii) a Tier 1 capital ratio of 8% (increased from 6%); (iii) a total capital ratio of 10% (unchanged from current rules); and (iv) a Tier 1 leverage ratio of 5% (increased from 4%).

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The proposed rules set forth certain changes for the calculation of risk-weighted assets, which we would be required to utilize beginning January 1, 2015. The standardized approach proposed rule utilizes an increased number of credit risk exposure categories and risk weights, and also addresses: (i) a proposed alternative standard of creditworthiness consistent with Section 939A of the Reform Act; (ii) revisions to recognition of credit risk mitigation; (iii) rules for risk weighting of equity exposures and past due loans; (iv) revised capital treatment for derivatives and repo-style transactions; and (v) disclosure requirements for top-tier banking organizations with $50 billion or more in total assets that are not subject to the “advance approach rules” that apply to banks with greater than $250 billion in consolidated assets.

Based on our current capital composition and levels, we believe that we would be in compliance with the requirements as set forth in the proposed rules if they were presently in effect.

For more information regarding legislative and regulatory matters that may impact us, see “Business - Supervision and Regulation,” “Management's Discussion and Analysis of Financial Condition and Results of Operations - Regulatory Environment and Developments” and “Risk Factors” in our annual report on Form 10-K for the year ended November 30, 2011.

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Segments

We manage our business activities in two segments: Direct Banking and Payment Services. In compiling the segment results that follow, our Direct Banking segment bears all overhead costs that are not specifically associated with a particular segment and all costs associated with Discover Network marketing, servicing and infrastructure, with the exception of an allocation of direct and incremental costs driven by our Payment Services segment.

Direct Banking. Our Direct Banking segment includes Discover card-branded credit cards issued to individuals and small businesses and other consumer products and services, including home loans, personal loans, private student loans, prepaid cards and other consumer lending and deposit products. The majority of the Direct Banking revenues relate to interest income earned on each of our loan products. Additionally, our credit card products generate substantially all of our revenues related to discount and interchange, protection products and loan fee income.

Payment Services. Our Payment Services segment includes PULSE, an automated teller machine, debit and electronic funds transfer network; Diners Club, a global payments network; and our third-party issuing business, which includes credit, debit and prepaid cards issued on the Discover Network by third parties. The majority of our Payment Services revenues relate to transaction processing revenue from PULSE and royalty and licensee revenue (included in other income) from Diners Club.

The following table presents segment data (dollars in thousands):
	For the Three Months Ended August 31,					For the Nine Months Ended August 31,
	2012		2011			2012			2011
Direct Banking
Interest income
Credit card	$	1,451,836	$	1,423,496		$	4,296,757		$	4,243,803
Private student loans	46,964		30,014			132,028			80,473
PCI student loans	75,243		54,304			229,678			149,460
Personal loans	93,912		70,052			264,882			189,525
Other	27,014		21,209			73,797			62,044
Total interest income	1,694,969		1,599,075			4,997,142			4,725,305
Interest expense	325,310		362,017			1,019,057			1,124,597
Net interest income	1,369,659		1,237,058			3,978,085			3,600,708
Provision for loan losses	126,288		99,514			510,401			692,763
Other income	505,960		481,134			1,419,046			1,436,764
Other expense	786,900		609,202			2,141,892			1,774,915
Income before income tax expense	962,431		1,009,476			2,744,838			2,569,794
Payment Services
Interest income	—		17			4			29
Interest expense	—		36			52			163
Net interest expense	—		(19		)	(48		)	(134		)
Provision for loan losses	—		—			—			—
Other income	88,290		70,829			257,847			221,667
Other expense	39,007		33,205			109,510			97,784
Income before income tax expense	49,283		37,605			148,289			123,749
Total income before income tax expense	$	1,011,714	$	1,047,081		$	2,893,127		$	2,693,543

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The following table presents information on transaction volume (in thousands):
	For the Three Months Ended August 31,				For the Nine Months Ended August 31,
	2012		2011		2012		2011
Network Transaction Volume
PULSE Network	$	40,990,471	$	35,109,450	$	120,568,280	$	106,208,008
Third-Party Issuers	2,231,224		1,983,863		6,456,903		5,593,364
Diners Club (1)	7,040,743		7,426,859		21,345,640		21,804,221
Total Payment Services	50,262,438		44,520,172		148,370,823		133,605,593
Discover Network—Proprietary (2)	28,084,201		27,133,026		81,551,969		77,601,894
Total Volume	$	78,346,639	$	71,653,198	$	229,922,792	$	211,207,487
Transactions Processed on Networks
Discover Network	475,861		451,041		1,374,869		1,282,783
PULSE Network	1,125,209		949,965		3,256,862		2,885,239
Total	1,601,070		1,401,006		4,631,731		4,168,022
Credit Card Volume
Discover Card Volume (3)	$	29,763,304	$	28,455,156	$	85,273,360	$	81,141,781
Discover Card Sales Volume (4)	$	27,201,688	$	26,270,622	$	78,920,772	$	75,104,974

____________________

(1) Diners Club volume is derived from data provided by licensees for Diners Club branded cards issued outside North America and is subject to subsequent revision or amendment.

(2) Represents gross proprietary sales volume on the Discover Network.

(3) Represents Discover card activity related to net sales, balance transfers, cash advances, and other activity.

(4) Represents Discover card activity related to net sales.

Direct Banking

Our Direct Banking segment reported pretax income of $962 million and $2.7 billion for the three and nine months ended August 31, 2012, respectively, as compared to pretax income of $1.0 billion and $2.6 billion for the three and nine months ended August 31, 2011.

Loan receivables totaled $59.2 billion at August 31, 2012, up from $57.3 billion at November 30, 2011, due to growth in the credit card loans portfolio and the personal loan and private student loan classes of the other loans portfolio. This growth was offset by continued decreases in the purchased credit-impaired ("PCI") student loan balances resulting from paydowns on the portfolio. Discover card sales volume increased 4% and 5% for the three and nine months ended August 31, 2012, respectively, compared to the same periods in 2011. This growth was driven primarily by an increase in the number of existing customers using their Discover card.

Net interest margin was relatively flat for the nine months ended August 31, 2012, as compared to the same period in 2011. Net interest margin increased, however, during the three months ended August 31, 2012 as compared to the same period in 2011. This was primarily driven by improved funding rates on our deposit products and borrowings, partially offset by lower yields on credit cards and growth in lower yielding private student loans. There was an increase in interest income relating to credit card loan receivables largely driven by a higher average level of loans and lower interest charge-offs, which was partially offset by lower yield. Lower yields were driven by growth in loans offered at a promotional rate as well as the receivable repricing restrictions imposed by the CARD Act. During the three and nine months ended August 31, 2012, as compared to the same periods in 2011, there were also increases in interest income related to student loans and personal loans. The increase in interest income on PCI student loans was due to the acquisition of additional loans on September 30, 2011 (see Note 4: Loan Receivables to our condensed consolidated financial statements), while the increases in interest income on personal and private student loans were attributable to organic growth in these portfolios. Interest expense declined in the three and nine months ended August 31, 2012, as compared to the same periods in 2011, as maturities of deposits bearing higher interest rates were replaced by funding from deposits that bear a lower interest rate.

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At August 31, 2012, our delinquency rate for credit card loans over 30 days past due was 1.81%, as compared to 2.39% at November 30, 2011, reflective of continuing trends of strong credit performance. For the three and nine months ended August 31, 2012, our net charge-off rate on credit cards declined to 2.43% and 2.76%, respectively, as compared to 3.85% and 4.93% for the three and nine months ended August 31, 2011. Lower reserve releases offset in part by lower net charge-offs led to an increase in the provision for loan losses for the three months ended August 31, 2012, as compared to to the same period in 2011. A decline in the level of net charge-offs and lower levels of reserves led to a decrease in the provision for loan losses for the nine months ended August 31, 2012, as compared to the same period in 2011. For a more detailed discussion on provision for loan losses, see “ - Loan Quality - Provision and Allowance for Loan Losses.”

Total other income increased during the three months ended August 31, 2012 by $25 million as compared to the same period in 2011. This increase was driven primarily by revenue related to the acquisition and integration of the assets of the Home Loan Center in the third quarter of 2012 (see Note 2: Business Combinations to our condensed consolidated financial statements). This included a net gain on the sale of loans and a net gain on the related interest rate lock commitments. This increase was slightly offset by a decrease in discount and interchange revenue due to an increase in Cashback Bonus rewards earned by our customers during the current quarter as compared to the same period in 2011.

For the nine months ended August 31, 2012, total other income decreased by $18 million as compared to the same period in 2011. The decrease was primarily attributable to lower revenue from The Student Loan Corporation ("SLC") transition services agreement, which was partially offset by an increase in the value of an interest rate swap acquired in the SLC acquisition. Furthermore, other income in 2011 benefited from a fair value adjustment on federal student loans that were held for sale. The decrease in other income was also driven by lower revenues from protection products and loan fee income. The decrease in revenue from loan fees was primarily attributable to lower levels of late fee income due to improved credit quality. In addition to the above factors, the decrease in other income was also caused by the inclusion of the impact of the originally estimated bargain purchase gain of $16 million related to the acquisition of SLC in the first quarter of 2011 (see Note 2: Business Combinations to our condensed consolidated financial statements). The decrease in other income was partially offset by revenue related to the acquisition and integration of the assets of the Home Loan Center in the third quarter of 2012 (see Note 2: Business Combinations to our condensed consolidated financial statements), including a net gain on the sale of loans and a net gain on the related interest rate lock commitments.

Total other expense increased for the three and nine months ended August 31, 2012 by $178 million and $367 million, respectively, as compared to the same periods in 2011, primarily due to an increase in legal reserves as well as higher incentive payments related to merchant global acceptance. Legal reserves increased by $94 million and $189 million for the three and nine month periods ended August 31, 2012 as compared to the same periods in 2011. The increases for both the three and nine month periods were primarily due to legal expenses associated with the FDIC and CFPB matter. The increase in other expense was also caused by higher compensation expenses from an increase in headcount, partially related to the acquisition of the assets of the Home Loan Center. Higher information processing related expenses also contributed to the increase in other expense mainly related to increased software maintenance, licenses and mortgage-related technology expenses. In addition, for the three months ended August 31, 2012, there was an increase in marketing and business development related expenses due to new mortgage customer and other growth initiatives.

Payment Services

Our Payment Services segment reported pretax income of $49 million and $148 million, respectively, for the three and nine months ended August 31, 2012, up $11 million and $24 million compared to the same periods in 2011. The increase in pretax income was primarily driven by a greater number of point-of-sale transactions on the PULSE network, which have a higher margin, as well as increased third-party issuer volume. Expense increased as a result of higher employee compensation expense driven by headcount, as well as due to incentive payments and infrastructure-related costs. In addition, prior year pretax income was reduced due to an investment impairment.

Transaction dollar volume increased $6 billion and $15 billion, respectively, for the three and nine months ended August 31, 2012, as compared to the same periods in 2011, primarily driven by increased PULSE point-of-sale volume. The number of transactions on the PULSE network increased by 18% and 13%, respectively, for the three and nine months ended August 31, 2012, as compared to the same periods in 2011.    

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Critical Accounting Estimates

In preparing our condensed consolidated financial statements in conformity with accounting principles generally accepted in the United States (“GAAP”), management must make judgments and use estimates and assumptions about the effects of matters that are uncertain. For estimates that involve a high degree of judgment and subjectivity, it is possible that different estimates could reasonably be derived for the same period. For estimates that are particularly sensitive to changes in economic or market conditions, significant changes to the estimated amount from period to period are also possible. Management believes the current assumptions and other considerations used to estimate amounts reflected in our condensed consolidated financial statements are appropriate. However, if actual experience differs from the assumptions and other considerations used in estimating amounts in our consolidated financial statements, the resulting changes could have a material effect on our consolidated results of operations and, in certain cases, could have a material effect on our consolidated financial condition. Management has identified the estimates related to our allowance for loan losses, purchased credit-impaired loans, litigation reserves, accrual of credit card customer rewards cost, evaluation of goodwill and other nonamortizable intangible assets for potential impairment, and accrual of income taxes as critical accounting estimates. These critical accounting estimates are discussed in greater detail in our annual report on Form 10-K for the year ended November 30, 2011. That discussion can be found within “Management’s Discussion and Analysis of Financial Condition and Results of Operations” under the heading “Critical Accounting Estimates.”

Following our acquisition of the Home Loan Center, Inc. mortgage business in the third quarter 2012, we determined the fair value estimates related to our accounting for loan commitments and mortgage loans held for sale to be critical accounting estimates. We enter into commitments with consumers to originate mortgage loans at a specified interest rate, known as interest rate lock commitments (“IRLCs”). We carry IRLCs and mortgage loans held for sale on our condensed consolidated statements of financial condition at their estimated fair values. Fair values for each of these instruments are estimated using quantitative risk models.

Valuations of mortgage loans held for sale are based on the loan amount, note rate, loan program, expected sale date of the loan and, most significantly, investor pricing tables stratified by product, note rate and term, adjusted for current market conditions. Mortgage loans held for sale are classified as Level 2 in the GAAP fair value hierarchy as the investor pricing tables used to value them are an observable input. In periods of normal market activity, sufficient market data is available to value these loans. However, in illiquid markets, greater variability in pricing data could occur. In such instances, meaningfully different valuations could be derived for the same pool of loans. A decrease in the estimated fair value of mortgage loans held for sale would result in an immediate charge to earnings for the fair value adjustment.

Valuations of IRLCs for loans to be sold to investors on a mandatory or assignment of trade delivery method are based on valuations for similar underlying loans by reference to the to be announced mortgage-backed securities ("TBA MBS") market, which is actively quoted and easily validated through external sources. The data inputs used in these valuations include, but are not limited to, loan type, underlying loan amount, note rate, loan program, and expected sale date of the loan. IRLCs for loans to be sold to investors on a best-efforts basis derive their base value from the value of the underlying loans using investor pricing tables stratified by product, note rate and term, adjusted for current market conditions. These valuations are adjusted at the loan level to consider the servicing release premium and loan pricing adjustments specific to each loan. For all IRLCs, the base value is then adjusted for the anticipated loan funding probability, or pull through rate. The anticipated loan funding probability is an unobservable input that is based on historical experience and which results in classification of IRLCs as Level 3. A decrease in the pull through rate assumption would result in an immediate charge to earnings for the decrease in the value of IRLCs.

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Earnings Summary

The following table outlines changes in our condensed consolidated statements of income for the periods presented (dollars in thousands):
	For the Three Months Ended August 31,				2012 vs. 2011 increase (decrease)					For the Nine Months Ended August 31,				2012 vs. 2011 increase (decrease)
	2012		2011		$			%		2012		2011		$			%
Interest income	$	1,694,969	$	1,599,092	$	95,877		6	%	$	4,997,146	$	4,725,334	$	271,812		6	%
Interest expense	325,310		362,053		(36,743		)	(10	)%	1,019,109		1,124,760		(105,651		)	(9	)%
Net interest income	1,369,659		1,237,039		132,620			11	%	3,978,037		3,600,574		377,463			11	%
Provision for loan losses	126,288		99,514		26,774			27	%	510,401		692,763		(182,362		)	(26	)%
Net interest income after provision for loan losses	1,243,371		1,137,525		105,846			9	%	3,467,636		2,907,811		559,825			19	%
Other income	594,250		551,963		42,287			8	%	1,676,893		1,658,431		18,462			1	%
Other expense	825,907		642,407		183,500			29	%	2,251,402		1,872,699		378,703			20	%
Income (loss) before income tax expense	1,011,714		1,047,081		(35,367		)	(3	)%	2,893,127		2,693,543		199,584			7	%
Income tax expense	385,028		398,263		(13,235		)	(3	)%	1,098,844		979,414		119,430			12	%
Net income	$	626,686	$	648,818	$	(22,132	)	(3	)%	$	1,794,283	$	1,714,129	$	80,154		5	%

Net Interest Income

The tables that follow this section have been provided to supplement the discussion below and provide further analysis of net interest income, net interest margin and the impact of rate and volume changes on net interest income. Net interest income represents the difference between interest income earned on our interest-earning assets and the interest expense incurred to finance those assets. We analyze net interest income in total by calculating net interest margin (net interest income as a percentage of average total loan receivables) and net yield on interest-bearing assets (net interest income as a percentage of average total interest-earning assets). We also separately consider the impact of the level of loan receivables and the related interest yield and the impact of the cost of funds related to each of our funding sources, along with the income generated by our liquidity portfolio, on net interest income.

Our interest-earning assets consist of: (i) loan receivables, (ii) cash and cash equivalents, which includes amounts on deposit with the Federal Reserve, highly rated certificates of deposit, and triple-A rated government mutual funds, (iii) restricted cash, (iv) short-term investments and (v) investment securities. Our interest-bearing liabilities consist primarily of deposits, both direct-to-consumer and brokered, and long-term borrowings, including amounts owed to securitization investors. Net interest income is influenced by the following:

• The level and composition of loan receivables, including the proportion of credit card loans to other loans, as well as the proportion of loan receivables bearing interest at promotional rates as compared to standard rates;

• The credit performance of our loans, particularly with regard to charge-offs of finance charges, which reduce interest income;

• The terms of long-term borrowings and certificates of deposit upon initial offering, including maturity and interest rate;

• The level and composition of other interest-bearing assets and liabilities, including our liquidity portfolio;

• Changes in the interest rate environment, including the levels of interest rates and the relationships among interest rate indices, such as the prime rate, the Federal Funds rate and LIBOR;

• The effectiveness of interest rate swaps in our interest rate risk management program; and

• The difference between the carrying amount and future cash flows expected to be collected on PCI loans.

Net interest margin was relatively flat for the nine months ended August 31, 2012, as compared to the same period in 2011. Net interest margin increased during the three months ended August 31, 2012, as compared to the same periods in 2011. The increase in the three month period was primarily driven by improved funding rates on our deposit products, partially offset by lower yields on credit cards and growth in lower yielding student loans. The net interest margin for the quarter benefited further from improved borrowing rates.

61

Interest income increased during the three and nine months ended August 31, 2012, as compared to the same periods in 2011, primarily due to higher interest income across all of our loan products. The increase in interest income on credit card loans was driven by higher average levels of loans and lower interest charge-offs, offset in part by a decline in yield. The decrease in yield was due to the combination of higher levels of loans being offered at a promotional rate, as well as the receivable repricing restrictions under the CARD Act. The increase in interest income on student loans was due to growth in our student loan receivables, both through the acquisition of additional PCI private student loans on September 30, 2011 (see Note 4: Loan Receivables to our condensed consolidated financial statements), as well as due to organic growth in the private student loan portfolio, partially offset by a decrease in yield due to the lower yield on the acquired PCI student loans. Interest income on personal loans also increased due to growth in the portfolio, combined with a modest increase in the yield.

Interest income on other interest-earning assets, which largely relates to investment income on our liquidity portfolio, increased during the three and nine months ended August 31, 2012 primarily due a continued shift in the mix of our liquidity portfolio to higher yielding investments, and higher average levels of liquidity. Interest expense declined in the three and nine months ended August 31, 2012, as compared to the same periods in 2011, primarily due to deposits bearing higher interest rates maturing and being replaced by deposits bearing lower interest rates.

62

Average Balance Sheet Analysis
	For the Three Months Ended August 31,
	2012							2011
	Average Balance			Rate		Interest		Average Balance			Rate		Interest
Assets
Interest-earning assets:
Cash and cash equivalents	$	5,442,901		0.28	%	$	3,839	$	3,453,928		0.25	%	$	2,160
Restricted cash	1,388,389			0.14	%	490		1,184,566			0.11	%	336
Other short-term investments	250			—	%	—		—			—	%	—
Investment securities	6,532,840			1.30	%	21,371		5,814,467			1.07	%	15,676
Loan receivables(1):
Credit card(2)(3)	47,066,962			12.27	%	1,451,836		45,343,304			12.46	%	1,423,496
Personal loans	3,011,379			12.41	%	93,912		2,321,496			11.97	%	70,052
Federal student loans(4)	—			—	%	—		747,719			1.57	%	2,957
Private student loans	2,560,636			7.30	%	46,964		1,673,058			7.12	%	30,014
PCI student loans	4,932,677			6.07	%	75,243		2,915,342			7.39	%	54,304
Mortgage loans held for sale	122,157			3.44	%	1,057		—			—	%	—
Other	27,341			3.74	%	257		12,140			3.13	%	97
Total loan receivables	57,721,152			11.50	%	1,669,269		53,013,059			11.83	%	1,580,920
Total interest-earning assets	71,085,532			9.49	%	1,694,969		63,466,020			10.00	%	1,599,092
Allowance for loan losses	(1,891,694		)					(2,490,577		)
Other assets	4,059,120							3,796,491
Total assets	$	73,252,958						$	64,771,934
Liabilities and Stockholders’ Equity
Interest-bearing liabilities:
Interest-bearing deposits:
Time deposits(5)	$	27,639,575		2.46	%	171,013		$	24,829,744		3.29	%	205,929
Money market deposits	5,382,369			0.87	%	11,744		4,676,243			1.21	%	14,296
Other interest-bearing savings deposits	8,855,038			1.00	%	22,225		6,432,652			1.33	%	21,494
Total interest-bearing deposits(6)	41,876,982			1.95	%	204,982		35,938,639			2.67	%	241,719
Borrowings:
Short-term borrowings	113,104			1.49	%	423		167,804			0.08	%	33
Securitized borrowings(5)	17,270,971			1.90	%	82,636		15,624,848			2.05	%	80,573
Other long-term borrowings(5)	1,904,400			7.79	%	37,269		2,449,670			6.43	%	39,728
Total borrowings	19,288,475			2.48	%	120,328		18,242,322			2.62	%	120,334
Total interest-bearing liabilities	61,165,457			2.12	%	325,310		54,180,961			2.65	%	362,053
Other liabilities and stockholders’ equity	12,087,501							10,590,973
Total liabilities and stockholders’ equity	$	73,252,958						$	64,771,934
Net interest income						$	1,369,659						$	1,237,039
Net interest margin(7)				9.44	%						9.26	%
Net yield on interest-earning assets(8)				7.67	%						7.73	%
Interest rate spread(9)				7.37	%						7.35	%

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	For the Nine Months Ended August 31,
	2012							2011
	Average Balance			Rate		Interest		Average Balance			Rate		Interest
Assets
Interest-earning assets:
Cash and cash equivalents	$	4,879,431		0.27	%	$	10,079	$	3,885,023		0.24	%	$	7,143
Restricted cash	971,317			0.15	%	1,128		1,365,770			0.14	%	1,452
Other short-term investments	160			—	%	—		203,832			1.07	%	1,639
Investment securities	6,462,369			1.21	%	58,869		5,469,488			1.04	%	42,535
Loan receivables(1):
Credit card(2)(3)	46,584,681			12.28	%	4,296,757		45,021,656			12.56	%	4,243,803
Personal loans	2,859,342			12.33	%	264,882		2,127,084			11.87	%	189,525
Federal student loans(4)	161,378			1.64	%	1,984		761,580			1.58	%	9,019
Private student loans	2,437,137			7.21	%	132,028		1,517,809			7.06	%	80,473
PCI student loans	5,059,495			6.04	%	229,678		2,638,981			7.54	%	149,460
Mortgage loans held for sale	40,867			3.44	%	1,057		—			—	%	—
Other	24,554			3.71	%	684		13,169			2.88	%	285
Total loan receivables	57,167,454			11.47	%	4,927,070		52,080,279			11.95	%	4,672,565
Total interest-earning assets	69,480,731			9.57	%	4,997,146		63,004,392			9.99	%	4,725,334
Allowance for loan losses	(2,031,521		)					(2,863,500		)
Other assets	3,980,819							3,781,777
Total assets	$	71,430,029						$	63,922,669
Liabilities and Stockholders’ Equity
Interest-bearing liabilities:
Interest-bearing deposits:
Time deposits(5)	$	26,804,396		2.71	%	545,258		$	25,102,544		3.45	%	649,406
Money market deposits	5,428,663			0.93	%	37,906		4,511,303			1.25	%	42,414
Other interest-bearing savings deposits	8,548,349			1.04	%	67,049		5,576,319			1.38	%	57,764
Total interest-bearing deposits(6)	40,781,408			2.12	%	650,213		35,190,166			2.84	%	749,584
Borrowings:
Short-term borrowings	41,177			1.37	%	424		125,590			0.12	%	116
Securitized borrowings(5)	16,748,332			2.00	%	251,955		16,142,231			2.09	%	253,297
Other long-term borrowings(5)	2,058,856			7.53	%	116,517		2,472,765			6.56	%	121,763
Total borrowings	18,848,365			2.60	%	368,896		18,740,586			2.67	%	375,176
Total interest-bearing liabilities	59,629,773			2.27	%	1,019,109		53,930,752			2.78	%	1,124,760
Other liabilities and stockholders’ equity	11,800,256							9,991,917
Total liabilities and stockholders’ equity	$	71,430,029						$	63,922,669
Net interest income						$	3,978,037						$	3,600,574
Net interest margin(7)				9.26	%						9.21	%
Net yield on interest-earning assets(8)				7.62	%						7.61	%
Interest rate spread(9)				7.30	%						7.21	%

____________________

(1) Average balances of loan receivables include non-accruing loans, which are included in the yield calculations. If the non-accruing loan balances were excluded, there would not be a material impact on the amounts reported.

(2) Interest income on credit card loans includes $46.5 million and $134.8 million of amortization of balance transfer fees for the three and nine months ended August 31, 2012, respectively. Interest income on credit card loans includes $60.8 million and $170.1 million of amortization of balance transfer fees for the three and nine months ended August 31, 2011, respectively.

(3) Includes the impact of interest rate swap agreements used to change a portion of certain floating-rate credit card loan receivables to fixed rates.

(4) Includes federal student loans held for sale, which were all sold during the first quarter of 2012.

(5) Includes the impact of interest rate swap agreements used to change a portion of fixed-rate funding to floating-rate funding.

(6) Includes the impact of FDIC insurance premiums and special assessments, and all periods reflect management's current product allocation methodology.

(7) Net interest margin represents net interest income as a percentage of average total loan receivables.

(8) Net yield on interest-earning assets represents net interest income as a percentage of average total interest-earning assets.

(9) Interest rate spread represents the difference between the rate on total interest-earning assets and the rate on total interest-bearing liabilities.

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Rate/Volume Variance Analysis(1)
	For the Three Months Ended August 31, 2012 vs. August 31, 2011									For the Nine Months Ended August 31, 2012 vs. August 31, 2011
	Volume			Rate			Total			Volume			Rate			Total
Increase/(decrease) in net interest income due to changes in:
Interest-earning assets:
Cash and cash equivalents	$	1,368		$	311		$	1,679		$	1,986		$	950		$	2,936
Restricted cash	63			91			154			(515		)	191			(324		)
Other short-term investments	—			—			—			(1,639		)	—			(1,639		)
Investment securities	2,068			3,627			5,695			8,428			7,906			16,334
Loan receivables:
Credit card	140,446			(112,106		)	28,340			186,055			(133,101		)	52,954
Personal loans	21,262			2,598			23,860			67,733			7,624			75,357
Federal student loans	(2,957		)	—			(2,957		)	(7,572		)	537			(7,035		)
Private student loans	16,183			767			16,950			49,840			1,715			51,555
PCI student loans	77,873			(56,934		)	20,939			131,070			(50,852		)	80,218
Mortgage loans held for sale	1,057			—			1,057			1,057			—			1,057
Other	138			22			160			299			100			399
Total loan receivables	254,002			(165,653		)	88,349			428,482			(173,977		)	254,505
Total interest income	257,501			(161,624		)	95,877			436,742			(164,930		)	271,812
Interest-bearing liabilities:
Interest-bearing deposits:
Time deposits	116,774			(151,690		)	(34,916		)	64,096			(168,244		)	(104,148		)
Money market deposits	10,301			(12,853		)	(2,552		)	10,863			(15,371		)	(4,508		)
Other interest-bearing deposits	25,868			(25,137		)	731			32,095			(22,810		)	9,285
Total interest-bearing deposits	152,943			(189,680		)	(36,737		)	107,054			(206,425		)	(99,371		)
Borrowings:
Short-term borrowings	(78		)	468			390			(176		)	484			308
Securitized borrowings	28,039			(25,976		)	2,063			12,771			(14,113		)	(1,342		)
Other long-term borrowings	(35,329		)	32,870			(2,459		)	(28,287		)	23,041			(5,246		)
Total borrowings	(7,368		)	7,362			(6		)	(15,692		)	9,412			(6,280		)
Total interest expense	145,575			(182,318		)	(36,743		)	91,362			(197,013		)	(105,651		)
Net interest income	$	111,926		$	20,694		$	132,620		$	345,380		$	32,083		$	377,463

 _______________

(1) The rate/volume variance for each category has been allocated on a consistent basis between rate and volume variances between August 31, 2012 and August 31, 2011 based on the percentage of the rate or volume variance to the sum of the two absolute variances.

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Loan Quality

Loan receivables consist of the following (dollars in thousands):

	August 31, 2012			November 30, 2011
Student loans held for sale	$	—		$	714,180
Mortgage loans held for sale, measured at fair value	272,082			—
Loan portfolio:
Credit card loans:
Discover card	47,915,177			46,419,544
Discover business card	209,291			219,081
Total credit card loans	48,124,468			46,638,625
Other loans:
Personal loans	3,114,408			2,648,051
Private student loans	2,752,715			2,069,001
Other	26,829			16,690
Total other loans	5,893,952			4,733,742
PCI student loans(1)	4,867,010			5,250,388
Total loan portfolio	58,885,430			56,622,755
Total loan receivables	59,157,512			57,336,935
Allowance for loan losses	(1,687,664		)	(2,205,196		)
Net loan receivables	$	57,469,848		$	55,131,739

 ____________________

(1) Represents purchased credit-impaired private student loans which do not have a related allowance for loan losses or charge-offs (see Note 4: Loan Receivables to our condensed consolidated financial statements).

Provision and Allowance for Loan Losses

Provision for loan losses is the expense related to maintaining the allowance for loan losses at an appropriate level to absorb the estimated probable losses in the loan portfolio at each period end date. Factors that influence the provision for loan losses include:

• The impact of general economic conditions on the consumer, including unemployment levels, bankruptcy trends and interest rate movements;

• Changes in consumer spending and payment behaviors;

• Changes in our loan portfolio, including the overall mix of accounts, products and loan balances within the portfolio;

• The level and direction of historical and anticipated loan delinquencies and charge-offs;

• The credit quality of the loan portfolio, which reflects, among other factors, our credit granting practices and effectiveness of collection efforts; and

• Regulatory changes or new regulatory guidance.

In calculating the allowance for loan losses, we estimate probable losses separately for segments of the loan portfolio that have similar risk characteristics, such as credit card and other loans. We use a migration analysis to estimate the likelihood that a loan will progress through the various stages of delinquency. We use other analyses to estimate losses incurred from non-delinquent accounts which adds an additional element to the identification of loss emergence. We use these analyses together to determine our allowance for loan losses.

The allowance for loan loss was $1.7 billion at August 31, 2012 which reflects a $518 million reserve release over the amount of the allowance for loan loss at November 30, 2011. The reserve release was driven by favorability in the credit performance of the receivable portfolio and a continuation of a declining trend in net charge-offs.

66

The provision for loan loss is the amount of expense realized after considering the level of net charge-offs in the period and the required amount of allowance for loan loss at the balance sheet date. The reduction in reserve requirements as described above led to a decrease in the provision for loan losses of $182 million, or 26%, as compared to the nine months ended August 31, 2011. For the three months ended August 31, 2012, the provision increased by $27 million, or 27%, as compared to the third quarter 2011 due to lower reserve releases over the comparative periods offset in part by lower net charge-offs in the current quarter.

At August 31, 2012, the level of the allowance related to total other loans increased by $30 million as compared to November 30, 2011. The increase attributable to the personal loan portfolio was driven by growth in the portfolio as the reserve for these loans is consistent as a percent of the related outstanding loan balance. The increase attributable to the student loan portfolio was driven both by the seasoning of the portfolio and by a higher percentage of the loans that came into repayment. "Seasoning" refers to the maturing of a loan portfolio as, in general, loans do not begin to show signs of credit deterioration or default until they have been in repayment for some period of time. For student loans, payments are not required while the borrower is still in school, therefore this loan portfolio matures at a slower pace.

The following table provides changes in our allowance for loan losses for the periods presented (dollars in thousands):
	For the Three Months Ended August 31,						For the Nine Months Ended August 31,
	2012			2011			2012			2011
Balance at beginning of period	$	1,869,253		$	2,632,320		$	2,205,196		$	3,304,118
Additions:
Provision for loan losses	126,288			99,514			510,401			692,763
Deductions:
Charge-offs:
Discover card	(428,935		)	(584,534		)	(1,400,273		)	(2,085,452		)
Discover business card	(2,623		)	(4,416		)	(8,540		)	(17,672		)
Total credit card loans	(431,558		)	(588,950		)	(1,408,813		)	(2,103,124		)
Personal loans	(17,341		)	(16,458		)	(52,474		)	(52,438		)
Private student loans	(4,793		)	(2,663		)	(11,956		)	(5,646		)
Other	(22		)	(411		)	(194		)	(1,025		)
Total other loans	(22,156		)	(19,532		)	(64,624		)	(59,109		)
Total charge-offs	(453,714		)	(608,482		)	(1,473,437		)	(2,162,233		)
Recoveries:
Discover card	143,590			148,292			439,870			434,141
Discover business card	882			910			2,599			2,735
Total credit card loans	144,472			149,202			442,469			436,876
Personal loans	1,127			458			2,605			1,458
Private student loans	119			45			306			73
Other	119			1			124			3
Total other loans	1,365			504			3,035			1,534
Total recoveries	145,837			149,706			445,504			438,410
Net charge-offs	(307,877		)	(458,776		)	(1,027,933		)	(1,723,823		)
Balance at end of period	$	1,687,664		$	2,273,058		$	1,687,664		$	2,273,058

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The following table presents a breakdown of the allowance for loan losses (dollars in thousands):
	August 31, 2012		November 30, 2011
Discover card	$	1,514,678	$	2,058,247
Discover business card	7,585		11,914
Total credit card loans	1,522,263		2,070,161
Personal loans	96,356		82,075
Private student loans	68,262		52,740
Other	783		220
Total other loans	165,401		135,035
Total allowance for loan losses	$	1,687,664	$	2,205,196

Net Charge-offs

Our net charge-offs include the principal amount of losses charged off less principal recoveries and exclude charged-off interest and fees, recoveries of interest and fees and fraud losses. Charged-off and recovered interest and fees are recorded in interest and loan fee income, respectively, which is effectively a reclassification of the loan loss provision, while fraud losses are recorded in other expense. Credit card loan receivables are charged off at the end of the month during which an account becomes 180 days contractually past due. Closed-end consumer loan receivables are generally charged-off at the end of the month during which an account becomes 120 days contractually past due. Generally, customer bankruptcies and probate accounts are charged-off at the end of the month 60 days following the receipt of notification of the bankruptcy or death but not later than the 180-day or 120-day contractual time frame.

The following table presents amounts and rates of net charge-offs of key loan portfolio segments (dollars in thousands):
	For the Three Months Ended August 31,								For the Nine Months Ended August 31,
	2012				2011				2012				2011
	$		%		$		%		$		%		$		%
Credit card loans	$	287,086	2.43	%	$	439,748	3.85	%	$	966,344	2.76	%	$	1,666,248	4.93	%
Personal loans	$	16,214	2.14	%	$	16,000	2.73	%	$	49,869	2.32	%	$	50,980	3.19	%
Private student loans (excluding PCI(1))	$	4,674	0.73	%	$	2,618	0.62	%	$	11,650	0.64	%	$	5,573	0.49	%

____________________

(1) Charge-offs for PCI loans did not result in a charge to earnings during 2012 or 2011 and are therefore excluded from the calculation. See Note 4: Loan Receivables to our condensed consolidated financial statements for more information regarding the accounting for charge-offs on PCI loans.

The net charge-off rate on our credit card loan receivables decreased 142 basis points and 217 basis points, respectively, for the three and nine months ended August 31, 2012 as compared to the three and nine months ended August 31, 2011. The decrease in net charge-offs for credit card loan receivables was attributable to improvement in both contractual and bankruptcy-related charge-offs, combined with a slightly higher level of recoveries as compared to the same periods in 2011. The net charge-off rate on personal loans decreased 59 basis points and 87 basis points, respectively, for the three and nine months ended August 31, 2012 as compared to the three and nine months ended August 31, 2011. The decrease in the net charge-off rate for personal loan receivables was primarily attributable to an increase in the receivables balance as the amounts charged off were relatively flat for the three and nine months ended August 31, 2012 as compared to the same periods in 2011. As loans have entered repayment, the net charge-off rate on student loans has increased by 11 basis points and 15 basis points for the three and nine months ended August 31, 2012, respectively, as compared to the same periods in 2011.

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Delinquencies

Delinquencies are an indicator of credit quality at a point in time. Loan balances are considered delinquent when contractual payments on the loan become 30 days past due. Information related to loans 90 days or more delinquent and accruing interest is provided in Note 4: Loan Receivables to our condensed consolidated financial statements.

The following table presents the amounts and delinquency rates of key loan portfolio segments that are 30 and 90 days or more delinquent, loan receivables that are not accruing interest, regardless of delinquency and restructured loans (dollars in thousands):
	August 31, 2012				November 30, 2011
	$		%		$		%
Loans 30 days delinquent or more:
Credit card loans	$	870,345	1.81	%	$	1,116,851	2.39	%
Personal loans	$	23,179	0.74	%	$	22,966	0.87	%
Private student loans (excluding PCI(1))	$	35,190	1.28	%	$	13,065	0.63	%
Loans 90 days delinquent or more:
Credit card loans	$	426,997	0.89	%	$	559,674	1.20	%
Personal loans	$	6,784	0.22	%	$	7,362	0.28	%
Private student loans (excluding PCI(1))	$	5,876	0.21	%	$	2,992	0.14	%
Loans not accruing interest	$	187,560	0.35	%	$	207,138	0.40	%
Restructured loans
Credit card loans(2)	$	1,117,359	2.32	%	$	1,216,738	2.61	%
Personal loans	$	16,395	0.53	%	$	7,635	0.29	%
Private student loans (excluding PCI(1))	$	12,503	0.45	%	$	5,439	0.26	%

 ____________________

(1) Excludes PCI loans which are accounted for on a pooled basis. Since a pool is accounted for as a single asset with a single composite interest rate and aggregate expectation of cash flows, the past-due status of a pool, or that of the individual loans within a pool, is not meaningful. Because we are recognizing interest income on a pool of loans, it is all considered to be performing.

(2) Restructured loans include $31.8 million and $37.9 million at August 31, 2012 and November 30, 2011, respectively, that are also included in loans over 90 days delinquent or more.

Credit card loan receivables delinquency rates at August 31, 2012 have declined as compared to November 30, 2011 due to continued improvement in customer credit performance, which has resulted in declines in both over 30-day and over 90-day delinquency balances. The decline is also attributable to proactive customer account management.

The rate for over 30-day delinquency balances for personal loans decreased slightly, also due to improvement in customer credit performance. The rate for over 90-day delinquency balances for personal loans was flat at August 31, 2012 as compared to November 30, 2011.

The rate for over 30 and 90-day day delinquency balances (which includes loans not in repayment) increased for private student loans at August 31, 2012 as compared to November 30, 2011 due to a combination of continued seasoning of our loan portfolio along with a higher population of loans coming into repayment. The increase in the delinquency rate was partially offset by overall growth of the loan portfolio.

Loans not accruing interest at August 31, 2012 decreased compared to the prior year primarily as a result of a decrease in the number of bankruptcies. Restructured credit card loans decreased slightly at August 31, 2012 as compared to November 30, 2011, due to continued improvement in customer credit performance. Restructured personal loans and private student loans remained modest at August 31, 2012 as compared to November 30, 2011.

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Modified and Restructured Loans

We have loan modification programs that provide for temporary or permanent hardship relief for our credit card loans to borrowers experiencing financial difficulties. The temporary hardship program primarily consists of a reduced minimum payment and an interest rate reduction, both lasting for a period no longer than twelve months. The permanent workout program involves changing the structure of the loan to a fixed payment loan with a maturity no longer than 60 months and reducing the interest rate on the loan. The permanent programs do not normally provide for the forgiveness of unpaid principal, but may allow for the reversal of certain unpaid interest or fee assessments. We also make loan modifications for customers who request financial assistance through external sources, such as a consumer credit counseling agency program. These loans continue to be subject to the original minimum payment terms and do not normally include waiver of unpaid principal, interest or fees. For additional information regarding the accounting treatment for these loans as well as amounts recorded in the financial statements related to these loans, see Note 4: Loan Receivables to our condensed consolidated financial statements.

For student loan borrowers, in certain situations we offer payment forbearance to borrowers who are experiencing temporary financial difficulties and are willing to resume making payments. When a delinquent borrower is granted a second forbearance period, we classify these loans as troubled debt restructurings.

For personal loan customers, in certain situations we offer various payment programs, including temporary and permanent programs. The temporary programs normally consist of a reduction of the minimum payment for a period of no longer than twelve months with a final balloon payment required at the end of the loan term. The permanent program involves changing the terms of the loan in order to payoff the outstanding balance over the new term for a period no longer than four years. The total term may not exceed nine years. We also allow loan modifications for customers who request financial assistance through external sources, similar to our credit card customers discussed above. Payments are modified based on the new terms agreed upon with the credit counseling agency. Personal loans included in temporary and permanent programs are accounted for as troubled debt restructurings.

Borrower performance after using payment programs or forbearance is monitored and the methods have proven effective in helping to prevent defaults and in assisting customers experiencing temporary financial difficulties. We plan to continue to use payment programs and forbearance, and as a result, we expect to have additional loans classified as troubled debt restructurings in the future.

Other Income

The following table presents the components of other income for the periods presented (dollars in thousands):

	For the Three Months Ended August 31,					2012 vs. 2011 increase (decrease)					For the Nine Months Ended August 31,					2012 vs. 2011 increase (decrease)
	2012		2011			$			%		2012		2011			$			%
Discount and interchange revenue(1)	$	265,531	$	282,889		$	(17,358	)	(6	)%	$	795,166	$	809,631		$	(14,465	)	(2	)%
Protection products	104,201		107,858			(3,657		)	(3	)%	310,256		321,527			(11,271		)	(4	)%
Loan fee income	80,012		84,243			(4,231		)	(5	)%	241,719		250,596			(8,877		)	(4	)%
Transaction processing revenue	59,168		43,931			15,237			35	%	163,823		131,792			32,031			24	%
Merchant fees	4,426		4,110			316			8	%	11,654		12,981			(1,327		)	(10	)%
Gain (loss) on investments	—		(3,614		)	3,614			100	%	28		(3,622		)	3,650			101	%
Other income	80,912		32,546			48,366			149	%	154,247		135,526			18,721			14	%
Total other income	$	594,250	$	551,963		$	42,287		8	%	$	1,676,893	$	1,658,431		$	18,462		1	%

____________________ 

(1) Net of rewards, including Cashback Bonus rewards, of $268 million and $234 million for the three months ended August 31, 2012 and 2011, respectively, and $753 million and $664 million for the nine months ended August 31, 2012 and August 31, 2011, respectively.

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Total other income increased $42 million during the three months ended August 31, 2012, as compared to the three months ended August 31, 2011, primarily due to revenue related to the acquisition and integration of the Home Loan Center in the third quarter of 2012 (see Note 2: Business Combinations to our condensed consolidated financial statements). This increase included a net gain on the sale of loans and a net gain on the related interest rate lock commitments. There was also an increase in transaction processing revenue resulting from greater volume, primarily point-of-sale transactions, which have higher margins, on the PULSE network. These increases were partially offset by a decrease in discount and interchange revenue and loan fee income. The decrease in discount and interchange revenue was mainly due to higher rewards expenses which were partially offset by higher revenue based on the increase in sales volume.

Total other income increased $18 million during the nine months ended August 31, 2012, as compared to the nine months ended August 31, 2011, primarily due to the revenue related to the acquisition and integration of the assets of the Home Loan Center in the third quarter of 2012 as well as higher transaction processing revenue, as further discussed above. This increase was partially offset by lower revenue from the SLC transition services agreement. In addition, other income decreased due to the inclusion of the impact of the originally estimated bargain purchase gain of $16 million related to the acquisition of SLC in the first quarter of 2011. Finally, there were slight decreases in discount and interchange revenue, loan fee income and protection product revenue, the latter of which is expected to continue to decline.

Other Expense

The following table represents the components of other expense for the periods presented (dollars in thousands):

	For the Three Months Ended August 31,				2012 vs. 2011 increase (decrease)				For the Nine Months Ended August 31,				2012 vs. 2011 increase (decrease)
	2012		2011		$		%		2012		2011		$		%
Employee compensation and benefits	$	274,366	$	241,881	$	32,485	13	%	$	770,448	$	684,782	$	85,666	13	%
Marketing and business development	160,534		133,398		27,136		20	%	410,975		393,244		17,731		5	%
Information processing and communications	68,812		63,547		5,265		8	%	210,723		194,852		15,871		8	%
Professional fees	107,749		106,042		1,707		2	%	317,334		301,122		16,212		5	%
Premises and equipment	19,562		18,063		1,499		8	%	55,728		53,268		2,460		5	%
Other expense	194,884		79,476		115,408		145	%	486,194		245,431		240,763		98	%
Total other expense	$	825,907	$	642,407	$	183,500	29	%	$	2,251,402	$	1,872,699	$	378,703	20	%

Total other expense increased for both the three and nine month periods, primarily due to legal expenses associated with the FDIC and CFPB matter. Litigation-related expenses were $96.2 million and $212.0 million for the three and nine months ended August 31, 2012, respectively, compared to $1.9 million and $22.6 million for the same periods in 2011. In addition, there was an increase in compensation costs due to an increase in headcount, which was partially related to the acquisition of the assets of the Home Loan Center. Furthermore, there was an increase in marketing related expenses related to growth initiatives.

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Income Tax Expense

The following table reconciles our effective tax rate to the U.S. federal statutory income tax rate:
	For the Three Months Ended August 31,				For the Nine Months Ended August 31,
	2012		2011		2012		2011
U.S. federal statutory income tax rate	35.0	%	35.0	%	35.0	%	35.0	%
U.S. state, local and other income taxes, net of U.S. federal income tax benefits	3.2		3.4		3.2		2.6
Valuation allowance — capital loss	—		—		—		(0.8	)
Other	(0.1	)	(0.4	)	(0.2	)	(0.4	)
Effective income tax rate	38.1	%	38.0	%	38.0	%	36.4	%

Income tax expense decreased $13 million for the three months ended August 31, 2012, as compared to the same period in 2011, as 2011 had slightly higher pretax income. For the nine months ended August 31, 2012, as compared to the same period in 2011, income tax expense increased $119 million as a result of an increase in pretax income. The effective tax rate increased from 38.0% and 36.4% for the three and nine months ended August 31, 2011, respectively, to 38.1% and 38.0% for the three and nine months ended August 31, 2012. The nine months ended August 31, 2011 benefited from the release of the valuation allowance that was previously established on the capital loss generated from the sale of the Goldfish business unit, receiving confirmation of a state’s treatment on a previously uncertain tax position and the settlement on certain state examinations. There were no similar benefits in 2012.

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Liquidity and Capital Resources

Funding and Liquidity

We seek to maintain diversified funding sources and a strong liquidity profile in order to fund our business and repay or refinance our maturing obligations. In addition, we seek to achieve an appropriate maturity profile and utilize a cost-effective mix of funding sources. Our primary funding sources include deposits, sourced directly from consumers or through brokers, term asset-backed securitizations, private asset-backed securitizations and long-term borrowings.

Funding Sources

Deposits. We offer deposit products, including certificates of deposit, money market accounts, online savings accounts and Individual Retirement Account (“IRA”) certificates of deposit, to customers through two channels: (i) through direct marketing, internet origination and affinity relationships (“direct-to-consumer deposits”); and (ii) indirectly through contractual arrangements with securities brokerage firms (“brokered deposits”).

At August 31, 2012, we had $27.7 billion of direct-to-consumer deposits and $14.5 billion of brokered deposits. Maturities of our certificates of deposit range from one month to ten years, with a weighted average maturity of 21 months. The following table summarizes deposits by contractual maturity as of August 31, 2012 (dollars in thousands):

	Total		Three  Months or Less		Over Three Months Through Six Months		Over Six Months Through Twelve Months		Over Twelve Months		Indeterminate
Certificates of deposit in amounts less than $100,000(1)	$	21,301,782	$	2,508,162	$	1,805,366	$	5,337,910	$	11,650,344	$	—
Certificates of deposit in amounts of $100,000 to less than $250,000(1)	5,352,917		694,888		656,721		1,176,736		2,824,572		—
Certificates of deposit in amounts of $250,000(1)or greater	1,216,105		164,904		182,743		231,420		637,038		—
Savings deposits, including money market deposit accounts(2)	14,304,228		—		—		—		—		14,304,228
Total interest-bearing deposits	$	42,175,032	$	3,367,954	$	2,644,830	$	6,746,066	$	15,111,954	$	14,304,228

____________________

(1) $100,000 represents the basic insurance amount previously covered by the FDIC. Effective July 21, 2010, the basic insurance per depositor was permanently increased to $250,000.

(2) Represents demand deposits with no contractual maturity.

Credit Card Securitization Financing. We use the securitization of credit card receivables as an additional source of funding. We access the asset-backed securitization market using the Discover Card Master Trust I (“DCMT”) and the Discover Card Execution Note Trust (“DCENT”), through which we issue asset-backed securities both publicly and through private transactions. We retain significant exposure to the performance of trust assets through holdings of the seller's interest and subordinated security classes of DCMT and DCENT.

The securitization structures include certain features designed to protect investors. The primary feature relates to the availability and adequacy of cash flows in the securitized pool of receivables to meet contractual requirements, the insufficiency of which triggers early repayment of the securities. We refer to this as “economic early amortization,” which is based on excess spread levels. Excess spread is the amount by which income received by a trust during a collection period, including interest collections, fees and interchange, exceeds the fees and expenses of the trust during such collection period, including interest expense, servicing fees and charged-off receivables. Our excess spread previously included the amount of certain principal collections available to be reallocated from Series 2009-SD, which enhanced securities of both DCMT and DCENT. Series 2009-SD matured on January 17, 2012, and as prescribed in amendments to the governing documents which became effective in January 2010, the size of the Class D (2009-1) note was increased. In the event of an economic early amortization, which would occur if the excess spread fell below 0% on a three-month rolling average basis, we would be required to repay the affected outstanding securitized borrowings using available collections received by the trust (the period of ultimate repayment would be determined by the amount and timing of collections received). An early amortization event would negatively impact our liquidity, and require us to utilize our available non-securitization related contingent liquidity or rely on alternative funding sources, which may or may not be available at the time. As of August 31, 2012, the three-month rolling average excess spread was 13.41%.

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Another feature of our securitization structure, which is applicable only to the notes issued from DCENT, is a reserve account funding requirement in which, in limited circumstances, excess cash flows generated by the transferred loan receivables are held at the trust. This funding requirement is triggered when DCENT’s three-month average excess spread rate decreases to below 4.50%, with increasing funding requirements as excess spread levels decline below preset levels to 0%. See Note 5: Credit Card and Student Loan Securitization Activities to our consolidated financial statements for additional information regarding the structures of DCMT and DCENT and for tables providing information concerning investors’ interests and related excess spreads at August 31, 2012.

At August 31, 2012, we had $14.8 billion of outstanding public asset-backed securities, $0.3 billion of outstanding private asset-backed securitizations and $4.8 billion of outstanding asset-backed securities that had been issued to our wholly-owned subsidiaries. The following table summarizes expected contractual maturities of the investors’ interests in credit card securitizations excluding those that have been issued to our wholly-owned subsidiaries at August 31, 2012 (dollars in thousands):

	Total		Less Than One Year		One Year Through Three Years		Four Years Through Five Years		After Five Years
Scheduled maturities of long-term borrowings—owed to credit card securitization investors	$	15,075,044	$	5,178,839	$	6,247,183	$	1,650,000	$	1,999,022

At August 31, 2012, we had capacity to issue up to $2.6 billion in triple-A rated asset-backed securities from DCENT without the issuance of additional Class B or Class C notes as subordination. The triple-A rating of DCENT Class A Notes issued to date has been based, in part, on an FDIC rule which created a safe harbor that provides that the FDIC, as conservator or receiver, will not, using its power to disaffirm or repudiate contracts, seek to reclaim or recover assets transferred in connection with a securitization, or recharacterize them as assets of the insured depository institution, provided such transfer satisfies the conditions for sale accounting treatment under previous GAAP. Pursuant to amendments to GAAP related to transfers of financial assets, effective for us on December 1, 2009, certain transfers of assets to special purpose entities (including Discover Bank’s transfers of assets to the DCMT) no longer qualify for sale accounting treatment. However, on September 27, 2010, the FDIC approved a final rule that preserves the safe-harbor treatment applicable to revolving trusts and master trusts, including DCMT, so long as those trusts would have satisfied the original FDIC safe harbor if evaluated under GAAP pertaining to transfers of financial assets in effect prior to December 1, 2009. Other legislative and regulatory developments, namely the proposed SEC Regulation AB II (including the SEC's July 2011 reproposal of certain of its provisions), the August 2011 SEC advance notice of proposed rulemaking regarding the rule exempting securitization entities from being regarded as "investment companies" under the Investment Company Act of 1940, the securitization and rating agency provisions of the Reform Act and the rules promulgated or proposed thereunder, including proposed rules requiring us to retain risk in our securitization on an unhedged basis, may, however, impact our ability and/or desire to issue asset-backed securities in the future.

Other Long-Term Borrowings—Student Loans. At August 31, 2012, we had $2.4 billion of remaining principal balance outstanding on securitized debt assumed as part of the SLC acquisition. Principal and interest payments on the underlying student loans will reduce the balance of these secured borrowings over time. During the first quarter of 2012, we sold our remaining federal student loans that had been classified as held for sale as of November 30, 2011. As part of the sale, the associated funding was assumed by the buyer.

Corporate and Bank Debt. At August 31, 2012, we had $800 million in principal amount of senior unsecured notes outstanding and Discover Bank had $1.2 billion in principal amount of subordinated notes outstanding. During the second quarter, we completed a private exchange offer, resulting in the exchange of $321.5 million outstanding aggregate principal amount of 10.25% Senior Notes due 2019 for the same aggregate principal amount of new 5.20% Senior Notes due 2022 and a cash premium. At August 31, 2012, our senior unsecured notes are comprised of a $400 million issuance due in June 2017, a $78.5 million issuance due in July 2019 and a $321.5 million issuance due in April 2022. The senior unsecured notes require us to offer to repurchase the notes at a price equal to 101% of their aggregate principal amount plus accrued and unpaid interest in the event of a change of control involving us and a corresponding ratings downgrade to below investment grade. Discover Bank’s subordinated notes are comprised of one $700 million issuance due in November 2019 and a $500 million issuance due in April 2020. For more information, see Note 7: Borrowings to our condensed consolidated financial statements.

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Short-Term Borrowings. We primarily access short-term borrowings through the Federal Funds market or through repurchase agreements. At August 31, 2012, there were no outstanding Federal Funds or repurchase agreements. Beginning in June 2012, we also began utilizing a $300 million warehouse line of credit as another form of short-term borrowings. This line of credit was established for the sole purpose of funding consumer residential loans as part of the addition of residential mortgage lending to our direct banking business. The warehouse line of credit had an outstanding balance of $250.1 million as of August 31, 2012. The weighted-average interest rate on short-term borrowings was 1.13% and 1.04% for the three and nine months ended August 31, 2012. At November 30, 2011, the short-term borrowing balance was $50 million. The weighted-average interest rate on short term borrowings was 0.06% and 0.11% for the three and nine months ended August 31, 2011, respectively.

The maximum daily balance for the three and nine months ended August 31, 2012 and August 31, 2011 is shown in the table below (dollars in thousands):

	For the Three Months Ended August 31,				For the Nine Months Ended August 31,
	2012		2011		2012		2011
Overnight Federal Funds purchased	$	—	$	265,000	$	135,000	$	265,000
Overnight repurchase agreements	$	—	$	—	$	—	$	48,188
Warehouse Line of Credit	$	250,139	$	—	$	250,139	$	—

Additional Funding Sources

Private Asset-Backed Securitizations. We have access to committed undrawn capacity through privately placed asset-backed securitizations to support the funding of our credit card loan receivables. Under these arrangements, we had used $250 million of capacity and had undrawn capacity of $7.3 billion at August 31, 2012. On September 27, 2012, DCENT issued $500 million of asset-backed securities through a private conduit provider, reducing our undrawn capacity to $6.8 billion.

Federal Reserve. Discover Bank has access to the Federal Reserve Bank of Philadelphia’s discount window. As of August 31, 2012, Discover Bank had $9.8 billion of available capacity through the discount window based on the amount of assets pledged. We have no borrowings outstanding under the discount window.

Credit Ratings

Our borrowing costs and capacity in certain funding markets, including securitizations and senior and subordinated debt, may be affected by the credit ratings of Discover Financial Services ("DFS"), Discover Bank and the securitization trusts. Downgrades in these credit ratings could result in higher interest expense on our unsecured debt and asset securitizations, as well as potentially higher fees related to borrowings under our lines of credit. In addition to increased funding costs, deterioration in credit ratings could reduce our borrowing capacity in the unsecured debt and asset securitization capital markets.

We also have agreements with certain of our derivative counterparties that contain provisions that require DFS and Discover Bank’s debt to maintain an investment grade credit rating from specified major credit rating agencies. Because the credit rating of DFS did not meet the specified thresholds, it had posted $4.0 million of collateral with its counterparties at August 31, 2012. Discover Bank's credit rating met specified thresholds set by its counterparties. However, if Discover Bank’s credit rating is reduced by one ratings notch, it would be required to post additional collateral, which, as of August 31, 2012, would have been $112.1 million.

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A credit rating is not a recommendation to buy, sell or hold securities, may be subject to revision or withdrawal at any time by the assigning rating organization, and each rating should be evaluated independently of any other rating. The credit ratings are summarized in the following table:
	Discover Financial Services	Discover Bank	Outlook for Senior Unsecured Debt	Discover Bank	Discover Card Master Trust I		Discover Card Execution Note Trust
	Senior Unsecured Debt	Senior Unsecured Debt		Subordinated Debt	Class  A(1)	Class B	Class  A(1)	Class B	Class C
Moody’s Investors Service	Ba1	Baa3	Stable	Ba1	Aaa(sf)	A1(sf)	Aaa(sf)	A1(sf)	N/A(2)
Standard & Poor’s	BBB-	BBB	Stable	BBB-	AAA(sf)	AA+(sf)	AAA(sf)	AA+(sf)	N/A(2)
Fitch Ratings	BBB	BBB	Stable	BBB-	AAAsf	AAsf	AAAsf	AA-sf	N/A(2)

____________________ 

(1) An “sf” in the rating denotes rating agency identification for structured finance product ratings.

(2) All Class C notes are currently held by subsidiaries of Discover Bank and, therefore, are not publicly rated.

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Liquidity

We seek to ensure that we have adequate liquidity to sustain business operations, fund asset growth and satisfy debt obligations under normal and stress conditions. In addition to the funding sources discussed above, we also maintain highly liquid unencumbered assets in our investment portfolio.

We employ a variety of metrics to monitor and manage liquidity. Regular liquidity stress testing and contingency funding planning is performed as part of our liquidity management process. We evaluate a range of stress scenarios including company specific and systemic events that could impact funding sources and our ability to meet liquidity needs. These scenarios measure the liquidity position over a two-year horizon by analyzing the stress on liquidity versus the ability to generate contingent liquidity. We maintain contingent funding sources, including our liquidity portfolio, private securitizations with unused capacity and Federal Reserve discount window capacity, which we could utilize to satisfy liquidity needs during such stress events. We expect to be able to satisfy all maturing obligations and fund business operations during the next 12 months by utilizing the funding sources that are currently available to us.

We maintain policies outlining the overall framework and general principles for managing liquidity risk across our business, which is the responsibility of our Asset and Liability Committee (the “ALCO”). We seek to balance the trade-offs between maintaining too much liquidity, which may limit financial flexibility and be costly, with having too little liquidity that could cause financial distress. Liquidity risk is centrally managed by the ALCO, which is chaired by our Treasurer and has cross-functional membership. The ALCO monitors positions and determines any actions that may need to be taken.

At August 31, 2012, our liquidity portfolio was comprised of cash and cash equivalents and high quality, liquid investment securities. Cash and cash equivalents were primarily in the form of deposits with the Federal Reserve. Investment securities primarily included debt obligations of the U.S. Treasury and U.S. government agencies and residential mortgage-backed securities issued by U.S. government agencies. These investments are considered highly liquid, and we have the ability to raise cash by utilizing repurchase agreements and pledging certain of these investments to access the secured funding markets. The level of our liquidity portfolio may fluctuate based upon the level of expected maturities of our funding sources as well as operational requirements and market conditions.

At August 31, 2012, our liquidity portfolio and undrawn credit facilities were $29 billion, which was $2.8 billion higher than the balance at November 30, 2011, as an increase in cash and cash equivalents to ensure adequate coverage for forward-looking maturities was partially offset by our December 2011 cancellation of our credit facility. During the three and nine months ended August 31, 2012, the average balance of our liquidity portfolio was $12.5 billion and $11.6 billion, respectively.
	August 31, 2012		November 30, 2011
	(dollars in millions)
Liquidity portfolio
Cash and cash equivalents(1)	$	5,816	$	2,440
Investment securities(2)	6,268		6,108
Total liquidity portfolio	12,084		8,548
Undrawn credit facilities(3)
Private asset-backed securitizations(4)	7,250		6,750
Federal Reserve discount window(5)	9,662		8,407
Unsecured committed credit facility	—		2,445
Total undrawn credit facilities	16,912		17,602
Total liquidity portfolio and undrawn credit facilities	$	28,996	$	26,150

____________________

(1) Cash-in-process is excluded from cash and cash equivalents for liquidity purposes.

(2) At August 31, 2012, investment securities excludes $110 million of residential mortgage-backed securities that have been traded, but for which settlement did not occur until the fourth quarter.

(3) See "—Funding Sources—Additional Funding Sources" for additional information.

(4) On September 27, 2012, DCENT issued $500 million of asset-backed securities through a private conduit provider, reducing our undrawn capacity to $6,750 million.

(5) Excludes $159 million and $276 million of investments accounted for in the liquidity portfolio that were pledged to the Federal Reserve as of August 31, 2012 and November 30, 2011, respectively.

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Capital

Our primary sources of capital are from the earnings generated by our businesses and issuances in the capital markets. We seek to manage capital to a level and composition sufficient to support the risks of our businesses, meet regulatory requirements, adhere to rating agency guidelines and support future business growth. Within these constraints, we are focused on deploying capital in a manner that provides attractive returns to our stockholders. The level, composition and utilization of capital are influenced by changes in the economic environment, strategic initiatives, and legislative and regulatory developments.

Under regulatory capital requirements adopted by the FDIC, the Federal Reserve and other bank regulatory agencies, we, along with Discover Bank, must maintain minimum levels of capital. Failure to meet minimum capital requirements can result in the initiation of certain mandatory and possibly additional discretionary actions by regulators that, if undertaken, could limit our business activities and have a direct material effect on our financial position and results. We must meet specific capital guidelines that involve quantitative measures of assets and liabilities as calculated under regulatory accounting practices. Capital amounts and classification are also subject to qualitative judgments by the regulators about components, risk weightings and other factors.

Our capital adequacy assessment also includes tax and accounting considerations in accordance with regulatory guidance. We maintain a substantial deferred tax asset on our balance sheet, and we include this asset when calculating our regulatory capital levels. However, for regulatory capital purposes, deferred tax assets that are dependent on future taxable income are currently limited to the lesser of: (i) the amount of deferred tax assets we expect to realize within one year of the calendar quarter-end date, based on our projected future taxable income for that year; or (ii) 10% of the amount of our Tier 1 capital. At August 31, 2012, no portion of our deferred tax asset was disallowed for regulatory capital purposes.

At August 31, 2012, Discover Financial Services and Discover Bank met the requirements for "well-capitalized" status, exceeding the regulatory minimums to which they were subject under Basel I.

Current or future regulatory initiatives may require us to hold more capital in the future. In June 2012, the Federal Reserve, FDIC and OCC proposed rules to implement the provisions of the Basel III regulatory capital reforms that would be applicable to us and Discover Bank. The proposed rules include new minimum and “well-capitalized” risk-based capital and leverage ratios, which would be phased in from 2013 to 2019, and refine the definition of what constitutes “capital” for purposes of calculating those ratios. In December 2011, the Federal Reserve issued proposed rules to implement heightened prudential standards for large bank holding companies, including us, as required by the Reform Act, including risk-based capital and leverage standards that will work in concert with the Basel III rules. In November 2011, the Federal Reserve issued a final rule requiring the submission of annual capital plans to the Federal Reserve for its review and non-objection. On March 13, 2012, we received non-objection from the Federal Reserve with respect to our proposed capital actions through March 31, 2013. For more information regarding these regulatory initiatives, see “ - Regulatory Environment and Developments” in this report and in our annual report on Form 10-K for the year ended November 30, 2011.

In the first quarter of 2012, we increased our quarterly common stock dividend from $.06 per share to $.10 per share and maintained a $.10 per share dividend for each of the second and third quarters of 2012. In addition, on March 13, 2012, our board of directors approved a share repurchase program authorizing the repurchase of up to $2 billion of our outstanding shares of common stock. The program expires on March 22, 2014, and may be terminated at any time. This share repurchase program replaces the prior $1 billion program that had $575 million of remaining authorization. In the third quarter of 2012, we repurchased approximately ten million shares of our outstanding common stock for $350 million, reducing our number of shares outstanding by 1.9%. We expect to continue to make share repurchases under our repurchase program from time to time based on market conditions and other factors, subject to legal and regulatory restrictions. Share repurchases under the program may be made through a variety of methods, including open market purchases, privately negotiated transactions or other purchases, including block trades, accelerated share repurchase transactions, or any combination of such methods.

The declaration and payment of future dividends, as well as the amount thereof, are subject to the discretion of our Board of Directors. The amount and size of any future dividends and share repurchases will depend upon our results of operations, financial condition, capital levels, cash requirements, future prospects and other factors. In addition, banking laws and regulations and our banking regulators may limit our ability to pay dividends and make share repurchases. For example, our ability to make capital distributions, including our ability to pay dividends or repurchase shares of our common stock, is subject to the Federal Reserve's annual review and non-objection of our capital plan, as noted above. In certain circumstances, we may not be able to make a capital distribution, such as a dividend or share repurchase, unless the Federal Reserve has approved such distribution. Further, as noted above, current or future regulatory initiatives may require us to hold more capital in the future. There can be no assurance that we will declare and pay any dividends or repurchase any shares of our common stock in the future.

78

Certain Off-Balance Sheet Arrangements

Guarantees

Guarantees are contracts or indemnification agreements that contingently require us to make payments to a guaranteed party based on changes in an underlying asset, liability, or equity security of a guaranteed party, rate or index. Also included in guarantees are contracts that contingently require the guarantor to make payments to a guaranteed party based on another entity’s failure to perform under an agreement. Our guarantees relate to transactions processed on the Discover Network and certain transactions processed by PULSE and Diners Club. See Note 12: Commitments, Contingencies and Guarantees to our condensed consolidated financial statements for further discussion regarding our guarantees.

Contractual Obligations and Contingent Liabilities and Commitments

In the normal course of business, we enter into various contractual obligations that may require future cash payments. Contractual obligations at August 31, 2012, which include deposits, borrowings, operating and capital lease obligations, interest payments on fixed rate debt, purchase obligations and other long-term liabilities, were $64.1 billion. For a description of our contractual obligations, see our annual report on Form 10-K for the year ended November 30, 2011 under “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources—Contractual Obligations and Contingent Liabilities and Commitments.”

We extend credit for consumer and commercial loans, primarily arising from agreements with customers for unused lines of credit on certain credit cards, provided there is no violation of conditions established in the related agreement. At August 31, 2012, our unused commitments were $162.3 billion. These commitments, substantially all of which we can terminate at any time and which do not necessarily represent future cash requirements, are periodically reviewed based on account usage and customer creditworthiness. In addition, in the ordinary course of business, we guarantee payment on behalf of subsidiaries relating to contractual obligations with external parties. The activities of the subsidiaries covered by any such guarantees are included in our condensed consolidated financial statements.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

Market risk refers to the risk that a change in the level of one or more market prices, rates, indices, correlations or other market factors will result in losses for a position or portfolio. We are exposed to market risk primarily from changes in interest rates.

Interest Rate Risk. We borrow money from a variety of depositors and institutions in order to provide loans to our customers, as well as invest in other assets and our business. These loans and other assets earn interest, which we use to pay interest on the money borrowed. Our net interest income and, therefore, earnings, will be negatively affected if the interest rate earned on assets increases at a slower pace than increases to the interest rate we owe on our borrowings. Changes in interest rates and competitor responses to those changes may influence customer payment rates, loan balances or deposit account activity. We may face higher-cost alternative sources of funding as a result, which has the potential to decrease earnings.

Our interest rate risk management policies are designed to measure and manage the potential volatility of earnings that may arise from changes in interest rates by having a financing portfolio that reflects the mix of variable and fixed rate assets. To the extent that asset and related financing repricing characteristics of a particular portfolio are not matched effectively, we may utilize interest rate derivative contracts, such as swap agreements, to achieve our objectives. Interest rate swap agreements effectively convert the underlying asset or liability from fixed to floating rate or from floating to fixed rate. See Note 15: Derivatives and Hedging Activities to our condensed consolidated financial statements for information on our derivatives activity.

We use an interest rate sensitivity simulation to assess our interest rate risk exposure. For purposes of presenting the possible earnings effect of a hypothetical, adverse change in interest rates over the 12-month period from our reporting date, we assume that all interest rate sensitive assets and liabilities will be impacted by a hypothetical, immediate 100 basis point increase in interest rates as of the beginning of the period. The sensitivity is based upon the hypothetical assumption that all relevant types of interest rates that affect our results would increase instantaneously, simultaneously and to the same degree.

79

Our interest rate sensitive assets include our variable rate loan receivables and the assets that make up our liquidity portfolio. We have restrictions on our ability to mitigate interest rate risk by adjusting rates on existing balances. At August 31, 2012, the majority of our credit card and student loans were at variable rates. Assets with rates that are fixed at period end but which will mature, or otherwise contractually reset to a market-based indexed rate or other fixed rate prior to the end of the 12-month period, are considered to be rate sensitive. The latter category includes certain credit card loans that may be offered at below-market rates for an introductory period, such as balance transfers and special promotional programs, after which the loans will contractually reprice in accordance with our normal market-based pricing structure. For purposes of measuring rate sensitivity for such loans, only the effect of the hypothetical 100 basis point change in the underlying market-based indexed rate or other fixed rate has been considered rather than the full change in the rate to which the loan would contractually reprice. For assets that have a fixed interest rate at the fiscal period end but which contractually will, or are assumed to, reset to a market-based indexed rate or other fixed rate during the next 12 months, earnings sensitivity is measured from the expected repricing date. In addition, for all interest rate sensitive assets, earnings sensitivity is calculated net of expected loan losses.

Interest rate sensitive liabilities are assumed to be those for which the stated interest rate is not contractually fixed for the next 12-month period. Thus, liabilities that vary with changes in a market-based index, such as Federal Funds or LIBOR, which will reset before the end of the 12-month period, or liabilities whose rates are fixed at the fiscal period end but which will mature and are assumed to be replaced with a market-based indexed rate prior to the end of the 12-month period, also are considered to be rate sensitive. For these fixed rate liabilities, earnings sensitivity is measured from the expected repricing date.

Assuming an immediate 100 basis point increase in the interest rates affecting all interest rate sensitive assets and liabilities at August 31, 2012, we estimate that net interest income over the following 12-month period would increase by approximately $40 million, or 1%. Assuming an immediate 100 basis point increase in the interest rates affecting all interest rate sensitive assets and liabilities at November 30, 2011, we estimated that net interest income over the following 12-month period would increase by approximately $49 million, or 1%. We have not provided an estimate of any impact on net interest income of a decrease in interest rates as many of our interest rate sensitive assets and liabilities are tied to interest rates that are already at or near their minimum levels (i.e., Prime and LIBOR) and, therefore, could not materially decrease further.

Item 4.     Controls and Procedures

Evaluation of Disclosure Controls and Procedures

Under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, we conducted an evaluation of the effectiveness of our disclosure controls and procedures (as defined in Rule 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”)), which are designed to ensure that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified by the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure. Based on this evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective as of the end of the period covered by this report.

Changes in Internal Control over Financial Reporting

On June 6, 2012, through our Discover Home Loans, Inc. subsidiary, we acquired substantially all of the operating and related assets of Home Loan Center, Inc., a subsidiary of Tree.com, Inc. During the third quarter, we extended our oversight and monitoring processes that support our internal control over financial reporting to include the assets we acquired. There have been no other changes in our internal control over financial reporting (as such term is defined in Exchange Act Rule 13a-15(f) and 15d-15(f)) that occurred during the quarter ended August 31, 2012 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

80

PART II. OTHER INFORMATION

Item 1. Legal Proceedings

For a description of legal proceedings, see Note 13: Litigation and Regulatory Matters to our condensed consolidated financial statements.

Item 1A. Risk Factors

There have been no material changes to the risk factors disclosed in our annual report on Form 10-K for the year ended November 30, 2011 or our quarterly report on Form 10-Q for the quarter ended May 31, 2012.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

Issuer Purchases of Equity Securities

The table below sets forth information regarding purchases of our common stock related to our share repurchase program and employee transactions that were made by us or on our behalf during the three months ended August 31, 2012.

Period	Total Number of Shares Purchased	Average  Price Paid Per Share		Total Number of Shares Purchased as Part of Publicly Announced Plan or Program(1)	Maximum Dollar Value of Shares that may yet be purchased under the Plans or Programs (1)
June 1- 30, 2012
Repurchase program (1)	2,463,524	$	32.35	2,463,524	$	1,473,337,902
Employee transactions (2)	17,654	$	33.27	N/A	N/A
July 1 - 31, 2012
Repurchase program (1)	3,654,352	$	34.80	3,654,352	$	1,346,183,170
Employee transactions (2)	2,843	$	34.86	N/A	N/A
August 1 - 31, 2012
Repurchase program (1)	3,849,328	$	37.11	3,849,328	$	1,203,337,919
Employee transactions (2)	51,658	$	35.75	N/A	N/A
Total
Repurchase program (1)	9,967,204	$	35.08	9,967,204	$	1,203,337,919
Employee transactions (2)	72,155	$	35.11	N/A	N/A

____________________

(1) On March 13, 2012, our board of directors approved a share repurchase program authorizing the repurchase of up to $2 billion of our outstanding shares of common stock. This program expires on March 22, 2014 and may be terminated at any time.

(2) Reflects shares withheld (under the terms of grants under employee stock compensation plans) to offset tax withholding obligations that occur upon the delivery of outstanding shares underlying restricted stock units or upon the exercise of stock options.

Item 3. Defaults Upon Senior Securities

None

Item 4. Mine Safety Disclosures

None

Item 5. Other Information

None

Item 6. Exhibits

See “Exhibit Index” for documents filed herewith and incorporated herein by reference.

81

Signature

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

Discover Financial Services (Registrant)
By:	/s/ R. Mark Graf
	R. Mark Graf Executive Vice President, Chief Financial Officer and Chief Accounting Officer

Date: October 3, 2012

82

Exhibit Index

Exhibit Number	Description
12.1	Statement regarding computation of ratio of earnings to fixed charges and ratio of earnings to fixed charges and preferred dividends.
31.1	Certification of Chief Executive Officer pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934.
31.2	Certification of Chief Financial Officer pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934.
32.1	Certification of Chief Executive Officer and Chief Financial Officer pursuant to Section 1350 of Chapter 63 of Title 18 of the United States Code.
101.INS	XBRL Instance Document.
101.SCH	XBRL Taxonomy Extension Schema Document.
101.CAL	XBRL Taxonomy Extension Calculation Linkbase Document.
101.DEF	XBRL Taxonomy Extension Definition Linkbase Document.
101.LAB	XBRL Taxonomy Extension Label Linkbase Document.
101.PRE	XBRL Taxonomy Extension Presentation Linkbase Document.

83

EX-12.1

Exhibit 12.1

DISCOVER FINANCIAL SERVICES

COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES

(dollars in thousands)

	For the Nine Months Ended		For the Years Ended November 30,
	August 31, 2012	August 31, 2011	2011	2010	2009	2008	2007
Earnings:
Income from continuing operations before income tax expense	2,893,127	2,693,543	3,511,244	1,268,859	2,120,898	1,657,605	1,525,714
Losses from unconsolidated investees	8,061	3,493	5,301	4,143	3,396	3,946	4,279
Total earnings	2,901,188	2,697,036	3,516,545	1,273,002	2,124,294	1,661,551	1,529,993
Fixed charges:(1)
Total interest expense	1,019,109	1,124,760	1,484,552	1,582,988	1,251,285	1,288,004	1,223,271
Interest factor in rents	4,417	4,014	5,387	4,740	4,383	4,777	3,489
Total fixed charges	1,023,526	1,128,774	1,489,939	1,587,728	1,255,668	1,292,781	1,226,760
Combined fixed charges and preferred stock requirements:(1)
Total interest expense	1,019,109	1,124,760	1,484,552	1,582,988	1,251,285	1,288,004	1,223,271
Interest factor in rents	4,417	4,014	5,387	4,740	4,383	4,777	3,489
Preferred stock requirements	—	—	—	39,488	72,890	—	—
Total combined fixed charges and preferred stock requirements	1,023,526	1,128,774	1,489,939	1,627,216	1,328,558	1,292,781	1,226,760
Earnings from continuing operations before income tax expense and fixed charges	3,924,714	3,825,810	5,006,484	2,860,730	3,379,962	2,954,332	2,756,753
Earnings from continuing operations before income tax expense and combined fixed charges and preference dividends	3,924,714	3,825,810	5,006,484	2,900,218	3,452,852	2,954,332	2,756,753
Ratio of earnings to fixed charges	3.8	3.4	3.4	1.8	2.7	2.3	2.2
Ratio of earnings to combined fixed charges and preference dividends	3.8	3.4	3.4	1.8	2.6	2.3	2.2

(1) Fixed charges are the sum of interest expensed, amortized premiums, discounts and capitalized expenses related to indebtedness, an estimate of interest within rental expense. Combined fixed charges and preferred stock requirements are the sum of interest expense, amortized premiums, discounts and capitalized expenses related to indebtedness and preference security dividend requirements.

EX-31.1

Exhibit 31.1

CERTIFICATION

I, David W. Nelms, certify that:

1. I have reviewed this Quarterly Report on Form 10-Q of Discover Financial Services (the “registrant”);

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: October 3, 2012

/s/ DAVID W. NELMS

David W. Nelms

Chairman and Chief Executive Officer

EX-31.2

Exhibit 31.2

CERTIFICATION

I, R. Mark Graf, certify that:

1. I have reviewed this Quarterly Report on Form 10-Q of Discover Financial Services (the “registrant”);

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: October 3, 2012

/s/ R. MARK GRAF

R. Mark Graf

Executive Vice President, Chief Financial Officer and Chief Accounting Officer

EX-32.1

Exhibit 32.1

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of Discover Financial Services (the “Company”) on Form 10-Q for the period ended August 31, 2012, as filed with the Securities and Exchange Commission (the “Report”), each of David W. Nelms, Chairman and Chief Executive Officer of the Company, and R. Mark Graf, Executive Vice President, Chief Financial Officer and Chief Accounting Officer of the Company, certifies, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

1. The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date: October 3, 2012

/s/ DAVID W. NELMS

David W. Nelms

Chairman and Chief Executive Officer

Date: October 3, 2012

/s/ R. MARK GRAF

R. Mark Graf

Executive Vice President, Chief Financial Officer and Chief Accounting Officer

XML

Segment Disclosures (Tables)

9 Months Ended

Aug. 31, 2012

Segment Reporting [Abstract]

Segment Disclosures

The following table presents segment data for the three months ended August 31, 2012 and 2011 (dollars in thousands):
For the Three Months Ended	Direct Banking		Payment Services			Total
August 31, 2012
Interest income
Credit card	$	1,451,836	$	—		$	1,451,836
Private student loans	46,964		—			46,964
PCI student loans	75,243		—			75,243
Personal loans	93,912		—			93,912
Other	27,014		—			27,014
Total interest income	1,694,969		—			1,694,969
Interest expense	325,310		—			325,310
Net interest income (expense)	1,369,659		—			1,369,659
Provision for loan losses	126,288		—			126,288
Other income	505,960		88,290			594,250
Other expense	786,900		39,007			825,907
Income before income tax expense	$	962,431	$	49,283		$	1,011,714
August 31, 2011
Interest income
Credit card	$	1,423,496	$	—		$	1,423,496
Private student loans	30,014		—			30,014
PCI student loans	54,304		—			54,304
Personal loans	70,052		—			70,052
Other	21,209		17			21,226
Total interest income	1,599,075		17			1,599,092
Interest expense	362,017		36			362,053
Net interest income (expense)	1,237,058		(19		)	1,237,039
Provision for loan losses	99,514		—			99,514
Other income	481,134		70,829			551,963
Other expense	609,202		33,205			642,407
Income before income tax expense	$	1,009,476	$	37,605		$	1,047,081

The following table presents segment data for the nine months ended August 31, 2012 and 2011 (dollars in thousands):
For the Nine Months Ended	Direct Banking		Payment Services			Total
August 31, 2012
Interest income
Credit card	$	4,296,757	$	—		$	4,296,757
Private student loans	132,028		—			132,028
PCI student loans	229,678		—			229,678
Personal loans	264,882		—			264,882
Other	73,797		4			73,801
Total interest income	4,997,142		4			4,997,146
Interest expense	1,019,057		52			1,019,109
Net interest income (expense)	3,978,085		(48		)	3,978,037
Provision for loan losses	510,401		—			510,401
Other income	1,419,046		257,847			1,676,893
Other expense	2,141,892		109,510			2,251,402
Income before income tax expense	$	2,744,838	$	148,289		$	2,893,127
August 31, 2011
Interest income
Credit card	$	4,243,803	$	—		$	4,243,803
Private student loans	80,473		—			80,473
PCI student loans	149,460		—			149,460
Personal loans	189,525		—			189,525
Other	62,044		29			62,073
Total interest income	4,725,305		29			4,725,334
Interest expense	1,124,597		163			1,124,760
Net interest income (expense)	3,600,708		(134		)	3,600,574
Provision for loan losses	692,763		—			692,763
Other income	1,436,764		221,667			1,658,431
Other expense	1,774,915		97,784			1,872,699
Income before income tax expense	$	2,569,794	$	123,749		$	2,693,543

XML

Loan Receivables (Credit Risk Profile by FICO Score) (Details)	9 Months Ended		12 Months Ended
	Aug. 31, 2012		Nov. 30, 2011
Discover Card [Member]
Credit Risk Profile 660 and Above, Percentage	83.00%		81.00%
Credit Risk Profile Less than 660 or No Score, Percentage	17.00%		19.00%
Discover Business Card [Member]
Credit Risk Profile 660 and Above, Percentage	91.00%		89.00%
Credit Risk Profile Less than 660 or No Score, Percentage	9.00%		11.00%
Personal Loans [Member]
Credit Risk Profile 660 and Above, Percentage	97.00%		97.00%
Credit Risk Profile Less than 660 or No Score, Percentage	3.00%		3.00%
Private Student Loans (Excluding PCI) [Member]
Credit Risk Profile 660 and Above, Percentage	95.00%	[1]	95.00%	[1]
Credit Risk Profile Less than 660 or No Score, Percentage	5.00%	[1]	5.00%	[1]

[1] PCI loans are discussed under the heading "Purchased Credit-Impaired Loans."

XML

Investment Securities (Schedule of Fair Value of Securities in a Continuous Unrealized Loss Position for Less than 12 Months and More than 12 Months) (Details) (USD $) In Thousands, unless otherwise specified	Aug. 31, 2012 securities	Nov. 30, 2011 securities
U.S. Government Agency Securities [Member]
Number of securities in a loss position, available-for-sale investment securities		2
Available-for-sale securities, continuous unrealized loss position, less than 12 months, fair value		$ 242,898
Available-for-sale securities, continuous unrealized loss position, less than 12 months, unrealized losses		1,208
Available-for-sale securities, continuous unrealized loss position, more than 12 months, fair value		0
Available-for-sale securities, continuous unrealized loss position, more than 12 months, unrealized losses		0
Corporate Debt Securities [Member]
Number of securities in a loss position, available-for-sale investment securities		3
Available-for-sale securities, continuous unrealized loss position, less than 12 months, fair value		100,041
Available-for-sale securities, continuous unrealized loss position, less than 12 months, unrealized losses		20
Available-for-sale securities, continuous unrealized loss position, more than 12 months, fair value		0
Available-for-sale securities, continuous unrealized loss position, more than 12 months, unrealized losses		0
States and Political Subdivisions of States [Member]
Number of securities in a loss position, held-to-maturity investment securities	3	6
Held-to-maturity securities, continuous unrealized loss position, less than 12 months, fair value	0	2,689
Held-to-maturity securities, continuous unrealized loss position, less than 12 months, unrealized losses	0	46
Held-to-maturity securities, continuous unrealized loss position, more than 12 months, fair value	13,183	27,768
Held-to-maturity securities, continuous unrealized loss position, more than 12 months, unrealized losses	302	2,777
To-be-announced investment securities [Member]
Number of securities in a loss position, held-to-maturity investment securities		2
Held-to-maturity securities, continuous unrealized loss position, less than 12 months, fair value		50,050
Held-to-maturity securities, continuous unrealized loss position, less than 12 months, unrealized losses		204
Held-to-maturity securities, continuous unrealized loss position, more than 12 months, fair value		0
Held-to-maturity securities, continuous unrealized loss position, more than 12 months, unrealized losses		$ 0

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Deposits (Summary of Interest Bearing Deposit Accounts) (Details) (USD $)					9 Months Ended
	Aug. 31, 2012		Nov. 30, 2011		Aug. 31, 2012 Prior FDIC Insured Deposit Limit [Member]	Aug. 31, 2012 Current FDIC Insured Deposit Limit [Member]
Certificates of deposit in amounts less than $100,000	$ 21,301,782,000	[1]	$ 20,114,121,000	[1]
Certificates of deposit from amounts of $100,000 to less than $250,000	5,352,917,000	[1]	5,290,405,000	[1]
Certificates of deposit in amounts of $250,000 or greater	1,216,105,000	[1]	1,189,779,000	[1]
Savings deposits, including money market deposit accounts	14,304,228,000		12,869,582,000
Total interest-bearing deposits	42,175,032,000		39,463,887,000
Average annual interest rate	2.00%		2.57%
Basic deposit amount covered by FDIC insurance					$ 100,000	$ 250,000

[1] $100,000 represents the basic insurance amount previously covered by the FDIC. Effective July 21, 2010, the basic insurance per depositor was permanently increased to $250,000

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Loan Receivables (Changes in the Company's Allowance for Loan Losses) (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended		9 Months Ended
	Aug. 31, 2012	Aug. 31, 2011	Aug. 31, 2012	Aug. 31, 2011
Balance at beginning of period	$ 1,869,253	$ 2,632,320	$ 2,205,196	$ 3,304,118
Provision for loan losses	126,288	99,514	510,401	692,763
Total charge-offs	(453,714)	(608,482)	(1,473,437)	(2,162,233)
Total recoveries	145,837	149,706	445,504	438,410
Net Charge-offs	(307,877)	(458,776)	(1,027,933)	(1,723,823)
Balance at end of period	1,687,664	2,273,058	1,687,664	2,273,058
Credit Card Receivable [Member]
Balance at beginning of period			2,070,161
Total charge-offs	(431,558)	(588,950)	(1,408,813)	(2,103,124)
Total recoveries	144,472	149,202	442,469	436,876
Balance at end of period	1,522,263		1,522,263
Credit Card Receivable [Member] | Discover Card [Member]
Total charge-offs	(428,935)	(584,534)	(1,400,273)	(2,085,452)
Total recoveries	143,590	148,292	439,870	434,141
Credit Card Receivable [Member] | Discover Business Card [Member]
Total charge-offs	(2,623)	(4,416)	(8,540)	(17,672)
Total recoveries	882	910	2,599	2,735
Total Other Loans [Member]
Total charge-offs	(22,156)	(19,532)	(64,624)	(59,109)
Total recoveries	1,365	504	3,035	1,534
Total Other Loans [Member] | Personal Loans [Member]
Balance at beginning of period			82,075
Total charge-offs	(17,341)	(16,458)	(52,474)	(52,438)
Total recoveries	1,127	458	2,605	1,458
Balance at end of period	96,356		96,356
Total Other Loans [Member] | Private Student Loans [Member]
Total charge-offs	(4,793)	(2,663)	(11,956)	(5,646)
Total recoveries	119	45	306	73
Total Other Loans [Member] | Other Loans [Member]
Balance at beginning of period			220
Total charge-offs	(22)	(411)	(194)	(1,025)
Total recoveries	119	1	124	3
Balance at end of period	$ 783		$ 783

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Income Taxes (Reconciliation of the Company's Effective Tax Rate to the U.S. Federal Statutory Income Tax Rate) (Details)	3 Months Ended		9 Months Ended
	Aug. 31, 2012	Aug. 31, 2011	Aug. 31, 2012	Aug. 31, 2011
Effective Income Tax Rate, Continuing Operations, Tax Rate Reconciliation [Abstract]
U.S. federal statutory income tax rate	35.00%	35.00%	35.00%	35.00%
U.S. state and local income taxes, net of U.S. federal income tax benefits	3.20%	3.40%	3.20%	2.60%
Valuation allowance, capital loss	0.00%	0.00%	0.00%	(0.80%)
Other	(0.10%)	(0.40%)	(0.20%)	(0.40%)
Effective income tax rate	38.10%	38.00%	38.00%	36.40%

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Investment Securities (Schedule of Investment Securities) (Details) (USD $) In Thousands, unless otherwise specified	Aug. 31, 2012		Nov. 30, 2011
Total investment securities	$ 6,467,507		$ 6,206,053
U.S. Treasury Securities [Member]
Total investment securities	2,471,448		2,563,800
U.S. Government Agency Securities [Member]
Total investment securities	2,319,285		2,795,223
States and Political Subdivisions of States [Member]
Total investment securities	35,242		40,936
Total Other Securities [Member]
Total investment securities	1,641,532		806,094
Credit Card Asset-Backed Securities of Other Issuers [Member]
Total investment securities	164,294		299,889
Corporate Debt Securities [Member]
Total investment securities	145,529	[1]	449,469	[1]
To-be-announced investment securities [Member]
Total investment securities	0		50,254
Agency Residential Mortgage-Backed Securities [Member]
Total investment securities	$ 1,331,709	[2]	$ 6,482	[2]

[1] Amount represents corporate debt obligations issued under the Temporary Liquidity Guarantee Program (TLGP) that are guaranteed by the Federal Deposit Insurance Corporation (FDIC).

[2] Consists of residential mortgage-backed securities issued by Fannie Mae, Freddie Mac and Ginnie Mae.

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Income Taxes (Tables)

9 Months Ended

Aug. 31, 2012

Income Tax Disclosure [Abstract]

Income Tax Expense

Income tax expense consisted of the following (dollars in thousands):
	For the Three Months Ended August 31,				For the Nine Months Ended August 31,
	2012		2011		2012			2011
Current:
U.S. federal	$	306,999	$	213,765	$	815,833		$	550,250
U.S. state and local	43,698		38,576		120,844			74,292
International	984		747		3,166			3,018
Total	351,681		253,088		939,843			627,560
Deferred:
U.S. federal	30,578		135,145		146,795			332,965
U.S. state and local	2,759		10,024		12,215			18,882
International	10		6		(9		)	7
Total	33,347		145,175		159,001			351,854
Income tax expense	$	385,028	$	398,263	$	1,098,844		$	979,414

Reconciliation of the Company's Effective Tax Rate to the U.S. Federal Statutory Income Tax Rate

The following table reconciles the Company’s effective tax rate to the U.S. federal statutory income tax rate:
	For the Three Months Ended August 31,				For the Nine Months Ended August 31,
	2012		2011		2012		2011
U.S. federal statutory income tax rate	35.0	%	35.0	%	35.0	%	35.0	%
U.S. state, local and other income taxes, net of U.S. federal income tax benefits	3.2		3.4		3.2		2.6
Valuation allowance - capital loss	—		—		—		(0.8	)
Other	(0.1	)	(0.4	)	(0.2	)	(0.4	)
Effective income tax rate	38.1	%	38.0	%	38.0	%	36.4	%

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Earnings Per Share (Calculation of Basic and Diluted EPS ) (Details) (USD $) In Thousands, except Per Share data, unless otherwise specified	3 Months Ended		9 Months Ended
	Aug. 31, 2012	Aug. 31, 2011	Aug. 31, 2012	Aug. 31, 2011
Earnings Per Share Reconciliation [Abstract]
Net Income	$ 626,686	$ 648,818	$ 1,794,283	$ 1,714,129
Income allocated to participating securities	(5,916)	(7,046)	(17,513)	(19,493)
Net Income allocated to common stockholders	$ 620,770	$ 641,772	$ 1,776,770	$ 1,694,636
Weighted Average Number of Shares Outstanding Reconciliation [Abstract]
Weighted average shares of common stock outstanding	512,793	544,438	523,462	544,997
Effect of dilutive common stock equivalents	1,169	743	1,181	701
Weighted average shares of common stock outstanding and common stock equivalents	513,962	545,181	524,643	545,698
Basic earnings per share	$ 1.21	$ 1.18	$ 3.39	$ 3.11
Diluted earnings per share	$ 1.21	$ 1.18	$ 3.39	$ 3.11

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Borrowings (Summary of Long-Term Borrowings and Weighted Average Interest Rate) (Details) (USD $)	3 Months Ended		9 Months Ended
	Aug. 31, 2012		Aug. 31, 2012		Nov. 30, 2011
Debt Instrument [Line Items]
Total	$ 19,246,113,000		$ 19,246,113,000		$ 18,287,178,000
Secured Debt [Member] | Discover Card Master Trust I and Discover Card Execution Note Trust [Member]
Debt Instrument [Line Items]
Total	15,075,044,000		15,075,044,000		13,293,481,000
Secured Debt [Member] | SLC Private Student Loan Trust [Member]
Debt Instrument [Line Items]
Total	2,262,870,000		2,262,870,000		2,549,031,000
Secured Debt [Member] | Long-Term Borrowings-owed to Securitization Investors [Member]
Debt Instrument [Line Items]
Total	17,337,914,000		17,337,914,000		15,842,512,000
Secured Debt [Member] | Fixed Rate Asset Backed Securities [Member] | Discover Card Master Trust I and Discover Card Execution Note Trust [Member]
Debt Instrument [Line Items]
Principal value including discount	4,548,656,000		4,548,656,000		1,748,742,000
Fair value adjustment	7,965,000	[1]	7,965,000	[1]	0	[1]
Total	4,556,621,000		4,556,621,000		1,748,742,000
Interest Rate	2.87%		2.87%		5.65%
Interest Rate Terms			Various fixed rates
Long term borrowing maturity period			Various June 2013— July 2019
Debt Instrument, Maturity Date Range, Start			Jun. 30, 2013
Debt Instrument, Maturity Date Range, End			Sep. 30, 2017
Secured Debt [Member] | Floating Rate Asset Backed Securities Due 2012 to 2017 [Member] | Discover Card Master Trust I and Discover Card Execution Note Trust [Member]
Debt Instrument [Line Items]
Total	9,018,423,000		9,018,423,000		10,044,739,000
Interest Rate	0.51%		0.51%		0.81%
Interest Rate Terms			1-month LIBOR(2) + 8 to 65 basis points	[2]
Long term borrowing maturity period			Various December 2012— May 2017
Debt Instrument, Maturity Date Range, Start			Jun. 30, 2012
Debt Instrument, Maturity Date Range, End			May 31, 2017
Secured Debt [Member] | Floating Rate Asset Backed Securities Due 2012 [Member] | Discover Card Master Trust I and Discover Card Execution Note Trust [Member]
Debt Instrument [Line Items]
Total	1,250,000,000		1,250,000,000		1,250,000,000
Interest Rate	0.81%		0.81%		0.69%
Interest Rate Terms			3-month LIBOR(2) + 34 basis points	[2]
Long term borrowing maturity period			December 2012
Secured Debt [Member] | Floating Rate Asset Backed Securities Due 2012 [Member] | Discover Card Master Trust I and Discover Card Execution Note Trust [Member] | Libor [Member]
Debt Instrument [Line Items]
Debt Instrument, Basis Spread on Variable Rate	0.34%		0.34%
Secured Debt [Member] | Floating Rate Asset Backed Securities And Other Borrowings [Member] | Discover Card Master Trust I and Discover Card Execution Note Trust [Member]
Debt Instrument [Line Items]
Total	250,000,000		250,000,000		250,000,000
Interest Rate	0.91%		0.91%		0.91%
Interest Rate Terms			Commercial Paper rate + 70 basis points
Long term borrowing maturity period			April 2013
Secured Debt [Member] | Floating Rate Asset Backed Securities And Other Borrowings [Member] | Discover Card Master Trust I and Discover Card Execution Note Trust [Member] | Commercial Paper Rate [Member]
Debt Instrument [Line Items]
Debt Instrument, Basis Spread on Variable Rate	0.70%		0.70%
Secured Debt [Member] | Floating Rate Asset-Backed Securities 3-month LIBOR plus various basis points [Member] | SLC Private Student Loan Trust [Member]
Debt Instrument [Line Items]
Total	1,243,672,000		1,243,672,000		1,390,066,000
Interest Rate	0.67%		0.67%		0.60%
Interest Rate Terms			3-month LIBOR(2) + 12 to 45 basis points	[2]
Long term borrowing maturity period			Various January 2019— July 2036(3)	[3]
Debt Instrument, Maturity Date Range, Start			Jan. 31, 2019
Debt Instrument, Maturity Date Range, End			Jul. 31, 2036
Secured Debt [Member] | Floating Rate Asset-Backed Securities Prime Plus 100 Basis Points [Member] | SLC Private Student Loan Trust [Member]
Debt Instrument [Line Items]
Total	558,316,000		558,316,000		627,072,000
Interest Rate	4.25%		4.25%		4.25%
Interest Rate Terms			Prime rate +100 basis points
Long term borrowing maturity period			June 2031(3)	[3]
Secured Debt [Member] | Floating Rate Asset-Backed Securities Prime Plus 100 Basis Points [Member] | SLC Private Student Loan Trust [Member] | Prime Rate [Member]
Debt Instrument [Line Items]
Debt Instrument, Basis Spread on Variable Rate	1.00%		1.00%
Secured Debt [Member] | Floating Rate Asset-Backed Securities Prime Plus 75 Basis Points [Member] | SLC Private Student Loan Trust [Member]
Debt Instrument [Line Items]
Total	135,024,000		135,024,000		157,338,000
Interest Rate	4.00%		4.00%		4.00%
Interest Rate Terms			Prime rate + 75 basis points
Long term borrowing maturity period			July 2042(3)	[3]
Secured Debt [Member] | Floating Rate Asset-Backed Securities Prime Plus 75 Basis Points [Member] | SLC Private Student Loan Trust [Member] | Prime Rate [Member]
Debt Instrument [Line Items]
Debt Instrument, Basis Spread on Variable Rate	0.75%		0.75%
Secured Debt [Member] | Floating Rate Asset-Backed Securities 1-month LIBOR Plus 350 Basis Points [Member] | SLC Private Student Loan Trust [Member]
Debt Instrument [Line Items]
Total	325,858,000		325,858,000		374,555,000
Interest Rate	3.74%		3.74%		3.75%
Interest Rate Terms			1-month LIBOR(2) + 350 basis points	[2]
Long term borrowing maturity period			July 2042(3)	[3]
Secured Debt [Member] | Floating Rate Asset-Backed Securities 1-month LIBOR Plus 350 Basis Points [Member] | SLC Private Student Loan Trust [Member] | Libor [Member]
Debt Instrument [Line Items]
Debt Instrument, Basis Spread on Variable Rate	3.50%		3.50%
Secured Debt [Member] | Floating Rate Secured Borrowing Maturing February 2012 [Member] | Discover Bank [Member]
Debt Instrument [Line Items]
Total	0	[4]	0	[4]	437,613,000	[4]
Interest Rate	0.00%	[4]	0.00%	[4]	0.70%	[4]
Interest Rate Terms			Commercial Paper rate + 50 basis points	[4]
Long term borrowing maturity period			February 2012	[4]
Secured Debt [Member] | Floating Rate Secured Borrowing Maturing February 2012 [Member] | Discover Bank [Member] | Commercial Paper Rate [Member]
Debt Instrument [Line Items]
Debt Instrument, Basis Spread on Variable Rate	0.50%		0.50%
Corporate Debt Securities [Member] | Fixed Rate Senior Notes Due 2017 [Member] | Parent Company [Member]
Debt Instrument [Line Items]
Principal value including discount	399,610,000		399,610,000		399,549,000
Fair value adjustment	23,167,000	[1]	23,167,000	[1]	9,855,000	[1]
Total	422,777,000		422,777,000		409,404,000
Interest Rate	6.45%		6.45%		6.45%
Interest Rate Terms			Fixed
Long term borrowing maturity period			June 2017
Corporate Debt Securities [Member] | Fixed Rate Senior Notes Due 2019 [Member] | Parent Company [Member]
Debt Instrument [Line Items]
Total	78,484,000	[5]	78,484,000	[5]	400,000,000	[5]
Interest Rate	10.25%	[5]	10.25%	[5]	10.25%	[5]
Interest Rate Terms			Fixed	[5]
Long term borrowing maturity period			July 2019	[5]
Exchange of Debt, Amount, Old Notes	321,500,000
Corporate Debt Securities [Member] | Fixed Rate Senior Notes Due 2022 [Member] | Parent Company [Member]
Debt Instrument [Line Items]
Total	209,213,000	[5]	209,213,000	[5]	0	[5]
Interest Rate	5.20%	[5]	5.20%	[5]	0.00%	[5]
Interest Rate Terms			Fixed	[5]
Long term borrowing maturity period			April 2022	[5]
Subordinated Debt [Member] | Subordinated Bank Notes Due 2019 [Member] | Discover Bank [Member]
Debt Instrument [Line Items]
Total	698,698,000		698,698,000		698,563,000
Interest Rate	8.70%		8.70%		8.70%
Interest Rate Terms			Fixed
Long term borrowing maturity period			November 2019
Subordinated Debt [Member] | Subordinated Bank Notes Due 2020 [Member] | Discover Bank [Member]
Debt Instrument [Line Items]
Total	497,359,000		497,359,000		497,099,000
Interest Rate	7.00%		7.00%		7.00%
Interest Rate Terms			Fixed
Long term borrowing maturity period			April 2020
Capital Lease Obligations [Member]
Debt Instrument [Line Items]
Total	$ 1,668,000		$ 1,668,000		$ 1,987,000
Interest Rate	4.51%		4.51%		4.51%
Interest Rate Terms			Fixed
Long term borrowing maturity period			April 2016
Minimum [Member] | Secured Debt [Member] | Floating Rate Asset Backed Securities Due 2012 to 2017 [Member] | Discover Card Master Trust I and Discover Card Execution Note Trust [Member] | Libor [Member]
Debt Instrument [Line Items]
Debt Instrument, Basis Spread on Variable Rate	0.08%		0.08%
Minimum [Member] | Secured Debt [Member] | Floating Rate Asset-Backed Securities 3-month LIBOR plus various basis points [Member] | SLC Private Student Loan Trust [Member] | Libor [Member]
Debt Instrument [Line Items]
Debt Instrument, Basis Spread on Variable Rate	0.12%		0.12%
Maximum [Member] | Secured Debt [Member] | Floating Rate Asset Backed Securities Due 2012 to 2017 [Member] | Discover Card Master Trust I and Discover Card Execution Note Trust [Member] | Libor [Member]
Debt Instrument [Line Items]
Debt Instrument, Basis Spread on Variable Rate	0.65%		0.65%
Maximum [Member] | Secured Debt [Member] | Floating Rate Asset-Backed Securities 3-month LIBOR plus various basis points [Member] | SLC Private Student Loan Trust [Member] | Libor [Member]
Debt Instrument [Line Items]
Debt Instrument, Basis Spread on Variable Rate	0.45%		0.45%

[1] The Company uses interest rate swaps to hedge portions of these long-term borrowings against changes in fair value attributable to changes in LIBOR. See Note 15: Derivatives and Hedging Activities.

[2] London Interbank Offered Rate (“LIBOR”).

[3] Repayment of this debt is dependent upon the timing of principal and interest payments on the underlying student loans. The dates shown represent final maturity dates.

[4] Under a program established by the U.S. Department of Education, this loan facility was entered into to fund certain federal student loans, which were held for sale at November 30, 2011. Upon sale of the loans during the first quarter 2012, this loan facility was assumed by the buyer.

[5] During second quarter 2012, the Company exchanged $321.5 million outstanding aggregate principal amount of 10.25% Senior Notes due 2019 for the same aggregate principal amount of new 5.20% Senior Notes due 2022 and a cash premium. The new 5.20% Senior Notes due 2022 are carried at a discount as a result of the cash premium paid.

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Fair Value Disclosures (Assets and Liabilities Measured at Fair Value on a Recurring Basis) (Details) (Fair Value, Measurements, Recurring [Member], USD $) In Thousands, unless otherwise specified	Aug. 31, 2012		Nov. 30, 2011
Statement [Line Items]
Available-for-sale investment securities, fair value	$ 6,377,502		$ 6,107,831
Mortgages held-for-sale, fair value	272,082
Derivative financial instruments, assets	136,208
Derivative financial instruments, liabilities	4,776		448
U.S. Treasury Securities [Member]
Statement [Line Items]
Available-for-sale investment securities, fair value	2,470,898		2,563,250
U.S. Government Agency Securities [Member]
Statement [Line Items]
Available-for-sale investment securities, fair value	2,319,285		2,795,223
Credit Card Asset-Backed Securities of Other Issuers [Member]
Statement [Line Items]
Available-for-sale investment securities, fair value	164,294		299,889
Corporate Debt Securities [Member]
Statement [Line Items]
Available-for-sale investment securities, fair value	145,529		449,469
Agency Residential Mortgage-Backed Securities [Member]
Statement [Line Items]
Available-for-sale investment securities, fair value	1,277,496
Level 1 [Member]
Statement [Line Items]
Available-for-sale investment securities, fair value	4,790,183	[1]	5,358,473	[1]
Mortgages held-for-sale, fair value	0
Derivative financial instruments, assets	0
Derivative financial instruments, liabilities	0		0	[1]
Level 1 [Member] | U.S. Treasury Securities [Member]
Statement [Line Items]
Available-for-sale investment securities, fair value	2,470,898	[1]	2,563,250	[1]
Level 1 [Member] | U.S. Government Agency Securities [Member]
Statement [Line Items]
Available-for-sale investment securities, fair value	2,319,285	[1]	2,795,223	[1]
Level 1 [Member] | Credit Card Asset-Backed Securities of Other Issuers [Member]
Statement [Line Items]
Available-for-sale investment securities, fair value	0	[1]	0	[1]
Level 1 [Member] | Corporate Debt Securities [Member]
Statement [Line Items]
Available-for-sale investment securities, fair value	0	[1]	0	[1]
Level 1 [Member] | Agency Residential Mortgage-Backed Securities [Member]
Statement [Line Items]
Available-for-sale investment securities, fair value	0	[1]
Level 2 [Member]
Statement [Line Items]
Available-for-sale investment securities, fair value	1,587,319	[1]	749,358	[1]
Mortgages held-for-sale, fair value	272,082
Derivative financial instruments, assets	118,665
Derivative financial instruments, liabilities	4,736		448	[1]
Level 2 [Member] | U.S. Treasury Securities [Member]
Statement [Line Items]
Available-for-sale investment securities, fair value	0	[1]	0	[1]
Level 2 [Member] | U.S. Government Agency Securities [Member]
Statement [Line Items]
Available-for-sale investment securities, fair value	0		0	[1]
Level 2 [Member] | Credit Card Asset-Backed Securities of Other Issuers [Member]
Statement [Line Items]
Available-for-sale investment securities, fair value	164,294	[1]	299,889	[1]
Level 2 [Member] | Corporate Debt Securities [Member]
Statement [Line Items]
Available-for-sale investment securities, fair value	145,529	[1]	449,469	[1]
Level 2 [Member] | Agency Residential Mortgage-Backed Securities [Member]
Statement [Line Items]
Available-for-sale investment securities, fair value	1,277,496	[1]
Level 3 [Member]
Statement [Line Items]
Available-for-sale investment securities, fair value	0		0
Mortgages held-for-sale, fair value	0
Derivative financial instruments, assets	17,543
Derivative financial instruments, liabilities	40		0
Level 3 [Member] | U.S. Treasury Securities [Member]
Statement [Line Items]
Available-for-sale investment securities, fair value	0		0
Level 3 [Member] | U.S. Government Agency Securities [Member]
Statement [Line Items]
Available-for-sale investment securities, fair value	0		0
Level 3 [Member] | Credit Card Asset-Backed Securities of Other Issuers [Member]
Statement [Line Items]
Available-for-sale investment securities, fair value	0		0
Level 3 [Member] | Corporate Debt Securities [Member]
Statement [Line Items]
Available-for-sale investment securities, fair value	0		0
Level 3 [Member] | Agency Residential Mortgage-Backed Securities [Member]
Statement [Line Items]
Available-for-sale investment securities, fair value	0
Interest Rate Lock Commitments [Member]
Statement [Line Items]
Derivative financial instruments, assets	17,448
Derivative financial instruments, liabilities	34
Interest Rate Lock Commitments [Member] | Level 1 [Member]
Statement [Line Items]
Derivative financial instruments, assets	0
Derivative financial instruments, liabilities	0
Interest Rate Lock Commitments [Member] | Level 2 [Member]
Statement [Line Items]
Derivative financial instruments, assets	0
Derivative financial instruments, liabilities	0
Interest Rate Lock Commitments [Member] | Level 3 [Member]
Statement [Line Items]
Derivative financial instruments, assets	17,448
Derivative financial instruments, liabilities	34
Forward Delivery Contracts [Member]
Statement [Line Items]
Derivative financial instruments, assets	1,079
Derivative financial instruments, liabilities	4,674
Forward Delivery Contracts [Member] | Level 1 [Member]
Statement [Line Items]
Derivative financial instruments, assets	0
Derivative financial instruments, liabilities	0
Forward Delivery Contracts [Member] | Level 2 [Member]
Statement [Line Items]
Derivative financial instruments, assets	984
Derivative financial instruments, liabilities	4,668
Forward Delivery Contracts [Member] | Level 3 [Member]
Statement [Line Items]
Derivative financial instruments, assets	95
Derivative financial instruments, liabilities	6
Other Derivative Financial Instruments [Member]
Statement [Line Items]
Derivative financial instruments, assets	117,681		63,576
Derivative financial instruments, liabilities	68
Other Derivative Financial Instruments [Member] | Level 1 [Member]
Statement [Line Items]
Derivative financial instruments, assets	0	[1]	0	[1]
Derivative financial instruments, liabilities	0	[1]
Other Derivative Financial Instruments [Member] | Level 2 [Member]
Statement [Line Items]
Derivative financial instruments, assets	117,681	[1]	63,576	[1]
Derivative financial instruments, liabilities	68	[1]
Other Derivative Financial Instruments [Member] | Level 3 [Member]
Statement [Line Items]
Derivative financial instruments, assets	0		0
Derivative financial instruments, liabilities	$ 0

[1]

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Loan Receivables (Allowance for Loan Losses and Recorded Investment in its Loan Portfolio (which Excludes Loans Held for Sale) by Impairment Methodology) (Details) (USD $)	Aug. 31, 2012		May 31, 2012	Nov. 30, 2011		Aug. 31, 2011	May 31, 2011	Nov. 30, 2010
Allowance for loans evaluated for impairment	$ 1,687,664,000		$ 1,869,253,000	$ 2,205,196,000		$ 2,273,058,000	$ 2,632,320,000	$ 3,304,118,000
Recorded investment in loans evaluated for impairment	58,885,430,000			56,622,755,000
Collectively Impaired [Member]
Allowance for loans evaluated for impairment	1,489,337,000	[1]		2,000,456,000	[1]
Recorded investment in loans evaluated for impairment	52,872,163,000	[1]		50,142,555,000	[1]
Troubled Debt Restructurings [Member]
Allowance for loans evaluated for impairment	198,327,000	[2]		204,740,000	[2]
Recorded investment in loans evaluated for impairment	1,146,257,000	[2]		1,229,812,000	[2]
Purchased Credit Impaired [Member]
Allowance for loans evaluated for impairment	0	[3]		0	[3]
Recorded investment in loans evaluated for impairment	4,867,010,000	[3]		5,250,388,000	[3]
Credit Card Receivable [Member]
Allowance for loans evaluated for impairment	1,522,263,000			2,070,161,000
Recorded investment in loans evaluated for impairment	48,124,468,000			46,638,625,000
Credit Card Receivable [Member] | Collectively Impaired [Member]
Allowance for loans evaluated for impairment	1,331,282,000	[1]		1,865,797,000	[1]
Recorded investment in loans evaluated for impairment	47,007,109,000	[1]		45,421,887,000	[1]
Credit Card Receivable [Member] | Troubled Debt Restructurings [Member]
Allowance for loans evaluated for impairment	190,981,000	[2]		204,364,000	[2]
Recorded investment in loans evaluated for impairment	1,117,359,000	[2]		1,216,738,000	[2]
Unpaid principal balance of modified loans accounted for as troubled debt restructurings	955,400,000			1,000,000,000
Credit Card Receivable [Member] | Purchased Credit Impaired [Member]
Allowance for loans evaluated for impairment	0	[3]		0	[3]
Recorded investment in loans evaluated for impairment	0	[3]		0	[3]
Total Other Loans [Member] | Personal Loans [Member]
Allowance for loans evaluated for impairment	96,356,000			82,075,000
Recorded investment in loans evaluated for impairment	3,114,408,000			2,648,051,000
Total Other Loans [Member] | Personal Loans [Member] | Collectively Impaired [Member]
Allowance for loans evaluated for impairment	92,069,000	[1]		81,838,000	[1]
Recorded investment in loans evaluated for impairment	3,098,013,000	[1]		2,640,416,000	[1]
Total Other Loans [Member] | Personal Loans [Member] | Troubled Debt Restructurings [Member]
Allowance for loans evaluated for impairment	4,287,000	[2]		237,000	[2]
Recorded investment in loans evaluated for impairment	16,395,000	[2]		7,635,000	[2]
Unpaid principal balance of modified loans accounted for as troubled debt restructurings	16,100,000			7,500,000
Total Other Loans [Member] | Personal Loans [Member] | Purchased Credit Impaired [Member]
Allowance for loans evaluated for impairment	0	[3]		0	[3]
Recorded investment in loans evaluated for impairment	0	[3]		0	[3]
Total Other Loans [Member] | Private Student Loans (Excluding PCI) [Member] | Collectively Impaired [Member]
Allowance for loans evaluated for impairment	65,203,000	[1]		52,601,000	[1]
Recorded investment in loans evaluated for impairment	2,740,212,000	[1]		2,063,562,000	[1]
Total Other Loans [Member] | Private Student Loans (Excluding PCI) [Member] | Troubled Debt Restructurings [Member]
Allowance for loans evaluated for impairment	3,059,000	[2]		139,000	[2]
Recorded investment in loans evaluated for impairment	12,503,000	[2]		5,439,000	[2]
Unpaid principal balance of modified loans accounted for as troubled debt restructurings	11,700,000			5,400,000
Total Other Loans [Member] | Other Loans [Member]
Allowance for loans evaluated for impairment	783,000			220,000
Recorded investment in loans evaluated for impairment	26,829,000			16,690,000
Total Other Loans [Member] | Other Loans [Member] | Collectively Impaired [Member]
Allowance for loans evaluated for impairment	783,000	[1]		220,000	[1]
Recorded investment in loans evaluated for impairment	26,829,000	[1]		16,690,000	[1]
Total Other Loans [Member] | Other Loans [Member] | Troubled Debt Restructurings [Member]
Allowance for loans evaluated for impairment	0	[2]		0	[2]
Recorded investment in loans evaluated for impairment	0	[2]		0	[2]
Total Other Loans [Member] | Other Loans [Member] | Purchased Credit Impaired [Member]
Allowance for loans evaluated for impairment	0	[3]		0	[3]
Recorded investment in loans evaluated for impairment	0	[3]		0	[3]
Total Student Loans Excluding Held for Sale [Member]
Allowance for loans evaluated for impairment	68,262,000			52,740,000
Recorded investment in loans evaluated for impairment	7,619,725,000			7,319,389,000
PCI Student Loans [Member] | Purchased Credit Impaired [Member]
Allowance for loans evaluated for impairment	0	[3]		0	[3]
Recorded investment in loans evaluated for impairment	$ 4,867,010,000	[3]		$ 5,250,388,000	[3]

[1] Represents loans evaluated for impairment in accordance with ASC 450-20, Loss Contingencies.

[2] Represents loans evaluated for impairment in accordance with ASC 310-40, Receivables, which consists of modified loans accounted for as troubled debt restructurings. The unpaid principal balance of credit card loans was $955.4 million and $1.0 billion at August 31, 2012 and November 30, 2011 respectively. The unpaid principal balance of personal loans was $16.1 million and $7.5 million at August 31, 2012 and November 30, 2011, respectively. The unpaid principal balance of student loans was $11.7 million and $5.4 million at August 31, 2012 and November 30, 2011, respectively. All loans accounted for as troubled debt restructurings have a related allowance for loan losses.

[3] Represents loans evaluated for impairment in accordance with ASC 310-30, Receivables-Loans and Debt Securities Acquired with Deteriorated Credit Quality.

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Income Taxes Income Taxes (Narrative) (Details) (USD $) In Millions, unless otherwise specified	9 Months Ended
	Aug. 31, 2012
Significant Change in Unrecognized Tax Benefits is Reasonably Possible [Line Items]
Significant Change in Unrecognized Tax Benefits is Reasonably Possible, Amount of Unrecorded Benefit	$ 85
Period within which no anticipation of resolution of tax appeal	12 months
Period within which unable to determine if unrecognized tax benefits will increase or decrease	12 months

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Commitments, Contingencies and Guarantees (Settlement Withholdings and Escrow Deposits) (Details) (USD $) In Thousands, unless otherwise specified	Aug. 31, 2012	Nov. 30, 2011
Commitments Contingencies and Guarantees [Abstract]
Settlement withholdings and escrow deposits	$ 21,084	$ 24,297

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Capital Adequacy (Schedule of Minimum and Well-Capitalized Requirements) (Details) (USD $) In Thousands, unless otherwise specified	Aug. 31, 2012	Nov. 30, 2011
Parent Company [Member]
Total capital to risk-weighted assets, Amount	$ 10,686,110	$ 9,808,660
Total capital to risk-weighted assets, Ratio	17.10%	16.50%
Total capital to risk-weighted assets, Minimum capital requirements	4,997,394	4,764,887
Total capital to risk-weighted assets, Capital requirements to be classified as well capitalized	6,246,742	5,956,109
Tier I capital to risk-weighted assets, Amount	8,698,015	7,850,451
Tier I capital to risk-weighted assets, Ratio	13.90%	13.20%
Tier I capital to risk-weighted assets, Minimum capital requirements	2,498,697	2,382,444
Tier I capital to risk-weighted assets, Capital requirements to be classified as well capitalized	3,748,045	3,573,665
Tier I leverage capital to average assets ratio	11.90%	11.50%
Tier I leverage capital, minimum capital requirements	2,933,514	2,729,480
Tier I leverage capital, capital requirements to be classified as well capitalized	3,666,893	3,411,851
Tier One Risk Based Capital Required to be Well Capitalized to Risk Weighted Assets Ratio	6.00%	6.00%
Tier One Risk Based Capital Required for Capital Adequacy to Risk Weighted Assets Ratio	4.00%	4.00%
Tier One Leverage Capital Required to be Well Capitalized to Average Assets Terse	5.00%	5.00%
Capital Required for Capital Adequacy to Risk Weighted Assets Ratio	8.00%	8.00%
Capital Required to be Well Capitalized to Risk Weighted Assets Ratio	10.00%	10.00%
Tier One Leverage Capital Required for Capital Adequacy to Average Assets Ratio	4.00%	4.00%
Discover Bank [Member]
Total capital to risk-weighted assets, Amount	9,311,085	8,671,391
Total capital to risk-weighted assets, Ratio	15.20%	14.80%
Total capital to risk-weighted assets, Minimum capital requirements	4,905,887	4,693,645
Total capital to risk-weighted assets, Capital requirements to be classified as well capitalized	6,132,358	5,867,056
Tier I capital to risk-weighted assets, Amount	7,337,118	6,724,176
Tier I capital to risk-weighted assets, Ratio	12.00%	11.50%
Tier I capital to risk-weighted assets, Minimum capital requirements	2,452,943	2,346,822
Tier I capital to risk-weighted assets, Capital requirements to be classified as well capitalized	3,679,415	3,520,234
Tier I leverage capital to average assets ratio	10.20%	10.00%
Tier I leverage capital, minimum capital requirements	2,886,498	2,690,135
Tier I leverage capital, capital requirements to be classified as well capitalized	$ 3,608,122	$ 3,362,668
Tier One Risk Based Capital Required to be Well Capitalized to Risk Weighted Assets Ratio	6.00%	6.00%
Tier One Risk Based Capital Required for Capital Adequacy to Risk Weighted Assets Ratio	4.00%	4.00%
Tier One Leverage Capital Required to be Well Capitalized to Average Assets Terse	5.00%	5.00%
Capital Required for Capital Adequacy to Risk Weighted Assets Ratio	8.00%	8.00%
Capital Required to be Well Capitalized to Risk Weighted Assets Ratio	10.00%	10.00%
Tier One Leverage Capital Required for Capital Adequacy to Average Assets Ratio	4.00%	4.00%

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Litigation (Details) (USD $)	3 Months Ended		9 Months Ended				0 Months Ended
	Aug. 31, 2012	Aug. 31, 2011	Aug. 31, 2012	Aug. 31, 2011	Aug. 31, 2012 Case Involving Walter Bradley [Member] Violation [Member]	Aug. 31, 2012 Case Involving Walter Bradley [Member] Willful violation [Member]	Mar. 06, 2012 Case Involving Andrew Steinfeld [Member] Violation [Member]	Mar. 06, 2012 Case Involving Andrew Steinfeld [Member] Willful violation [Member]	Aug. 31, 2012 Pending and Threatened Litigation [Member]	Sep. 24, 2012 Subsequent Event [Member] Refund Required to be Paid to Customers [Member] Unfavorable Regulatory Action [Member]	Sep. 24, 2012 Subsequent Event [Member] Civil Monetary Penalty to be Paid to Cfpb and Fdic [Member] Unfavorable Regulatory Action [Member]
Litigation Expense excluding legal service provider	$ 96,200,000	$ 1,900,000	$ 212,000,000	$ 22,600,000
Loss Contingency, Range of Possible Loss, Maximum									100,000,000
Loss Contingency, Damages Sought, Value					500	1,500	500	1,500
Loss Contingency, Settlement Agreement, Consideration										$ 200,000,000	$ 14,000,000

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Income Taxes (Income Tax Expense) (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended		9 Months Ended
	Aug. 31, 2012	Aug. 31, 2011	Aug. 31, 2012	Aug. 31, 2011
Current Income Tax Expense (Benefit) [Abstract]
U.S. federal, current	$ 306,999	$ 213,765	$ 815,833	$ 550,250
U.S. state and local, current	43,698	38,576	120,844	74,292
International, current	984	747	3,166	3,018
Total, current	351,681	253,088	939,843	627,560
Deferred Income Tax Expense (Benefit) [Abstract]
U.S. federal, deferred	30,578	135,145	146,795	332,965
U.S. state and local, deferred	2,759	10,024	12,215	18,882
International, deferred	10	6	(9)	7
Total, deferred	33,347	145,175	159,001	351,854
Income tax expense	$ 385,028	$ 398,263	$ 1,098,844	$ 979,414

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Deposits (Certificates of Deposits) (Details) (USD $) In Thousands, unless otherwise specified	Aug. 31, 2012
Deposits [Abstract]
2012	$ 3,367,953
2013	11,499,477
2014	5,454,427
2015	3,292,971
2016	1,825,914
Thereafter	$ 2,430,062

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Background and Basis of Presentation (Policies)

9 Months Ended

Aug. 31, 2012

Organization, Consolidation and Presentation of Financial Statements [Abstract]

Basis of Presentation and Significant Accounting Policies [Text Block]

Basis of Presentation. The accompanying condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States (“GAAP”) for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by GAAP for complete consolidated financial statements. In the opinion of management, the financial statements reflect all adjustments which are necessary for a fair presentation of the results for the quarter. All such adjustments are of a normal, recurring nature.

Fair Value of Financial Instruments, Policy [Policy Text Block]

The fair values of these financial assets and liabilities, which are not carried at fair value on the condensed consolidated statements of financial condition, were determined applying the fair value provisions discussed herein. The use of different assumptions or estimation techniques may have a material effect on these estimated fair value amounts. The following describes the valuation techniques of these financial instruments measured at other than fair values.

Cash and cash equivalents. The carrying value of cash and cash equivalents approximates fair value due to the low level of risk these assets present to the Company as well as the relatively liquid nature of these assets, particularly given their short maturities.

Restricted cash. The carrying value of restricted cash approximates fair value due to the low level of risk these assets present to the Company as well as relatively liquid nature of these assets, particularly given their short maturities.

Held-to-maturity investment securities. Held-to-maturity investment securities consist of residential mortgage-backed securities issued by agencies and municipal bonds. The fair value of residential mortgage-backed securities included in the held-to-maturity portfolio is estimated similarly to residential mortgage-backed securities carried at fair value on a recurring basis discussed herein. Municipal bonds are valued based on quoted market prices for the same or similar securities.

Total loan portfolio. The Company's loan receivables are comprised of credit card and installment loans, including the PCI student loans. Fair value estimates are derived utilizing discounted cash flow analyses, the calculations of which are performed on groupings of loan receivables that are similar in terms of loan type and characteristics. Inputs to the cash flow analysis of each grouping consider recent pre-payment and interest accrual trends and leverage forecasted loss estimates. The expected future cash flows of each grouping are discounted at rates at which similar loans within each grouping could be made under current market conditions. Significant inputs to the fair value measurement of the loan portfolio are unobservable, and as such are classified as Level 3.

Accrued interest receivable. For the Company's accrued interest receivable, which is included in other assets on the statement of financial condition, the carrying value approximates fair value as it is short-term in nature and is due in less than one year.

Deposits. The carrying values of money market deposits, savings deposits and demand deposits approximate fair value due to the potentially liquid nature of these deposits. For time deposits for which readily available market rates do not exist, fair values are estimated by discounting expected future cash flows using market rates currently offered for deposits with similar remaining maturities.

Short-term borrowings. The carrying values of short-term borrowings approximate fair value as they are short term in nature and have maturities of less than one year.

Long-term borrowings-owed to securitization investors. Fair values of long-term borrowings owed to credit card securitization investors are determined utilizing quoted market prices of the same transactions, and as such are classified as Level 2. Fair values of long-term borrowings owed to student loan securitization investors are calculated by discounting cash flows using estimated assumptions including, among other things, maturity and market discount rates. Significant inputs to these fair value measurements are unobservable, and as such, are classified as Level 3.

Other long-term borrowings. Fair values of other long-term borrowings, consisting of subordinated debt and unsecured debt, are determined utilizing current observable market prices for those transactions, and as such are classified as Level 2. Fair values of other long-term borrowing for which there are no observable market transactions, namely capitalized leases, are determined by discounting cash flows of future interest accruals at market rates currently offered for borrowings with similar credit risks, remaining maturities and repricing terms. As the significant inputs to these fair value measurements are unobservable, they are classified as Level 3.

Accrued interest payable. The Company's accrued interest payable, which is included in other liabilities on the statement of financial condition, carrying value approximates fair value as it is short term in nature and is payable in less than one year.

Use of Estimates, Policy [Policy Text Block]

The preparation of financial statements in conformity with GAAP requires the Company to make estimates and assumptions that affect the amounts reported in the condensed consolidated financial statements and related disclosures. These estimates are based on information available as of the date of the condensed consolidated financial statements. The Company believes that the estimates used in the preparation of the condensed consolidated financial statements are reasonable. Actual results could differ from these estimates.

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Loan Receivables (Narrative) (Details) (USD $)	3 Months Ended		9 Months Ended
	Aug. 31, 2012	Aug. 31, 2011	Aug. 31, 2012	Aug. 31, 2011	Nov. 30, 2011	Sep. 30, 2011	Dec. 31, 2010
Loans Held-for-sale, Mortgages	$ 272,082,000		$ 272,082,000		$ 0
Credit Card Charge-off period			180 days
Closed End Consumer Loan Charge Off Period			120 days
Bankruptcy And Probate Charge Off Period			60 days
Open-end loan receivables charge off period			120 days
Closed end loan receivables charge offs period			180 days
Student loans in forbearance	105,500,000		105,500,000		75,900,000
Private student loans in forbearance as a percentage of student loans	2.00%		2.00%		1.50%
Interest and fees forgiven due to loan modification program	10,200,000	15,000,000	34,500,000	49,100,000
Percentage of defaulted loans that charged off	45.00%	42.00%	47.00%	39.00%
Acquired private student loans unpaid principal balance	5,400,000,000		5,400,000,000		5,700,000,000
Purchased credit-impaired loans, Carrying Amount, Net	4,867,010,000		4,867,010,000		5,250,388,000
Aggregate outstanding balance of loans acquired							3,800,000,000
Fair Value of Student Loans Acquired						2,433,000,000	3,070,000,000
Other changes in expected cash flows	(13,000,000)	0	(126,000,000)	91,000,000
PCI Loans 30 Days Or More Delinquency Rate	2.63%	2.60%	2.63%	2.60%
PCI Loans 90 Days Or More Delinquency Rate	0.69%	0.83%	0.69%	0.83%
Finance Receivable Net charge Off Rate for PCI Student Loans	1.13%	1.23%	1.32%	1.22%
Loans Receivable [Member] | Student Loan Corporation [Member]
Fair Value of Student Loans Acquired							3,070,042,000
Nonperforming Financing Receivable [Member]
Fair Value of Student Loans Acquired						16,000,000
Mortgage Loans Held for Sale Pledged as Collateral [Member]
Loans Held-for-sale, Mortgages	272,082,000		272,082,000
Personal Loans [Member]
Temporary Hardship Program, Maturity			12 months
Permanent Program New Repayment Term			4 years
Permanent Program Maximum Repayment Term			9 years
Non-Performing [Member]
Aggregate outstanding balance of loans acquired							$ 31,000,000
Credit Card Receivable [Member]
Temporary Hardship Program, Maturity			12 months
Permanent Workout Program, Maturity			60 months
Student Loans [Member]
Student loan forbearance lifetime cap			12 months
Temporary financial difficulties maximum forbearance period			12 months

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Business Combinations (Calculation of Trust Certificate Purchase Price) (Details) (Student Loan Corporation [Member], USD $) In Millions, unless otherwise specified	Nov. 30, 2011	Dec. 31, 2010
Student Loan Corporation [Member]
Rate Of Discount On Acquisition Of Loans And Other Assets		8.50%
Gross trust assets	$ 3,977
Less: 8.5% discount	(338)
Net trust assets	3,639
Less: Principal amount of and accrued interest on trust debt	(3,193)
Trust certificate purchase price	$ 446

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Accumulated Other Comprehensive Income (Loss) Accumulated Other Comprehensive Income (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended		9 Months Ended
	Aug. 31, 2012	Aug. 31, 2011	Aug. 31, 2012	Aug. 31, 2011	Aug. 31, 2012 Accumulated Net Unrealized Investment Gain (Loss) [Member]	May 31, 2012 Accumulated Net Unrealized Investment Gain (Loss) [Member]	Nov. 30, 2011 Accumulated Net Unrealized Investment Gain (Loss) [Member]	Aug. 31, 2011 Accumulated Net Unrealized Investment Gain (Loss) [Member]	May 31, 2011 Accumulated Net Unrealized Investment Gain (Loss) [Member]	Nov. 30, 2010 Accumulated Net Unrealized Investment Gain (Loss) [Member]	Aug. 31, 2012 Accumulated Net Gain (Loss) from Designated or Qualifying Cash Flow Hedges [Member]	May 31, 2012 Accumulated Net Gain (Loss) from Designated or Qualifying Cash Flow Hedges [Member]	Nov. 30, 2011 Accumulated Net Gain (Loss) from Designated or Qualifying Cash Flow Hedges [Member]	Aug. 31, 2011 Accumulated Net Gain (Loss) from Designated or Qualifying Cash Flow Hedges [Member]	May 31, 2011 Accumulated Net Gain (Loss) from Designated or Qualifying Cash Flow Hedges [Member]	Nov. 30, 2010 Accumulated Net Gain (Loss) from Designated or Qualifying Cash Flow Hedges [Member]	Aug. 31, 2012 Accumulated Defined Benefit Plans Adjustment [Member]	May 31, 2012 Accumulated Defined Benefit Plans Adjustment [Member]	Nov. 30, 2011 Accumulated Defined Benefit Plans Adjustment [Member]	Aug. 31, 2011 Accumulated Defined Benefit Plans Adjustment [Member]	May 31, 2011 Accumulated Defined Benefit Plans Adjustment [Member]	Nov. 30, 2010 Accumulated Defined Benefit Plans Adjustment [Member]
Other Comprehensive Income (Loss), Available-for-sale Securities, Tax	$ 5,988	$ 22,810	$ 14,849	$ 32,806
Other Comprehensive Income (Loss), Derivatives Qualifying as Hedges, Tax Effect	(142)	4,905	(1,506)	4,381
Other Comprehensive Income (Loss) pension and other postretirement benefit plans tax	0	0	(1,920)	202
Accumulated Other Comprehensive Income Loss [Roll Forward]
Beginning of period, Accumulated Other Comprehensive Income (Loss), Net of Tax	(41,016)	(66,358)	(51,679)	(82,548)	79,514	69,583	54,888	62,818	24,648	7,921	4,508	4,749	7,005	9,855	1,647	2,525	(115,348)	(115,348)	(113,572)	(92,652)	(92,653)	(92,994)
Unrealized gain (loss) on available-for-sale investment securities, net of tax expense	9,931	38,170	24,626	54,897
Unrealized gain (loss) on cash flow hedges, net of tax	(241)	8,208	(2,497)	7,330
Unrealized pension and post-retirement benefit gain (loss), net of tax	0	1	(1,776)	342
End of period, Accumulated Other Comprehensive Income (Loss), Net of Tax	$ (31,326)	$ (19,979)	$ (31,326)	$ (19,979)	$ 79,514	$ 69,583	$ 54,888	$ 62,818	$ 24,648	$ 7,921	$ 4,508	$ 4,749	$ 7,005	$ 9,855	$ 1,647	$ 2,525	$ (115,348)	$ (115,348)	$ (113,572)	$ (92,652)	$ (92,653)	$ (92,994)

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Segment Disclosures (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended		9 Months Ended
	Aug. 31, 2012	Aug. 31, 2011	Aug. 31, 2012	Aug. 31, 2011
Segment Reporting Information [Line Items]
Interest income	$ 1,694,969	$ 1,599,092	$ 4,997,146	$ 4,725,334
Interest expense	325,310	362,053	1,019,109	1,124,760
Net interest income	1,369,659	1,237,039	3,978,037	3,600,574
Provision for loan losses	126,288	99,514	510,401	692,763
Other income	594,250	551,963	1,676,893	1,658,431
Other expense	825,907	642,407	2,251,402	1,872,699
Income before income tax expense	1,011,714	1,047,081	2,893,127	2,693,543
Direct Banking [Member]
Segment Reporting Information [Line Items]
Interest income	1,694,969	1,599,075	4,997,142	4,725,305
Interest expense	325,310	362,017	1,019,057	1,124,597
Net interest income	1,369,659	1,237,058	3,978,085	3,600,708
Provision for loan losses	126,288	99,514	510,401	692,763
Other income	505,960	481,134	1,419,046	1,436,764
Other expense	786,900	609,202	2,141,892	1,774,915
Income before income tax expense	962,431	1,009,476	2,744,838	2,569,794
Payment Services [Member]
Segment Reporting Information [Line Items]
Interest income	0	17	4	29
Interest expense	0	36	52	163
Net interest income	0	(19)	(48)	(134)
Provision for loan losses	0	0	0	0
Other income	88,290	70,829	257,847	221,667
Other expense	39,007	33,205	109,510	97,784
Income before income tax expense	49,283	37,605	148,289	123,749
Credit Card Receivable [Member]
Segment Reporting Information [Line Items]
Interest income	1,451,836	1,423,496	4,296,757	4,243,803
Credit Card Receivable [Member] | Direct Banking [Member]
Segment Reporting Information [Line Items]
Interest income	1,451,836	1,423,496	4,296,757	4,243,803
Credit Card Receivable [Member] | Payment Services [Member]
Segment Reporting Information [Line Items]
Interest income	0	0	0	0
Private Student Loans [Member]
Segment Reporting Information [Line Items]
Interest income	46,964	30,014	132,028	80,473
Private Student Loans [Member] | Direct Banking [Member]
Segment Reporting Information [Line Items]
Interest income	46,964	30,014	132,028	80,473
Private Student Loans [Member] | Payment Services [Member]
Segment Reporting Information [Line Items]
Interest income	0	0	0	0
PCI Student Loans [Member]
Segment Reporting Information [Line Items]
Interest income	75,243	54,304	229,678	149,460
PCI Student Loans [Member] | Direct Banking [Member]
Segment Reporting Information [Line Items]
Interest income	75,243	54,304	229,678	149,460
PCI Student Loans [Member] | Payment Services [Member]
Segment Reporting Information [Line Items]
Interest income	0	0	0	0
Personal Loans [Member]
Segment Reporting Information [Line Items]
Interest income	93,912	70,052	264,882	189,525
Personal Loans [Member] | Direct Banking [Member]
Segment Reporting Information [Line Items]
Interest income	93,912	70,052	264,882	189,525
Personal Loans [Member] | Payment Services [Member]
Segment Reporting Information [Line Items]
Interest income	0	0	0	0
Other [Member]
Segment Reporting Information [Line Items]
Interest income	27,014	21,226	73,801	62,073
Other [Member] | Direct Banking [Member]
Segment Reporting Information [Line Items]
Interest income	27,014	21,209	73,797	62,044
Other [Member] | Payment Services [Member]
Segment Reporting Information [Line Items]
Interest income	$ 0	$ 17	$ 4	$ 29

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Fair Value Disclosures (Tables)

9 Months Ended

Aug. 31, 2012

Fair Value Disclosures [Abstract]

Fair Value of Assets and Liabilities Measured on a Recurring Basis

Assets and liabilities measured at fair value on a recurring basis are as follows (dollars in thousands):
	Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Total
Balance at August 31, 2012
Assets
U.S Treasury securities	$	2,470,898	$	—	$	—	$	2,470,898
U.S government agency securities	2,319,285		—		—		2,319,285
Credit card asset-backed securities of other issuers	—		164,294		—		164,294
Corporate debt securities	—		145,529		—		145,529
Residential mortgage-backed securities - Agency	—		1,277,496		—		1,277,496
Available-for-sale investment securities	$	4,790,183	$	1,587,319	$	—	$	6,377,502
Mortgage loans held for sale	$	—	$	272,082	$	—	$	272,082
Interest rate lock commitments	$	—	$	—	$	17,448	$	17,448
Forward delivery contracts	—		984		95		1,079
Other derivative financial instruments	—		117,681		—		117,681
Derivative financial instruments	$	—	$	118,665	$	17,543	$	136,208
Liabilities
Interest rate lock commitments	$	—	$	—	$	34	$	34
Forward delivery contracts	—		4,668		6		4,674
Other derivative financial instruments	—		68		—		68
Derivative financial instruments	$	—	$	4,736	$	40	$	4,776
Balance at November 30, 2011
Assets
U.S Treasury securities	$	2,563,250	$	—	$	—	$	2,563,250
U.S government agency securities	2,795,223		—		—		2,795,223
Credit card asset-backed securities of other issuers	—		299,889		—		299,889
Corporate debt securities	—		449,469		—		449,469
Available-for-sale investment securities	$	5,358,473	$	749,358	$	—	$	6,107,831
Derivative financial instruments	$	—	$	63,576	$	—	$	63,576
Liabilities
Derivative financial instruments	$	—	$	448	$	—	$	448

Changes in Level 3 Assets and Liabilities Measured at Fair Value on a Recurring Basis

Assets and liabilities under the fair value option. Beginning in June 2012, the Company elected to account for mortgage loans held for sale at fair value. Electing the fair value option allows a better offset of the changes in fair values of the loans and the forward delivery contracts used to economically hedge them without the burden of complying with the requirements for hedge accounting. At August 31, 2012, the aggregate unpaid principal balance of loans held for sale for which the fair value option had been elected was $259.9 million. The same loans had a fair value of $272.1 million at August 31, 2012.

Level 3 Financial Instruments Only

The following tables provide changes in the Company’s Level 3 assets and liabilities measured at fair value on a recurring basis. There were no Level 3 assets or liabilities measured at fair value on a recurring basis at any point during the three months ended August 31, 2011.
Changes in Level 3 Assets and Liabilities Measured at Fair Value on a Recurring Basis (dollars in thousands)
For the Three Months Ended August 31, 2012
	Balance at May 31, 2012		Transfers into Level 3		Transfers out of Level 3			Total net gains (losses) included in earnings		Purchases		Sales			Settlements			Transfers of IRLCs to closed loans			Balance at August 31, 2012
Interest rate lock commitments	$	—	$	—	$	—		$	49,437	$	4,757	$	—		$	(202	)	$	(36,578	)	$	17,414
Forward delivery contracts	$	—	$	—	$	(734	)	$	802	$	21	$	—		$	—		$	—		$	89
For the Nine Months Ended August 31, 2012
	Balance at November 30, 2011		Transfers into Level 3		Transfers out of Level 3			Total net gains (losses) included in earnings		Purchases		Sales			Settlements			Transfers of IRLCs to closed loans			Balance at August 31, 2012
Interest rate lock commitments	$	—	$	—	$	—		$	49,437	$	4,757	$	—		$	(202	)	$	(36,578	)	$	17,414
Forward delivery contracts	$	—	$	—	$	(734	)	$	802	$	21	$	—		$	—		$	—		$	89
For the Nine Months Ended August 31, 2011
	Balance at November 30, 2010		Transfers into Level 3		Transfers out of Level 3			Total net gains (losses) included in earnings		Purchases		Sales			Settlements			Transfers of IRLCs to closed loans			Balance at August 31, 2011
Equity securities	$	17	$	—	$	—		$	144	$	—	$	(161	)	$	—		$	—		$	—

Significant Unobservable Inputs Related to Level 3 Assets and Liabilities

Unobservable inputs and sensitivities

The following table presents information about significant unobservable inputs related to the Company's Level 3 financial assets and liabilities measured at fair value on a recurring and non-recurring basis as of August 31, 2012.
	Fair Value		Valuation Technique	Significant Unobservable Input	Ranges of Inputs
					Low		High
Interest rate lock commitments	$	17,414	Quantitative risk models	Loan funding probability	20	%	95	%
Forward delivery contracts	$	89	Quantitative risk models	Loan funding probability	28	%	99	%

Assets and Liabilities Not Required to be Carried at Fair Value on a Recurring Basis

The following table discloses the estimated fair value of the Company's financial assets and financial liabilities that are not required to be carried at fair value, as of August 31, 2012 (dollars in thousands):
	Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Total		Carrying Value
Balance at August 31, 2012
Assets
U.S Treasury securities	$	550	$	—	$	—	$	550	$	550
States and political subdivisions of states	—		35,174		—		35,174		35,242
Residential mortgage-backed securities - Agency	—		56,544		—		56,544		54,213
Held-to-maturity investment securities	$	550	$	91,718	$	—	$	92,268	$	90,005
Cash and cash equivalents	$	6,237,610	$	—	$	—	$	6,237,610	$	6,237,610
Restricted cash	$	301,349	$	—	$	—	$	301,349	$	301,349
Net loan receivables	$	—	$	—	$	59,047,925	$	59,047,925	$	57,469,848
Accrued interest receivables	$	—	$	486,798	$	—	$	486,798	$	486,798
Liabilities
Deposits	$	—	$	42,854,843	$	—	$	42,854,843	$	42,318,312
Short-term borrowings	$	—	$	250,139	$	—	$	250,139	$	250,139
Long-term borrowings - owed to securitization investors	$	—	$	15,365,667	$	2,405,139	$	17,770,806	$	17,337,914
Other long-term borrowings	$	—	$	2,358,219	$	1,797	$	2,360,016	$	1,908,199
Accrued interest payables	$	—	$	164,080	$	—	$	164,080	$	164,080

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Loan Receivables (Delinquent and Non-Accruing Loans) (Details) (USD $)	3 Months Ended		9 Months Ended
	Aug. 31, 2012		Aug. 31, 2012		Nov. 30, 2011
Financing Receivable, Recorded Investment, Past Due [Line Items]
Financing Receivable Recorded Investment 30 to 89 Days Past Due	$ 489,559,000		$ 489,559,000		$ 583,361,000	[1]
Financing Receivable, Recorded Investment, Equal to Greater than 90 Days Past Due	441,294,000	[2]	441,294,000	[2]	572,119,000	[1]
Financing Receivable, Recorded Investment, Past Due	930,853,000		930,853,000		1,155,480,000	[1]
Financing Receivable, Recorded Investment, 90 Days Past Due and Still Accruing	387,265,000		387,265,000		511,159,000	[1]
Financing Receivable, Recorded Investment, Nonaccrual Status	187,560,000	[2]	187,560,000	[2]	207,138,000	[1]
Estimated Gross Interest Income Based on Original Terms	7,800,000		24,500,000
Consumer Credit Card Financing Receivable [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Financing Receivable, Recorded Investment, Equal to Greater than 90 Days Past Due	31,800,000		31,800,000		37,900,000
Credit Card Receivable [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Financing Receivable Recorded Investment 30 to 89 Days Past Due	443,348,000		443,348,000		557,177,000
Financing Receivable, Recorded Investment, Equal to Greater than 90 Days Past Due	426,997,000		426,997,000		559,674,000
Financing Receivable, Recorded Investment, Past Due	870,345,000		870,345,000		1,116,851,000
Financing Receivable, Recorded Investment, 90 Days Past Due and Still Accruing	376,412,000		376,412,000		501,640,000
Financing Receivable, Recorded Investment, Nonaccrual Status	180,205,000	[2]	180,205,000	[2]	201,068,000
Credit Card Receivable [Member] | Discover Card [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Financing Receivable Recorded Investment 30 to 89 Days Past Due	441,545,000		441,545,000		554,354,000
Financing Receivable, Recorded Investment, Equal to Greater than 90 Days Past Due	424,514,000		424,514,000		556,126,000
Financing Receivable, Recorded Investment, Past Due	866,059,000		866,059,000		1,110,480,000
Financing Receivable, Recorded Investment, 90 Days Past Due and Still Accruing	374,035,000	[3]	374,035,000	[3]	498,305,000	[3]
Financing Receivable, Recorded Investment, Nonaccrual Status	179,716,000		179,716,000		200,208,000
Credit Card Receivable [Member] | Discover Business Card [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Financing Receivable Recorded Investment 30 to 89 Days Past Due	1,803,000		1,803,000		2,823,000
Financing Receivable, Recorded Investment, Equal to Greater than 90 Days Past Due	2,483,000		2,483,000		3,548,000
Financing Receivable, Recorded Investment, Past Due	4,286,000		4,286,000		6,371,000
Financing Receivable, Recorded Investment, 90 Days Past Due and Still Accruing	2,377,000		2,377,000		3,335,000
Financing Receivable, Recorded Investment, Nonaccrual Status	489,000		489,000		860,000
Total Other Loans [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Financing Receivable Recorded Investment 30 to 89 Days Past Due	46,211,000		46,211,000		26,184,000
Financing Receivable, Recorded Investment, Equal to Greater than 90 Days Past Due	14,297,000		14,297,000		12,445,000
Financing Receivable, Recorded Investment, Past Due	60,508,000		60,508,000		38,629,000
Financing Receivable, Recorded Investment, 90 Days Past Due and Still Accruing	10,853,000		10,853,000		9,519,000
Financing Receivable, Recorded Investment, Nonaccrual Status	7,355,000		7,355,000		6,070,000
Total Other Loans [Member] | Personal Loans [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Financing Receivable Recorded Investment 30 to 89 Days Past Due	16,395,000		16,395,000		15,604,000
Financing Receivable, Recorded Investment, Equal to Greater than 90 Days Past Due	6,784,000		6,784,000		7,362,000
Financing Receivable, Recorded Investment, Past Due	23,179,000		23,179,000		22,966,000
Financing Receivable, Recorded Investment, 90 Days Past Due and Still Accruing	6,021,000		6,021,000		6,636,000
Financing Receivable, Recorded Investment, Nonaccrual Status	4,229,000		4,229,000		3,628,000
Total Other Loans [Member] | Private Student Loans (Excluding PCI) [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Financing Receivable Recorded Investment 30 to 89 Days Past Due	29,314,000		29,314,000		10,073,000
Financing Receivable, Recorded Investment, Equal to Greater than 90 Days Past Due	5,876,000		5,876,000		2,992,000
Financing Receivable, Recorded Investment, Past Due	35,190,000		35,190,000		13,065,000
Financing Receivable, Recorded Investment, 90 Days Past Due and Still Accruing	4,832,000		4,832,000		2,883,000
Financing Receivable, Recorded Investment, Nonaccrual Status	1,237,000		1,237,000		125,000
Total Other Loans [Member] | Other Loans [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Financing Receivable Recorded Investment 30 to 89 Days Past Due	502,000		502,000		507,000	[1]
Financing Receivable, Recorded Investment, Equal to Greater than 90 Days Past Due	1,637,000		1,637,000		2,091,000	[1]
Financing Receivable, Recorded Investment, Past Due	2,139,000		2,139,000		2,598,000	[1]
Financing Receivable, Recorded Investment, 90 Days Past Due and Still Accruing	0		0		0	[1]
Financing Receivable, Recorded Investment, Nonaccrual Status	$ 1,889,000		$ 1,889,000		$ 2,317,000	[1]

[1]

[2] The Company estimates that the gross interest income that would have been recorded in accordance with the original terms of these credit card loans was $7.8 million and $24.5 million for the three and nine months ended August 31, 2012, respectively. The Company does not separately track the amount of gross interest income that would have been recorded in accordance with the original terms of loans. These amounts were estimated based on customers' current balances and most recent rates.

[3] Consumer credit card loans that are 90 or more days delinquent and accruing interest include $31.8 million and $37.9 million of loans accounted for as troubled debt restructurings at August 31, 2012 and November 30, 2011, respectively.

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Credit Card and Student Loan Securitization Activities (Investors' Interests and Related Excess Spreads) (Details) (USD $) In Thousands, unless otherwise specified	9 Months Ended
	Aug. 31, 2012
Investors Interests	19,873,825	[1]
Number of Series Outstanding	41
Group Excess Spread Percentage [Member]
Three Month Rolling Average Excess Spread Percentage	13.41%	[2]
Discover Series Excess Spread Percentage [Member]
Three Month Rolling Average Excess Spread Percentage	13.32%	[2]
Discover Card Master Trust I [Member]
Investors Interests	2,288,598	[1]
Number of Series Outstanding	4
Discover Card Execution Note Trust (DiscoverSeries Notes) [Member]
Investors Interests	17,585,227	[1]
Number of Series Outstanding	37

[1] Investors’ interests include third-party interests and subordinated interests held by wholly-owned subsidiaries of Discover Bank.

[2] DCMT certificates refer to the higher of the Group excess spread or their applicable series excess spread (not shown) and DiscoverSeries notes refer to the higher of the Group or DiscoverSeries excess spread in assessing whether an economic early amortization has been triggered.

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Loan Receivables (Contractually Required Payments Receivable, Cash Flows Expected to be Collected and Fair Value as of the Acquisition Date) (Details) (USD $) In Millions, unless otherwise specified	Aug. 31, 2012	May 31, 2012	Nov. 30, 2011	Sep. 30, 2011		Aug. 31, 2011	May 31, 2011	Dec. 31, 2010		Nov. 30, 2010
Loans and Leases Receivable Disclosure [Abstract]
Contractually required payments receivable				$ 3,861	[1]			$ 5,673	[1]
Less: Non-accretable difference				(573)	[2]			(683)	[2]
Cash flows expected to be collected				3,288				4,990
Less: Accretable yield	2,225	2,313	2,580	(855)	[3]	1,718	1,772	(1,920)	[3]	0
Fair value of loans acquired				$ 2,433				$ 3,070

[1] Amount represents principal and interest payments, both currently due and due in the future, adjusted for the effect of estimated prepayments.

[2] Charge-offs on acquired loans will be written off against non-accretable difference.

[3] Amount accreted into interest income over the estimated lives of the acquired loans.

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Investment Securities (Schedule of Fair Value, Amortized Cost, Gross Unrealized Gains and Gross Unrealized Losses) (Details) (USD $) In Thousands, unless otherwise specified	Aug. 31, 2012		Nov. 30, 2011
Available-for-sale securities, amortized cost	$ 6,250,126	[1]	$ 6,019,927	[1]
Available-for-sale securities, gross unrealized gains	127,376	[1]	89,132	[1]
Available-for-sale securities, gross unrealized losses	0	[1]	(1,228)	[1]
Available-for-sale investment securities, fair value	6,377,502	[1]	6,107,831	[1]
Held-to-maturity investment securities, amortized cost	90,005	[2]	98,222	[2]
Held-to-maturity securities, gross unrealized gains	2,565	[2]	847	[2]
Held-to-maturity securities, gross unrealized losses	(302)	[2]	(3,027)	[2]
Held-to-maturity, fair value	92,268	[2]	96,042	[2]
U.S. Treasury Securities [Member]
Available-for-sale securities, amortized cost	2,417,773	[1]	2,516,008	[1]
Available-for-sale securities, gross unrealized gains	53,125	[1]	47,242	[1]
Available-for-sale securities, gross unrealized losses	0	[1]	0	[1]
Available-for-sale investment securities, fair value	2,470,898	[1]	2,563,250	[1]
Held-to-maturity investment securities, amortized cost	550	[2],[3]	550	[2],[3]
Held-to-maturity securities, gross unrealized gains	0	[2],[3]	0	[2],[3]
Held-to-maturity securities, gross unrealized losses	0	[2],[3]	0	[2],[3]
Held-to-maturity, fair value	550	[2],[3]	550	[2],[3]
U.S. Government Agency Securities [Member]
Available-for-sale securities, amortized cost	2,267,348	[1]	2,762,265	[1]
Available-for-sale securities, gross unrealized gains	51,937	[1]	34,166	[1]
Available-for-sale securities, gross unrealized losses	0	[1]	(1,208)	[1]
Available-for-sale investment securities, fair value	2,319,285	[1]	2,795,223	[1]
States and Political Subdivisions of States [Member]
Held-to-maturity investment securities, amortized cost	35,242	[2]	40,936	[2]
Held-to-maturity securities, gross unrealized gains	234	[2]	197	[2]
Held-to-maturity securities, gross unrealized losses	(302)	[2]	(2,823)	[2]
Held-to-maturity, fair value	35,174	[2]	38,310	[2]
Credit Card Asset-Backed Securities of Other Issuers [Member]
Available-for-sale securities, amortized cost	161,386	[1]	293,231	[1]
Available-for-sale securities, gross unrealized gains	2,908	[1]	6,658	[1]
Available-for-sale securities, gross unrealized losses	0	[1]	0	[1]
Available-for-sale investment securities, fair value	164,294	[1]	299,889	[1]
Corporate Debt Securities [Member]
Available-for-sale securities, amortized cost	145,396	[1]	448,423	[1]
Available-for-sale securities, gross unrealized gains	133	[1]	1,066	[1]
Available-for-sale securities, gross unrealized losses	0	[1]	(20)	[1]
Available-for-sale investment securities, fair value	145,529	[1]	449,469	[1]
Agency Residential Mortgage-Backed Securities [Member]
Available-for-sale securities, amortized cost	1,258,223	[1]
Available-for-sale securities, gross unrealized gains	19,273	[1]
Available-for-sale securities, gross unrealized losses	0	[1]
Available-for-sale investment securities, fair value	1,277,496	[1]
Held-to-maturity investment securities, amortized cost	54,213	[2],[4]	6,482	[2],[4]
Held-to-maturity securities, gross unrealized gains	2,331	[2],[4]	650	[2],[4]
Held-to-maturity securities, gross unrealized losses	0	[2],[4]	0	[2],[4]
Held-to-maturity, fair value	56,544	[2],[4]	7,132	[2],[4]
To-be-announced investment securities [Member]
Held-to-maturity investment securities, amortized cost			50,254	[2]
Held-to-maturity securities, gross unrealized gains			0	[2]
Held-to-maturity securities, gross unrealized losses			(204)	[2]
Held-to-maturity, fair value			$ 50,050	[2]

[1] Available-for-sale investment securities are reported at fair value.

[2] Held-to-maturity investment securities are reported at amortized cost.

[3] Amount represents securities pledged as collateral to a government-related merchant for which transaction settlement occurs beyond the normal 24-hour period.

[4] Amounts represent residential mortgage-backed securities that were classified as held-to-maturity as they were entered into as a part of the Company's community reinvestment initiatives.

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Business Combinations

9 Months Ended

Aug. 31, 2012

Business Combinations [Abstract]

Business Combinations

Business Combinations

Acquisition of the net assets of the Home Loan Center, Inc. On June 6, 2012, through its Discover Home Loans, Inc. subsidiary, the Company acquired substantially all of the operating and related assets and certain liabilities of Home Loan Center, Inc. ("Home Loan Center"), a subsidiary of Tree.com, Inc., adding a residential mortgage lending component to the Company's direct banking business. In exchange for the net assets acquired, the Company paid an aggregate of $48.9 million, including payments made prior to the closing that were applied to the closing price. A portion of such amount is being held in escrow pending the Home Loan Center's ability to discharge certain contingent liabilities related to loans previously sold to secondary market investors. These contingent liabilities were not assumed by the Company. An additional $10.0 million of purchase price will be due from the Company on the first anniversary of the closing, subject to certain conditions being satisfied. The Company is finalizing its valuation analysis of assets acquired and liabilities assumed. The acquisition did not have a significant impact for the three or nine months ended August 31, 2012 on the Company's consolidated financial condition, results of operations or cash flows or on the Direct Banking reportable segment in which it is included.

Acquisition of The Student Loan Corporation. On December 31, 2010, the Company acquired The Student Loan Corporation (“SLC”), which is now a wholly-owned subsidiary of Discover Bank and included in the Company’s Direct Banking segment. The Company acquired SLC’s ongoing private student loan business, which includes certain private student loans held in three securitization trusts and other assets, and assumed SLC’s asset-backed securitization debt incurred by those trusts and other liabilities. The acquired loans are considered to be purchased credit-impaired ("PCI") loans for accounting purposes, the details of which are discussed further in Note 4: Loan Receivables. The acquisition significantly increased the size of the Company’s private student loan portfolio. In addition, the acquisition has provided the Company with a developed student loan business platform, additional school relationships and SLC’s website. Since the acquisition date, the results of operations and cash flows of SLC have been included in the Company’s condensed consolidated results of operations and cash flows. Pro forma data is not provided as the impact of the SLC acquisition was not significant to the Company’s condensed consolidated results of operations or cash flows.

Net cash consideration paid. The following table provides a calculation of the amount paid by the Company for SLC based on the net assets of the SLC securitization trusts acquired after applying an 8.5% discount to the trust assets (the “Trust Certificate Purchase Price”) (dollars in millions):
	Actual
Gross trust assets	$	3,977
Less: 8.5% discount	(338		)
Net trust assets	3,639
Less: Principal amount of and accrued interest on trust debt	(3,193		)
Trust Certificate Purchase Price	$	446

Although the Company paid SLC shareholders $600 million for the acquisition of SLC (“Aggregate Merger Consideration”), the Company received a purchase price adjustment from Citibank, N.A. (“Citibank”) equivalent to the amount by which the Aggregate Merger Consideration exceeded the value of the Trust Certificate Purchase Price. In addition, Citibank agreed to adjust the cash consideration paid by the Company to compensate it for (i) agreeing to commute certain insurance policies covering certain of the loans acquired and (ii) the value of non-trust related liabilities assumed by the Company. The following table provides a summary of total consideration paid by Discover including post-closing adjustments (dollars in millions):
	Actual
Aggregate Merger Consideration	$	600
Less: Purchase price adjustment	(154		)
Trust Certificate Purchase Price	446
Less: Further adjustments provided for by Citibank
Cash received for consent to insurance commutation	(16		)
Cash received related to reimbursable liabilities	(29		)
Net cash consideration paid	$	401

Net assets acquired. The Company acquired net assets (including $155 million of cash) with an aggregate fair value of $563 million in exchange for cash consideration of $556 million, resulting in the recognition of a bargain purchase gain of approximately $7 million. The bargain purchase gain primarily resulted from Citibank’s adjustment of the cash consideration to be paid by the Company in exchange for the Company’s consent to permit SLC to commute, immediately prior to the acquisition, certain student loan insurance policies covering loans in one of the three trusts. The bargain purchase gain is recorded in other income on the Company’s condensed consolidated statement of income. During the fourth quarter of 2011, the Company finalized its purchase accounting, which resulted in a decrease of $27 million in the indemnification asset and a $19 million increase in student loan receivables. In addition, there were immaterial changes made to the other assets purchased and liabilities assumed. These adjustments reflect the Company's finalized cash flow projections related to the student loans acquired. The offset to these adjustments resulted in a $9 million reduction in the originally estimated bargain purchase gain of $16 million.

The following table summarizes the fair values of the assets acquired and liabilities assumed at the date of the SLC acquisition (dollars in thousands):
	At December 31, 2010
Student loan receivables	$	3,070,042
Cash	155,347
Indemnification asset	74,571
Student relationships intangible	2,400
Trade name intangible	3,800
Total intangible assets	6,200
Other assets	217,441
Total assets acquired	3,523,601
Securitized debt	2,921,372
Other liabilities	38,889
Total liabilities assumed	2,960,261
Net assets acquired	$	563,340

The Company acquired $6.2 million in identifiable intangible assets. These intangible assets consist of student relationships and trade name intangibles. Acquired student relationships consist of those relationships in existence between SLC and the numerous students that carry student loan balances. This intangible asset is deemed to have a finite useful life of 5 years and will be amortized over this period. Trade name intangibles relate to trademarks, trade names and internet domains and content. This intangible asset is deemed to have an indefinite useful life and therefore is not subject to amortization.

The Company also recorded a $75 million indemnification asset. This asset reflects the discounted present value of payments expected to be received under Citibank’s indemnification of student loan credit losses that would have been recoverable under certain student loan insurance policies which, as noted above, were commuted pursuant to an agreement entered into by SLC with the Company’s consent immediately prior to the acquisition. The indemnification pertains only to loans in one of the three SLC securitization trusts that the Company acquired, namely the SLC Private Student Loan Trust 2010-A (“SLC 2010-A”). The SLC 2010-A trust included loans with an aggregate outstanding principal balance of $1.2 billion at the time of acquisition; outstanding loans in that trust totaled $1 billion as of August 31, 2012. The initial value of the indemnification asset was based on the amount of projected credit losses expected to be reimbursed by Citibank. Under the terms of the indemnification agreement with Citibank, indemnification payments related to student loan credit losses are subject to an overall cap of $166.8 million, consistent with the terms of the insurance policies which the indemnification serves to replace.

The subsequent accounting for the indemnification asset will generally reflect the manner in which the indemnified loans are subsequently measured. The value of the indemnification asset will increase or decrease as expected credit losses on the PCI student loans increase or decrease, respectively. An increase in expected losses on PCI student loans that results in the immediate recognition of an allowance for loan losses will result in an immediate increase in the indemnification asset. A decrease in expected losses that results in an immediate reversal of a previously recognized loan loss allowance will result in the immediate reduction of the indemnification asset. Recognition of an allowance for loan losses on PCI student loans is discussed in more detail within Note 4: Loan Receivables under “Purchased Credit-Impaired Loans.” To the extent that a decrease in expected losses results in a prospective increase in the accretable yield on PCI student loans rather than an immediate reduction of the loan loss allowance, the value of the indemnification asset will be adjusted prospectively through a reduction in the rate of amortization. Amortization and valuation adjustments to the indemnification asset are recorded through other income on the condensed consolidated statement of income.

XML

Loan Receivables (Changes in Accretable Yield for the Acquired Loans) (Details) (USD $) In Millions, unless otherwise specified	3 Months Ended		9 Months Ended
	Aug. 31, 2012	Aug. 31, 2011	Aug. 31, 2012	Aug. 31, 2011	Sep. 30, 2011		Dec. 31, 2010
Certain Loans Acquired in Transfer Not Accounted for as Debt Securities, Accretable Yield Movement Schedule [Roll Forward]
Balance at beginning of period	$ 2,313	$ 1,772	$ 2,580	$ 0	$ (855)	[1]	$ (1,920)	[1]
Accretion into interest income	(75)	(54)	(229)	(149)
Other changes in expected cash flows	(13)	0	(126)	91
Balance at end of period	2,225	1,718	2,225	1,718	(855)	[1]	(1,920)	[1]
Initial Acquisition of Loans [Member]
Certain Loans Acquired in Transfer Not Accounted for as Debt Securities, Accretable Yield Movement Schedule [Roll Forward]
Acquisition of the Student Loan Corporation	$ 0	$ 0	$ 0	$ 1,776

[1] Amount accreted into interest income over the estimated lives of the acquired loans.

XML

Business Combinations (Summary of Total Consideration Paid) (Details) (USD $)	9 Months Ended		12 Months Ended
	Aug. 31, 2012	Aug. 31, 2011	Nov. 30, 2011 Student Loan Corporation [Member]
Aggregate Merger Consideration			$ 600,000,000
Less: Purchase Price Adjustment			(154,000,000)
Trust certificate purchase price			446,000,000
Less: Cash received for consent to insurance commutation			(16,000,000)
Less: Cash received related to reimbursable liabilities			(29,000,000)
Net cash consideration paid	$ 0	$ 401,158,000	$ 401,000,000

XML

Credit Card and Student Loan Securitization Activities (Tables)

9 Months Ended

Aug. 31, 2012

Transfers and Servicing of Financial Assets [Abstract]

Schedule Of Restricted Credit Card Securitized Assets [Text Block]

Upon transfer of credit card loan receivables to the trust, the receivables and certain cash flows derived from them become restricted for use in meeting obligations to the trusts’ creditors. The trusts have ownership of cash balances that also have restrictions, the amounts of which are reported in restricted cash. Investment of trust cash balances is limited to investments that are permitted under the governing documents of the trusts and which have maturities no later than the related date on which funds must be made available for distribution to trust investors. With the exception of the seller’s interest in trust receivables, the Company’s interests in trust assets are generally subordinate to the interests of third-party investors and, as such, may not be realized by the Company if needed to absorb deficiencies in cash flows that are allocated to the investors in the trusts’ debt. The carrying values of these restricted assets, which are presented on the Company’s condensed consolidated statement of financial condition as relating to securitization activities, are shown in the table below (dollars in thousands):
	August 31, 2012			November 30, 2011
Cash collateral accounts	$	147,632		$	187,105
Collections and interest funding accounts	63,140			977,195
Restricted cash	210,772			1,164,300
Investors’ interests held by third-party investors	15,068,423			13,294,739
Investors’ interests held by wholly owned subsidiaries of Discover Bank	4,805,402			5,157,536
Seller’s interest	13,643,757			15,363,585
Loan receivables (1)	33,517,582			33,815,860
Allowance for loan losses allocated to securitized loan receivables (1)	(1,074,058		)	(1,510,730		)
Net loan receivables	32,443,524			32,305,130
Other	33,123			26,506
Carrying value of assets of consolidated variable interest entities	$	32,687,419		$	33,495,936

 ____________________

(1) The Company maintains its allowance for loan losses at an amount sufficient to absorb probable losses inherent in all loan receivables, which includes all loan receivables in the trusts. Therefore, credit risk associated with the transferred receivables is fully reflected on the Company’s balance sheet in accordance with GAAP.

Investors' Interests and Related Excess Spreads

The tables below provide information concerning investors’ interests and related excess spreads at August 31, 2012 (dollars in thousands):
	Investors’ Interests(1)		# of Series Outstanding
Discover Card Master Trust I	$	2,288,598	4
Discover Card Execution Note Trust (DiscoverSeries notes)	17,585,227		37
Total investors’ interests	$	19,873,825	41

____________________ 

(1) Investors’ interests include third-party interests and subordinated interests held by wholly-owned subsidiaries of Discover Bank.

	3-Month Rolling Average Excess Spread(1)
Group excess spread percentage	13.41	%
DiscoverSeries excess spread percentage	13.32	%

 ____________________

(1) DCMT certificates refer to the higher of the Group excess spread or their applicable series excess spread (not shown) and DiscoverSeries notes refer to the higher of the Group or DiscoverSeries excess spread in assessing whether an economic early amortization has been triggered.

Schedule Of Restricted Student Loan Securitized Assets [Text Block]

The carrying values of these restricted assets, which are presented on the Company’s condensed consolidated statement of financial condition as relating to securitization activities, are shown in the table below (dollars in thousands):
	August 31, 2012		November 30, 2011
Restricted cash	$	84,667	$	109,875
Student loan receivables	2,631,970		2,839,871
Other assets	515		7,218
Carrying value of assets of consolidated variable interest entities	$	2,717,152	$	2,956,964

XML

Loan Receivables (Tables)

9 Months Ended

Aug. 31, 2012

Loans and Leases Receivable Disclosure [Abstract]

Loan Receivables

____________________________

(1) Amount represents federal student loans. At November 30, 2011, $446.6 million of federal student loan receivables were pledged as collateral against a long-term borrowing. During first quarter 2012, Discover Bank sold these loans and recorded a loss of $518 thousand. As a part of this transaction, the related borrowings were assumed by the purchaser.

(2) All mortgage loans held for sale are pledged as collateral against the warehouse line of credit used to fund consumer residential loans. See Note 7: Borrowings.

(3) Amounts include $19.9 billion and $18.5 billion underlying investors’ interest in trust debt at August 31, 2012 and November 30, 2011, respectively, and $13.6 billion and $15.4 billion in seller’s interest at August 31, 2012 and November 30, 2011, respectively. See Note 5: Credit Card and Student Loan Securitization Activities for further information.

(4) Amounts include $2.6 billion and $2.8 billion of loans pledged as collateral against the notes issued from the SLC securitization trusts at August 31, 2012 and November 30, 2011, respectively. See Note 5: Credit Card and Student Loan Securitization Activities. Of the remaining $2.3 billion and $2.5 billion at August 31, 2012 and November 30, 2011, respectively, that were not pledged as collateral, approximately $14.7 million and $12.8 million represent loans eligible for reimbursement through an indemnification claim. Discover Bank must purchase such loans from the trust before a claim may be filed.

Cr

Delinquent and Non-Accruing Loans

______________________ 

(1) Consumer credit card loans that are 90 or more days delinquent and accruing interest include $31.8 million and $37.9 million of loans accounted for as troubled debt restructurings at August 31, 2012 and November 30, 2011, respectively.

(2) The Company estimates that the gross interest income that would have been recorded in accordance with the original terms of these credit card loans was $7.8 million and $24.5 million for the three and nine months ended August 31, 2012, respectively. The Company does not separately track the amount of gross interest income that would have been recorded in accordance with the original terms of loans. These amounts were estimated based on customers' current balances and most recent rates.

Company's Net Charge-offs

As part of credit risk management activities, on an ongoing basis the Company reviews information related to the performance of a customer’s account with the Company as well as information from credit bureaus, such as a FICO or other credit scores, relating to the customer’s broader credit performance. Credit scores are generally obtained at origination of the account and are refreshed monthly or quarterly thereafter to assist in predicting customer behavior.  Historically, the Company has noted that a significant proportion of delinquent accounts have FICO scores below 660. The following table provides FICO scores available for the Company’s customers as a percentage of each class of loan receivables:
	August 31, 2012				November 30, 2011
	660 and Above		Less than 660 or No Score		660 and Above		Less than 660 or No Score
Discover card	83	%	17	%	81	%	19	%
Discover business card	91	%	9	%	89	%	11	%
Personal loans	97	%	3	%	97	%	3	%
Private student loans (excluding PCI)(1)	95	%	5	%	95	%	5	%

Credit Risk Profile by FICO Score

____________________

(1) PCI loans are discussed under the heading "Purchased Credit-Impaired Loans."

Changes in the Company's Allowance for Loan Losses

e following table provides changes in the Company’s allowance for loan losses for the three and nine months ended August 31, 2012 and 2011 (dollars in thousands):

	For the Three Months Ended August 31,						For the Nine Months Ended August 31,
	2012			2011			2012			2011
Balance at beginning of period	$	1,869,253		$	2,632,320		$	2,205,196		$	3,304,118
Additions:
Provision for loan losses	126,288			99,514			510,401			692,763
Deductions:
Charge-offs:
Discover card	(428,935		)	(584,534		)	(1,400,273		)	(2,085,452		)
Discover business card	(2,623		)	(4,416		)	(8,540		)	(17,672		)
Total credit card loans	(431,558		)	(588,950		)	(1,408,813		)	(2,103,124		)
Personal loans	(17,341		)	(16,458		)	(52,474		)	(52,438		)
Private student loans	(4,793		)	(2,663		)	(11,956		)	(5,646		)
Other	(22		)	(411		)	(194		)	(1,025		)
Total other loans	(22,156		)	(19,532		)	(64,624		)	(59,109		)
Total charge-offs	(453,714		)	(608,482		)	(1,473,437		)	(2,162,233		)
Recoveries:
Discover card	143,590			148,292			439,870			434,141
Discover business card	882			910			2,599			2,735
Total credit card loans	144,472			149,202			442,469			436,876
Personal loans	1,127			458			2,605			1,458
Private student loans	119			45			306			73
Other	119			1			124			3
Total other loans	1,365			504			3,035			1,534
Total recoveries	145,837			149,706			445,504			438,410
Net charge-offs	(307,877		)	(458,776		)	(1,027,933		)	(1,723,823		)
Balance at end of period	$	1,687,664		$	2,273,058		$	1,687,664		$	2,273,058

Net charge-offs of principal are recorded against the allowance for loan losses, as shown in the table above. Information regarding net charge-offs of interest and fee revenues on credit card and other loans is as follows (dollars in thousands):
	For the Three Months Ended August 31,				For the Nine Months Ended August 31,
	2012		2011		2012		2011
Interest accrued subsequently charged off, net of recoveries (recorded as a reduction of interest income)	$	76,942	$	128,329	$	272,345	$	480,044
Fees accrued subsequently charged off, net of recoveries (recorded as a reduction to other income)	$	14,845	$	22,807	$	52,503	$	86,762

Net Charge Offs of Interest and Fee Revenues on Loan Receivables

Allowance for Loan Losses and Recorded Investment in Loan Portfolio

following table provides additional detail of the Company’s allowance for loan losses and recorded investment in its loan portfolio (which excludes loans held for sale) by impairment methodology (dollars in thousands):

	Credit Card		Personal Loans		Student Loans		Other Loans		Total
At August 31, 2012
Allowance for loans evaluated for impairment as:
Collectively evaluated for impairment(1)	$	1,331,282	$	92,069	$	65,203	$	783	$	1,489,337
Troubled debt restructurings(2)	190,981		4,287		3,059		—		198,327
Purchased credit-impaired(3)	—		—		—		—		—
Total allowance for loan losses	$	1,522,263	$	96,356	$	68,262	$	783	$	1,687,664
Recorded investment in loans evaluated for impairment as:
Collectively evaluated for impairment(1)	$	47,007,109	$	3,098,013	$	2,740,212	$	26,829	$	52,872,163
Troubled debt restructurings(2)	1,117,359		16,395		12,503		—		1,146,257
Purchased credit-impaired(3)	—		—		4,867,010		—		4,867,010
Total recorded investment	$	48,124,468	$	3,114,408	$	7,619,725	$	26,829	$	58,885,430
At November 30, 2011
Allowance for loans evaluated for impairment as:
Collectively evaluated for impairment(1)	$	1,865,797	$	81,838	$	52,601	$	220	$	2,000,456
Troubled debt restructurings(2)	204,364		237		139		—		204,740
Purchased credit-impaired(3)	—		—		—		—		—
Total allowance for loan losses	$	2,070,161	$	82,075	$	52,740	$	220	$	2,205,196
Recorded investment in loans evaluated for impairment as:
Collectively evaluated for impairment(1)	$	45,421,887	$	2,640,416	$	2,063,562	$	16,690	$	50,142,555
Troubled debt restructurings(2)	1,216,738		7,635		5,439		—		1,229,812
Purchased credit-impaired(3)	—		—		5,250,388		—		5,250,388
Total recorded investment	$	46,638,625	$	2,648,051	$	7,319,389	$	16,690	$	56,622,755

 ____________________

(1) Represents loans evaluated for impairment in accordance with ASC 450-20, Loss Contingencies.

(2) Represents loans evaluated for impairment in accordance with ASC 310-40, Receivables, which consists of modified loans accounted for as troubled debt restructurings. The unpaid principal balance of credit card loans was $955.4 million and $1.0 billion at August 31, 2012 and November 30, 2011 respectively. The unpaid principal balance of personal loans was $16.1 million and $7.5 million at August 31, 2012 and November 30, 2011, respectively. The unpaid principal balance of student loans was $11.7 million and $5.4 million at August 31, 2012 and November 30, 2011, respectively. All loans accounted for as troubled debt restructurings have a related allowance for loan losses.

(3) Represents loans evaluated for impairment in accordance with ASC 310-30, Receivables-Loans and Debt Securities Acquired with Deteriorated Credit Quality.

Im

Loans in the Company's Temporary, Permanent and External Programs

	Average recorded investment in loans		Interest income recognized on impaired loans(1)		Gross interest income that would have been recorded with original terms(2)
For the Nine Months Ended August 31, 2012
Credit card loans
Modified credit card loans that have reverted to pre-modification payment terms(3)	$	248,118	$	35,456	N/A
Internal programs	$	564,650	$	13,162	$	54,922
External programs	$	618,120	$	39,905	$	6,396
Personal loans(4)	$	13,349	$	1,222	N/A
Student loans(4)	$	8,563	$	469	N/A
For the Nine Months Ended August 31, 2011
Credit card loans
Internal programs	$	534,479	$	16,660	$	47,950
External programs	$	727,113	$	46,974	$	7,535

____________________

(1) The Company does not separately track interest income on all of its loans modification programs. Amounts shown are estimated by applying an average interest rate to the average loans in the various modification programs.

(2) The Company does not separately track the amount of gross interest income that would have been recorded if the loans in modification programs had not been restructured and interest had instead been recorded in accordance with the original terms. Amounts shown are estimated by applying the difference between the average interest rate earned on non-impaired credit card loans and the average interest rate earned on loans in the modification programs to the average loans in the modification programs.

(3) This balance is considered impaired, but is excluded from the internal and external program amounts reflected in this table. Represents credit card loans that were modified in troubled debt restructurings but that have subsequently reverted back to the loans' pre-modification payment terms either due to noncompliance with the terms of the modification or successful completion of a temporary modification program.

(4) As interest rates for personal loan customers in modification programs and student loan customers that have been granted forbearance periods are rarely modified, gross interest income that would have been recorded with original terms is not significant.

I

Loans That Entered a Modification Program

Troubled Debt Restructurings That Subsequently Defaulted

___________________

(1) The outstanding balance upon default is the loan balance at the end of the month prior to default.

(2) A customer defaults from a modification program after two consecutive missed payments.

(3) Terms revert back to the pre-modification terms for customers who default from a temporary program and charging privileges remain revoked.

Of

Contractually Required Payments Receivable, Cash Flows Expected to be Collected and Fair Value as of the Acquisition Date

____________________

(1) Amount represents principal and interest payments, both currently due and due in the future, adjusted for the effect of estimated prepayments.

(2) Charge-offs on acquired loans will be written off against non-accretable difference.

(3) Amount accreted into interest income over the estimated lives of the acquired loans.

The following table shows contractually required payments receivable, cash flows expected to be collected and fair value of the additional private student loans acquired from Citibank for the loans acquired as of September 30, 2011 (dollars in millions):
	At September 30, 2011
Contractually required payments receivable (1)	$	3,861
Less: Non-accretable difference (2)	(573		)
Cash flows expected to be collected	3,288
Less: Accretable yield (3)	(855		)
Fair value of loans acquired	$	2,433

____________________

(1) Amount represents principal and interest payments, both currently due and due in the future, adjusted for the effect of estimated prepayments.

(2) Charge-offs on acquired loans will be written off against non-accretable difference.

(3) Amount to be accreted into interest income over the estimated lives of the acquired loans.

The following table provides changes in accretable yield for the acquired loans for the three and nine month periods ended August 31, 2012 and 2011 (dollars in millions):
	For the Three Months Ended August 31,						For the Nine Months Ended August 31,
	2012			2011			2012			2011
Balance at beginning of period	$	2,313		$	1,772		$	2,580		$	—
Acquisition of The Student Loan Corporation	—			—			—			1,776
Accretion into interest income	(75		)	(54		)	(229		)	(149		)
Other changes in expected cash flows	(13		)	—			(126		)	91
Balance at end of period	$	2,225		$	1,718		$	2,225		$	1,718

Changes in Accretable Yield for the Acquired Loans

u

Schedule of Initial Unpaid Principal Balance of Mortgage Loans Sold by Type [Table Text Block]

_

Schedule of Mortgage Loans Held for Sale [Table Text Block]

_

XML

Loan Receivables (Information Regarding Net Charge-offs of Interest and Fee Revenues on Credit Card Loans ) (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended		9 Months Ended
	Aug. 31, 2012	Aug. 31, 2011	Aug. 31, 2012	Aug. 31, 2011
Loans and Leases Receivable Disclosure [Abstract]
Interest and fees accrued subsequently charged off, net of recoveries (recorded as a reduction of interest income)	$ 76,942	$ 128,329	$ 272,345	$ 480,044
Fees accrued subsequently charged off, net of recoveries (recorded as a reduction to other income)	$ 14,845	$ 22,807	$ 52,503	$ 86,762

XML

Business Combinations (Fair Value of Assets Acquired and Liabilities Assumed) (Details) (USD $)	Sep. 30, 2011	Dec. 31, 2010
Fair Value of Student Loans Acquired	$ 2,433,000,000	$ 3,070,000,000
Student Loan Corporation [Member]
Business Combination, Recognized Identifiable Assets Acquired and Liabilities Assumed, Financial Assets		3,523,601,000
Business Combination, Recognized Identifiable Assets Acquired and Liabilities Assumed, Financial Liabilities		2,960,261,000
Net assets acquired		563,340,000
Student Loan Corporation [Member] | Loans Receivable [Member]
Fair Value of Student Loans Acquired		3,070,042,000
Student Loan Corporation [Member] | Cash [Member]
Business Combination, Recognized Identifiable Assets Acquired and Liabilities Assumed, Financial Assets		155,347,000
Student Loan Corporation [Member] | Indemnification Asset [Member]
Business Combination, Recognized Identifiable Assets Acquired and Liabilities Assumed, Financial Assets		74,571,000
Student Loan Corporation [Member] | Intangible Assets [Member]
Business Combination, Recognized Identifiable Assets Acquired and Liabilities Assumed, Financial Assets		6,200,000
Student Loan Corporation [Member] | Customer Relationships [Member]
Business Combination, Recognized Identifiable Assets Acquired and Liabilities Assumed, Financial Assets		2,400,000
Student Loan Corporation [Member] | Trade Names [Member]
Business Combination, Recognized Identifiable Assets Acquired and Liabilities Assumed, Financial Assets		3,800,000
Student Loan Corporation [Member] | Other Assets [Member]
Business Combination, Recognized Identifiable Assets Acquired and Liabilities Assumed, Financial Assets		217,441,000
Student Loan Corporation [Member] | Debt [Member]
Business Combination, Recognized Identifiable Assets Acquired and Liabilities Assumed, Financial Liabilities		2,921,372,000
Student Loan Corporation [Member] | Other Liabilities [Member]
Business Combination, Recognized Identifiable Assets Acquired and Liabilities Assumed, Financial Liabilities		$ 38,889,000

XML

Deposits (Tables)

9 Months Ended

Aug. 31, 2012

Deposits [Abstract]

Interest Bearing Deposit Accounts

A summary of interest-bearing deposit accounts is as follows (dollars in thousands):
	August 31, 2012			November 30, 2011
Certificates of deposit in amounts less than $100,000(1)	$	21,301,782		$	20,114,121
Certificates of deposit from amounts of $100,000(1)to less than $250,000(1)	5,352,917			5,290,405
Certificates of deposit in amounts of $250,000(1)or greater	1,216,105			1,189,779
Savings deposits, including money market deposit accounts	14,304,228			12,869,582
Total interest-bearing deposits	$	42,175,032		$	39,463,887
Average annual interest rate	2.00		%	2.57		%

____________________

(1) $100,000 represents the basic insurance amount previously covered by the FDIC. Effective July 21, 2010, the basic insurance per depositor was permanently increased to $250,000.

Deposit Maturities

At August 31, 2012, certificates of deposit maturing during the remainder of 2012, over each of the next four years, and thereafter were as follows (dollars in thousands):
Year	Amount
2012	$	3,367,953
2013	$	11,499,477
2014	$	5,454,427
2015	$	3,292,971
2016	$	1,825,914
Thereafter	$	2,430,062

XML

Borrowings (Tables)

9 Months Ended

Aug. 31, 2012

Debt Disclosure [Abstract]

Summary of the Company's Long-term Borrowings and Weighted Average Interest Rates

Long-term borrowings consist of borrowings and capital leases having original maturities of one year or more. The following table provides a summary of the Company’s long-term borrowings and weighted average interest rates on balances outstanding at period end (dollars in thousands):
	August 31, 2012				November 30, 2011
	Outstanding		Interest Rate		Outstanding		Interest Rate		Interest Rate Terms	Maturity
Securitized Debt
Fixed rate asset-backed securities
Principal value (including discount of $1,344)	$	4,548,656	2.87	%	$	1,748,742	5.65	%	Various fixed rates	Various June 2013— July 2019
Fair value adjustment(1)	7,965				—
Book value	4,556,621				1,748,742
Floating rate asset-backed securities	9,018,423		0.51	%	10,044,739		0.81	%	1-month LIBOR(2) + 8 to 65 basis points	Various December 2012— May 2017
Floating rate asset-backed securities	1,250,000		0.81	%	1,250,000		0.69	%	3-month LIBOR(2) + 34 basis points	December 2012
Floating rate asset-backed securities and other borrowings	250,000		0.91	%	250,000		0.91	%	Commercial Paper rate + 70 basis points	April 2013
Total Discover Card Master Trust I and Discover Card Execution Note Trust	15,075,044				13,293,481
Floating rate asset-backed securities (including discount of $188,798)	1,243,672		0.67	%	1,390,066		0.60	%	3-month LIBOR(2) + 12 to 45 basis points	Various January 2019— July 2036(3)
Floating rate asset-backed securities (including discount of $3,136)	558,316		4.25	%	627,072		4.25	%	Prime rate +100 basis points	June 2031(3)
Floating rate asset-backed securities (including premium of $2,139)	135,024		4.00	%	157,338		4.00	%	Prime rate + 75 basis points	July 2042(3)
Floating rate asset-backed securities (including premium of $5,162)	325,858		3.74	%	374,555		3.75	%	1-month LIBOR(2) + 350 basis points	July 2042(3)
Total SLC Private Student Loan Trusts	2,262,870				2,549,031
Total Long-Term Borrowings—owed to securitization investors	17,337,914				15,842,512
Discover Financial Services (Parent Company)
Fixed rate senior notes due 2017
Principal value (including discount of $390)	399,610		6.45	%	399,549		6.45	%	Fixed	June 2017
Fair value adjustment(1)	23,167				9,855
Book value	422,777				409,404
Fixed rate senior notes due 2019(4)	78,484		10.25	%	400,000		10.25	%	Fixed	July 2019
Fixed rate senior notes due 2022 (including discount of $112,303)(4)	209,213		5.20	%	—		—	%	Fixed	April 2022
Discover Bank
Subordinated bank notes due 2019 (including discount of $1,302)	698,698		8.70	%	698,563		8.70	%	Fixed	November 2019
Subordinated bank notes due 2020 (including discount of $2,641)	497,359		7.00	%	497,099		7.00	%	Fixed	April 2020
Floating rate secured borrowings(5)	—		—	%	437,613		0.70	%	Commercial Paper rate + 50 basis points	February 2012
Capital lease obligations	1,668		4.51	%	1,987		4.51	%	Fixed	April 2016
Total long-term borrowings	$	19,246,113			$	18,287,178

___________________

(1) The Company uses interest rate swaps to hedge portions of these long-term borrowings against changes in fair value attributable to changes in LIBOR. See Note 15: Derivatives and Hedging Activities.

(2) London Interbank Offered Rate (“LIBOR”).

(3) Repayment of this debt is dependent upon the timing of principal and interest payments on the underlying student loans. The dates shown represent final maturity dates.

(4) During second quarter 2012, the Company exchanged $321.5 million outstanding aggregate principal amount of 10.25% Senior Notes due 2019 for the same aggregate principal amount of new 5.20% Senior Notes due 2022 and a cash premium. The new 5.20% Senior Notes due 2022 are carried at a discount as a result of the cash premium paid.

(5) Under a program established by the U.S. Department of Education, this loan facility was entered into to fund certain federal student loans, which were held for sale at November 30, 2011. Upon sale of the loans during the first quarter 2012, this loan facility was assumed by the buyer.

Schedule of Maturities of Long-term Debt [Table Text Block]

Maturities. Long-term borrowings had the following maturities at August 31, 2012 (dollars in thousands):

Year	Amount
Due in 2012	$	109
Due in 2013	5,179,286
Due in 2014	3,789,941
Due in 2015	3,058,178
Due in 2016	400,177
Thereafter	6,818,422
Total	$	19,246,113

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Background and Basis of Presentation

9 Months Ended

Aug. 31, 2012

Organization, Consolidation and Presentation of Financial Statements [Abstract]

Background and Basis of Presentation

Background and Basis of Presentation

Description of Business. Discover Financial Services (“DFS” or the “Company”) is a direct banking and payment services company. The Company is a bank holding company under the Bank Holding Company Act of 1956 as well as a financial holding company under the Gramm-Leach-Bliley Act and therefore is subject to oversight, regulation and examination by the Board of Governors of the Federal Reserve System (the “Federal Reserve”). Through its Discover Bank subsidiary, a Delaware state-chartered bank, the Company offers its customers credit card loans, private student loans, personal loans, and deposit products. Through its Discover Home Loans, Inc. subsidiary, the Company offers its customers home loans. The majority of the Direct Banking revenues relate to interest income earned on each of its loan products. Through its DFS Services LLC subsidiary and its subsidiaries, the Company operates the Discover Network, the PULSE Network (“PULSE”), and Diners Club International (“Diners Club”). The Discover Network is a payment card transaction processing network for Discover card-branded and third-party issued credit, debit and prepaid cards. PULSE operates an electronic funds transfer network, providing financial institutions issuing debit cards on the PULSE network with access to ATMs domestically and internationally, as well as point of sale terminals at retail locations throughout the U.S. for debit card transactions. Diners Club is a global payments network of licensees, which are generally financial institutions, that issue Diners Club branded credit cards and/or provide card acceptance services.

The Company’s business segments are Direct Banking and Payment Services. The Direct Banking segment includes consumer banking and lending products which includes Discover card-branded credit cards issued to individuals and small businesses on the Discover Network and other consumer products and services, including home loans, personal loans, private student loans, prepaid cards and other consumer lending and deposit products. The Payment Services segment includes PULSE, Diners Club and the Company’s third-party issuing business, which includes credit, debit and prepaid cards issued on the Discover Network by third parties.

Basis of Presentation. The accompanying condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States (“GAAP”) for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by GAAP for complete consolidated financial statements. In the opinion of management, the financial statements reflect all adjustments which are necessary for a fair presentation of the results for the quarter. All such adjustments are of a normal, recurring nature. The preparation of financial statements in conformity with GAAP requires the Company to make estimates and assumptions that affect the amounts reported in the condensed consolidated financial statements and related disclosures. These estimates are based on information available as of the date of the condensed consolidated financial statements. The Company believes that the estimates used in the preparation of the condensed consolidated financial statements are reasonable. Actual results could differ from these estimates. These interim condensed consolidated financial statements should be read in conjunction with the Company’s 2011 audited consolidated financial statements filed with the Company’s annual report on Form 10-K for the fiscal year ended November 30, 2011.

Recently Issued Accounting Pronouncements. In July 2012, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update ("ASU") No. 2012-02, Intangibles-Goodwill and Other (Topic 350): Testing Indefinite-Lived Intangible Assets for Impairment. ASU 2012-02 applies to long-lived intangible assets, other than goodwill, that are not subject to amortization on the basis that they have indefinite useful lives. This standard is intended to simplify impairment testing by adding a qualitative review step to assess whether the required quantitative impairment analysis that exists today is necessary. Under the new standard, a company will not be required to calculate the fair value of the intangible asset unless it concludes, based on the qualitative assessment, that it is more likely than not that the fair value of that asset is less than its book value. If such a decline in fair value is deemed more likely than not to have occurred, then the quantitative impairment test that exists under current GAAP must be completed; otherwise, the asset is deemed to be not impaired and no further testing is required until the next annual test date (or sooner if conditions or events before that date raise concerns of potential impairment of the asset). The amended impairment guidance does not affect the manner in which fair value is determined. The new guidance is effective for annual and interim impairment tests performed for fiscal years beginning after September 15, 2012, with early adoption permitted. The Company's non-amortizable intangibles consist of $155 million in acquired trade names and other assets associated with Diners Club. The value of those assets will not be affected by the adoption of this standard.

In December 2011, the FASB issued ASU No. 2011-11, Balance Sheet (Topic 210): Disclosures about Offsetting Assets and Liabilities. ASU 2011-11 adds certain additional disclosure requirements about financial instruments and derivatives instruments that are subject to netting arrangements. The Company has master netting arrangements pertaining to collateral posting requirements with its interest rate swap counterparties, as more fully discussed in Note 15: Derivatives and Hedging Activities. Additional details about these positions and how they are reported will be disclosed. The new disclosures are required for annual reporting periods beginning on or after January 1, 2013, and interim periods within those periods. Because this amendment impacts disclosures only, it will have no effect on the Company's financial condition, results of operations or cash flows.

In September 2011, the FASB issued ASU No. 2011-08, Intangibles-Goodwill and Other (Topic 350): Testing Goodwill for Impairment. ASU 2011-08 is intended to simplify goodwill impairment testing by adding a qualitative review step to assess whether the required quantitative impairment analysis that exists today is necessary.Under the amended rule, a company will not be required to calculate the fair value of a business that contains recorded goodwill unless it concludes, based on the qualitative assessment, that it is more likely than not that the fair value of that business is less than its book value. If such a decline in fair value is deemed more likely than not to have occurred, then the quantitative goodwill impairment test that exists under current GAAP must be completed; otherwise, goodwill is deemed to be not impaired and no further testing is required until the next annual test date (or sooner if conditions or events before that date raise concerns of potential impairment in the business). The amended goodwill impairment guidance does not affect the manner in which a company estimates fair value. The new standard is effective for annual and interim goodwill impairment tests performed for fiscal years beginning after December 15, 2011, with early adoption permitted. The Company has $287 million in goodwill, which is associated with its PULSE Network and Discover Home Loans, Inc. The value of that goodwill will not be affected by the adoption of this standard.

In June 2011, the FASB issued ASU No. 2011-05, Comprehensive Income (Topic 220): Presentation of Comprehensive Income. This ASU will require companies to present the components of net income and other comprehensive income either as one continuous statement or as two consecutive statements. It eliminates the option to present components of other comprehensive income as part of the statement of changes in stockholders' equity. The standard does not change the items which must be reported in other comprehensive income, how such items are measured or when they must be reclassified to net income. The FASB subsequently deferred the effective date of certain provisions of this standard pertaining to the reclassification of items out of accumulated other comprehensive income, pending the issuance of further guidance on that matter. Because this ASU impacts presentation only, it had no effect on the Company's financial condition, results of operations or cash flows.

In May 2011, the FASB issued ASU No. 2011-04, Fair Value Measurement (Topic 820): Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRSs. This ASU is intended to result in convergence between U.S. GAAP and International Financial Reporting Standards (“IFRS”) requirements for measurement of and disclosures about fair value. The amendments are not expected to have a significant impact on companies applying U.S. GAAP. Key provisions of the amendment include: a prohibition on grouping financial instruments for purposes of determining fair value, except when an entity manages market and credit risks on the basis of the entity’s net exposure to the group; an extension of the prohibition against the use of a blockage factor to all fair value measurements (that prohibition previously applied only to financial instruments with quoted prices in active markets); and a requirement that for recurring Level 3 fair value measurements, entities disclose quantitative information about unobservable inputs, a description of the valuation process used and qualitative details about the sensitivity of the measurements. In addition, for items not carried at fair value but for which fair value is disclosed, entities will be required to disclose the level within the fair value hierarchy that applies to the fair value measurement disclosed. The adoption of this ASU did not have a significant impact on the Company’s fair value measurements, financial condition, results of operations or cash flows.

In April 2011, the FASB issued ASU No. 2011-03, Transfers and Servicing (Topic 860): Reconsideration of Effective Control for Repurchase Agreements. This ASU amends the sale accounting requirement concerning a transferor’s ability to repurchase transferred financial assets even in the event of default by the transferee, which typically is facilitated in a repurchase agreement by the presence of a collateral maintenance provision. Specifically, the level of cash collateral received by a transferor will no longer be relevant in determining whether a repurchase agreement constitutes a sale. As a result of this amendment, more repurchase agreements will be treated as secured financings rather than sales. This ASU became effective for the Company on March 1, 2012. Because essentially all repurchase agreements entered into by the Company have historically been deemed to constitute secured financing transactions, this amendment did not have an impact on the Company’s characterization of such transactions or on the Company's financial condition, results of operations or cash flows.

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Accumulated Other Comprehensive Income (Loss) Accumulated Other Comprehensive Income(Tables)

9 Months Ended

Aug. 31, 2012

Accumulated Other Comprehensive Income (Loss), Net of Tax [Abstract]

Schedule of Changes in Accumulated Other Comprehensive Income (Loss) [Table Text Block]

	Net Unrealized Gains on securities		Derivatives			Adjustments Related to Pension and Other Post Retirement Benefits			Accumulated Other Comprehensive Income (Loss)
For the Three Months Ended August 31, 2012
Balance at May 31, 2012	$	69,583	$	4,749		$	(115,348	)	$	(41,016	)
Unrealized gain on available-for-sale investment securities, net of tax expense of $5,988	9,931		—			—			9,931
Unrealized (loss) on cash flow hedges, net of tax benefit of $142	—		(241		)	—			(241		)
Balance at August 31, 2012	$	79,514	$	4,508		$	(115,348	)	$	(31,326	)
For the Three Months Ended August 31, 2011
Balance at May 31, 2011	$	24,648	$	1,647		$	(92,653	)	$	(66,358	)
Unrealized gain on available-for-sale investment securities, net of tax expense of $22,810	38,170		—			—			38,170
Unrealized gain on cash flow hedges, net of tax expense of $4,905	—		8,208			—			8,208
Unrealized pension and post retirement benefit (loss)	$	—	$	—		$	1		$	1
Balance at August 31, 2011	$	62,818	$	9,855		$	(92,652	)	$	(19,979	)
For the Nine Months Ended August 31, 2012
Balance at November 30, 2011	$	54,888	$	7,005		$	(113,572	)	$	(51,679	)
Unrealized gain on available-for-sale investment securities, net of tax expense of $14,849	24,626		—			—			24,626
Unrealized (loss) on cash flow hedges, net of tax benefit of $1,506	—		(2,497		)	—			(2,497		)
Unrealized pension and post retirement benefit (loss), net of tax benefit of $1,920	—		—			(1,776		)	(1,776		)
Balance at August 31, 2012	$	79,514	$	4,508		$	(115,348	)	$	(31,326	)
For the Nine Months Ended August 31, 2011
Balance at November 30, 2010	$	7,921	$	2,525		$	(92,994	)	$	(82,548	)
Unrealized gain on available-for-sale investment securities, net of tax expense of $32,806	54,897		—			—			54,897
Unrealized gain on cash flow hedges, net of tax expense of $4,381	—		7,330			—			7,330
Unrealized pension and post retirement benefit gain, net of tax expense of $202	—		—			342			342
Balance at August 31, 2011	$	62,818	$	9,855		$	(92,652	)	$	(19,979	)

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Commitments, Contingencies and Guarantees (Lease Commitments) (Details) (USD $) In Thousands, unless otherwise specified	Aug. 31, 2012
Capital Leases, Future Minimum Payments Due [Abstract]
2012, Capitalized Leases	$ 127
2013, Capitalized Leases	508
2014, Capitalized Leases	508
2015, Capitalized Leases	489
2016, Capitalized Leases	178
Thereafter, Capitalized Leases	0
Total Minimum Lease Payments, Capital Leases	1,810
Less: Amount Representing Interest, Capitalized Leases	142
Present Value of Net Minimum Lease Payments, Capitalized Leases	1,668
Operating Leases, Future Minimum Payments Due, Fiscal Year Maturity [Abstract]
2012, Operating Leases	4,093
2013, Operating Leases	14,906
2014, Operating Leases	13,088
2015, Operating Leases	9,316
2016, Operating Leases	8,348
Thereafter, Operating Leases	16,642
Total minimum lease payments, Operating Leases	$ 66,393

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Background and Basis of Presentation (Details) (USD $)	Aug. 31, 2012	Nov. 30, 2011
Goodwill	$ 287,043,000	$ 255,421,000
Diners Club [Member]
Indefinite-Lived Intangible Assets (Excluding Goodwill)	$ 155,000,000

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Loan Receivables (Company's Net Charge-offs) (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended		9 Months Ended
	Aug. 31, 2012	Aug. 31, 2011	Aug. 31, 2012	Aug. 31, 2011
Charge Offs [Line Items]
Net Charge-offs	$ 307,877	$ 458,776	$ 1,027,933	$ 1,723,823
Excluding PCI Loans [Member]
Charge Offs [Line Items]
Net Charge-offs	307,877	458,776	1,027,933	1,723,823
Net Charge-off Rate	2.32%	3.63%	2.63%	4.64%
Including PCI Loans [Member]
Charge Offs [Line Items]
Net Charge-offs	307,877	458,776	1,027,933	1,723,823
Net Charge-off Rate	2.12%	3.43%	2.39%	4.41%
Credit Card Receivable [Member] | Excluding PCI Loans [Member]
Charge Offs [Line Items]
Net Charge-offs	287,086	439,748	966,344	1,666,248
Net Charge-off Rate	2.43%	3.85%	2.76%	4.93%
Credit Card Receivable [Member] | Discover Card [Member] | Excluding PCI Loans [Member]
Charge Offs [Line Items]
Net Charge-offs	285,345	436,242	960,403	1,651,311
Net Charge-off Rate	2.42%	3.84%	2.76%	4.91%
Credit Card Receivable [Member] | Discover Business Card [Member] | Excluding PCI Loans [Member]
Charge Offs [Line Items]
Net Charge-offs	1,741	3,506	5,941	14,937
Net Charge-off Rate	3.34%	6.01%	3.75%	8.26%
Total Other Loans [Member] | Excluding PCI Loans [Member]
Charge Offs [Line Items]
Net Charge-offs	20,791	19,028	61,589	57,575
Net Charge-off Rate	1.45%	0.98%	1.48%	1.09%
Total Other Loans [Member] | Personal Loans [Member] | Excluding PCI Loans [Member]
Charge Offs [Line Items]
Net Charge-offs	16,214	16,000	49,869	50,980
Net Charge-off Rate	2.14%	2.73%	2.32%	3.19%
Total Other Loans [Member] | Private Student Loans (Excluding PCI) [Member] | Excluding PCI Loans [Member]
Charge Offs [Line Items]
Net Charge-offs	4,674	2,618	11,650	5,573
Net Charge-off Rate	0.73%	0.62%	0.64%	0.49%
Total Other Loans [Member] | Other Loans [Member] | Excluding PCI Loans [Member]
Charge Offs [Line Items]
Net Charge-offs	$ (97)	$ 410	$ 70	$ 1,022
Net Charge-off Rate	(0.26%)	13.41%	0.14%	10.35%

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Borrowings (Narrative) (Details) (USD $)	3 Months Ended	9 Months Ended			3 Months Ended						0 Months Ended										3 Months Ended		9 Months Ended			9 Months Ended
	Aug. 31, 2012	Aug. 31, 2012	Aug. 31, 2011	Nov. 30, 2011	May 31, 2012 Fixed Rate Senior Notes Due 2022 [Member]	May 31, 2012 Parent Company [Member] Fixed Rate Senior Notes Due 2019 [Member] Corporate Debt Securities [Member]	Aug. 31, 2012 Parent Company [Member] Fixed Rate Senior Notes Due 2019 [Member] Corporate Debt Securities [Member]		Nov. 30, 2011 Parent Company [Member] Fixed Rate Senior Notes Due 2019 [Member] Corporate Debt Securities [Member]		May 08, 2012 Parent Company [Member] Fixed Rate Senior Notes Due 2022 [Member] Corporate Debt Securities [Member]	Apr. 27, 2012 Parent Company [Member] Fixed Rate Senior Notes Due 2022 [Member] Corporate Debt Securities [Member]	Aug. 31, 2012 Parent Company [Member] Fixed Rate Senior Notes Due 2022 [Member] Corporate Debt Securities [Member]		Nov. 30, 2011 Parent Company [Member] Fixed Rate Senior Notes Due 2022 [Member] Corporate Debt Securities [Member]		Aug. 31, 2012 Discover Card Master Trust I and Discover Card Execution Note Trust [Member] Secured Debt [Member]	Nov. 30, 2011 Discover Card Master Trust I and Discover Card Execution Note Trust [Member] Secured Debt [Member]	Aug. 31, 2012 Discover Card Master Trust I and Discover Card Execution Note Trust [Member] Floating Rate Asset Backed Securities And Other Borrowings [Member] Secured Debt [Member]	Nov. 30, 2011 Discover Card Master Trust I and Discover Card Execution Note Trust [Member] Floating Rate Asset Backed Securities And Other Borrowings [Member] Secured Debt [Member]	Aug. 31, 2012 Discover Bank [Member] Federal Funds Purchased [Member]	Aug. 31, 2011 Discover Bank [Member] Federal Funds Purchased [Member]	Aug. 31, 2012 Discover Bank [Member] Federal Funds Purchased [Member]	Aug. 31, 2011 Discover Bank [Member] Federal Funds Purchased [Member]	Nov. 30, 2011 Discover Bank [Member] Federal Funds Purchased [Member]	Aug. 31, 2012 Discover Home Loans [Member] Warehouse Agreement Borrowings [Member]
Exchange of Debt, Amount						$ 321,500,000					$ 14,000,000	$ 307,500,000
Amortization of Premium Paid on Debt Exchange	1,600,000	2,200,000
Premium Paid on Debt Exchange		114,493,000	0		114,500,000
Total commitment of secured credit facilities																			7,500,000,000
Long-term borrowings	19,246,113,000	19,246,113,000		18,287,178,000			78,484,000	[1]	400,000,000	[1]			209,213,000	[1]	0	[1]	15,075,044,000	13,293,481,000	250,000,000	250,000,000
Line of Credit Facility, Maximum Borrowing Capacity																										300,000,000
Line of Credit Facility, Expiration Date																										May 24, 2013
Line of Credit Facility, Amount Outstanding																										250,100,000
Short Term Debt Weighted Average Interest Rate Period																					1.13%	0.06%	1.04%	0.11%
Short-term borrowings	$ 250,139,000	$ 250,139,000		$ 50,000,000																					$ 50,000,000

[1] During second quarter 2012, the Company exchanged $321.5 million outstanding aggregate principal amount of 10.25% Senior Notes due 2019 for the same aggregate principal amount of new 5.20% Senior Notes due 2022 and a cash premium. The new 5.20% Senior Notes due 2022 are carried at a discount as a result of the cash premium paid.

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Condensed Consolidated Statements of Financial Condition (USD $) In Thousands, unless otherwise specified	Aug. 31, 2012		Nov. 30, 2011
Available-for-sale Securities, Debt Maturities, Amortized Cost Basis	$ 6,250,126	[1]	$ 6,019,927	[1]
Assets
Cash and Cash Equivalents	6,237,610		2,849,843
Restricted cash	301,349		1,285,820
Other Short-term Investments	250		0
Investment securities:
Available-for-sale (amortized cost of $6,250,126 and $6,019,927 at August 31, 2012 and November 30, 2011, respectively)	6,377,502	[1]	6,107,831	[1]
Held-to-maturity (fair value of $92,268 and $96,042 at August 31, 2012 and November 30, 2011, respectively)	90,005	[2]	98,222	[2]
Total investments securities	6,467,507		6,206,053
Loan receivables:
Mortgage loans held for sale, measured at fair value	272,082		0
Student loans held for sale	0		714,180
Loan portfolio:
Credit card	48,124,468		46,638,625
Other	5,893,952		4,733,742
Purchased credit-impaired loans	4,867,010		5,250,388
Total loan portfolio	58,885,430		56,622,755
Total loan receivables	59,157,512		57,336,935
Allowance for loan losses	(1,687,664)		(2,205,196)
Net loan receivables	57,469,848		55,131,739
Premises and equipment, net	519,621		483,250
Goodwill	287,043		255,421
Intangible assets, net	192,181		188,018
Other assets	2,433,255		2,383,793
Total assets	73,908,664		68,783,937
Deposits:
Interest-bearing deposit accounts	42,175,032		39,463,887
Non-interest bearing deposit accounts	143,280		113,575
Total deposits	42,318,312		39,577,462
Short-term borrowings	250,139		50,000
Long-term borrowings	19,246,113		18,287,178
Accrued expenses and other liabilities	2,948,187		2,627,086
Total liabilities	64,762,751		60,541,726
Commitments, contingencies and guarantees (Notes 9, 12 and 13)
Stockholders' Equity:
Common stock, par value $.01 per share; 2,000,000,000 shares authorized; 552,572,624 and 549,748,783 shares issued at August 31, 2012 and November 30, 2011, respectively	5,526		5,497
Additional paid-in capital	3,570,371		3,507,754
Retained earnings	6,877,990		5,243,318
Accumulated other comprehensive loss	(31,326)		(51,679)
Treasury stock, at cost; 45,086,760 and 20,918,354 shares at August 31, 2012 and November 30, 2011, respectively	(1,276,648)		(462,679)
Total stockholders' equity	9,145,913		8,242,211
Total liabilities and stockholders' equity	73,908,664		68,783,937
Variable Interest Entity, Primary Beneficiary [Member]
Assets
Restricted cash	295,439		1,274,175
Loan portfolio:
Other assets	33,638		33,724
Deposits:
Long-term borrowings	17,337,914		15,842,512
Accrued expenses and other liabilities	13,906		13,184
Variable Interest Entity, Primary Beneficiary [Member] | Credit Card Securitization Trusts [Member]
Assets
Restricted cash	210,772		1,164,300
Loan portfolio:
Credit card	33,517,582	[3]	33,815,860	[3]
Allowance for loan losses	(1,074,058)	[3]	(1,510,730)	[3]
Other assets	33,123		26,506
Variable Interest Entity, Primary Beneficiary [Member] | Student Loan Securitization Trusts [Member]
Assets
Restricted cash	84,667		109,875
Loan portfolio:
Purchased credit-impaired loans	2,631,970		2,839,871
Other assets	$ 515		$ 7,218

[1] Available-for-sale investment securities are reported at fair value.

[2] Held-to-maturity investment securities are reported at amortized cost.

[3] The Company maintains its allowance for loan losses at an amount sufficient to absorb probable losses inherent in all loan receivables, which includes all loan receivables in the trusts. Therefore, credit risk associated with the transferred receivables is fully reflected on the Company’s balance sheet in accordance with GAAP.

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Investment Securities (Narrative) (Details) (USD $)	3 Months Ended		9 Months Ended				3 Months Ended		9 Months Ended
	Aug. 31, 2012	Aug. 31, 2011	Aug. 31, 2012	Aug. 31, 2011	Aug. 31, 2012 Community Reinvestment Act [Member]	Nov. 30, 2011 Community Reinvestment Act [Member]	Aug. 31, 2012 Available-for-sale Securities [Member]	Aug. 31, 2011 Available-for-sale Securities [Member]	Aug. 31, 2012 Available-for-sale Securities [Member]	Aug. 31, 2011 Available-for-sale Securities [Member]	Aug. 31, 2011 Other Debt and Equity Securities [Member]	Aug. 31, 2012 States and Political Subdivisions of States [Member]	Nov. 30, 2011 States and Political Subdivisions of States [Member]
Proceeds related to maturities or redemptions of investment securities	$ 473,700,000	$ 170,500,000	$ 1,600,000,000	$ 803,900,000			$ 0	$ 0	$ 0	$ 161,000
Available-for-sale Securities, Gross Realized Gain (Loss)											146,000
Unrealized losses on available-for-sale investment securities, pre tax	15,900,000	61,000,000	39,500,000	87,700,000
Unrealized losses on available-for-sale investment securities, net of tax	9,900,000	38,200,000	24,600,000	54,900,000
Held-to-maturity Securities, Continuous Unrealized Loss Position, 12 Months or Longer, Aggregate Losses												302,000	2,777,000
Equity Method Investments					194,800,000	137,900,000
Loss Contingency Accrual, at Carrying Value					$ 52,600,000	$ 6,300,000

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Segment Disclosures Segment Disclosures (Narrative) (Details)	9 Months Ended
	Aug. 31, 2012 segment
Segment Reporting [Abstract]
Number Of Reportable Segments	2

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Condensed Consolidated Statements of Changes in Stockholders' Equity (USD $) In Thousands, unless otherwise specified	Total	Common Stock [Member]	Additional Paid-in Capital [Member]	Retained Earnings [Member]	Accumulated Other Comprehensive Income (Loss) [Member]	Treasury Stock [Member]
Beginning Balance at Nov. 30, 2010	$ 6,456,846	$ 5,471	$ 3,435,318	$ 3,126,488	$ (82,548)	$ (27,883)
Common Stock, Shares, Outstanding - Beginning of period at Nov. 30, 2010		547,128
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Net income	1,714,129			1,714,129
Other comprehensive income	62,569				62,569
Purchases of treasury stock	(207,560)					(207,560)
Common stock issued under employee benefit plans (in shares)		40
Common stock issued under employee benefit plans	906	0	906
Common stock issued and stock-based compensation expense (in shares)		2,308
Common stock issued and stock-based compensation expense	56,463	24	56,439
Dividends-common stock	(77,437)			(77,437)
Ending Balance at Aug. 31, 2011	8,005,916	5,495	3,492,663	4,763,180	(19,979)	(235,443)
Common Stock, Shares, Outstanding - End of Period at Aug. 31, 2011		549,476
Beginning Balance at Nov. 30, 2011	8,242,211	5,497	3,507,754	5,243,318	(51,679)	(462,679)
Common Stock, Shares, Outstanding - Beginning of period at Nov. 30, 2011		549,749
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Net income	1,794,283			1,794,283
Other comprehensive income	20,353				20,353
Purchases of treasury stock	(813,969)					(813,969)
Common stock issued under employee benefit plans (in shares)		41
Common stock issued under employee benefit plans	1,323	0	1,323
Common stock issued and stock-based compensation expense (in shares)		2,783
Common stock issued and stock-based compensation expense	61,323	29	61,294
Dividends-common stock	(159,611)			(159,611)
Ending Balance at Aug. 31, 2012	$ 9,145,913	$ 5,526	$ 3,570,371	$ 6,877,990	$ (31,326)	$ (1,276,648)
Common Stock, Shares, Outstanding - End of Period at Aug. 31, 2012		552,573

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Derivatives and Hedging Activities (Fair Value and Related Outstanding Notional Amounts of Derivative Instruments) (Details)	Aug. 31, 2012 Interest Rate Swap [Member] Not designated as hedges [Member] USD ($) transactions	Nov. 30, 2011 Interest Rate Swap [Member] Not designated as hedges [Member] USD ($)	Aug. 31, 2012 Interest Rate Swap [Member] Other Assets [Member] Not designated as hedges [Member] USD ($)	Nov. 30, 2011 Interest Rate Swap [Member] Other Assets [Member] Not designated as hedges [Member] USD ($)	Aug. 31, 2012 Interest Rate Swap [Member] Other Liabilities [Member] Not designated as hedges [Member] USD ($)	Nov. 30, 2011 Interest Rate Swap [Member] Other Liabilities [Member] Not designated as hedges [Member] USD ($)	Aug. 31, 2012 Foreign Exchange Forward Contracts [Member] EUR (€)	Aug. 31, 2012 Foreign Exchange Forward Contracts [Member] GBP (£)	Aug. 31, 2012 Foreign Exchange Forward Contracts [Member] SGD	Nov. 30, 2011 Foreign Exchange Forward Contracts [Member] EUR (€)	Nov. 30, 2011 Foreign Exchange Forward Contracts [Member] GBP (£)	Aug. 31, 2012 Foreign Exchange Forward Contracts [Member] Not designated as hedges [Member] USD ($) transactions		Nov. 30, 2011 Foreign Exchange Forward Contracts [Member] Not designated as hedges [Member] USD ($)		Aug. 31, 2012 Foreign Exchange Forward Contracts [Member] Other Assets [Member] Not designated as hedges [Member] USD ($)		Nov. 30, 2011 Foreign Exchange Forward Contracts [Member] Other Assets [Member] Not designated as hedges [Member] USD ($)		Aug. 31, 2012 Foreign Exchange Forward Contracts [Member] Other Liabilities [Member] Not designated as hedges [Member] USD ($)		Nov. 30, 2011 Foreign Exchange Forward Contracts [Member] Other Liabilities [Member] Not designated as hedges [Member] USD ($)		Aug. 31, 2012 Cash Flow Hedge [Member] Interest Rate Swap [Member] Designated as hedges [Member] USD ($) transactions	Nov. 30, 2011 Cash Flow Hedge [Member] Interest Rate Swap [Member] Designated as hedges [Member] USD ($)	Aug. 31, 2012 Cash Flow Hedge [Member] Interest Rate Swap [Member] Other Assets [Member] Designated as hedges [Member] USD ($)	Nov. 30, 2011 Cash Flow Hedge [Member] Interest Rate Swap [Member] Other Assets [Member] Designated as hedges [Member] USD ($)	Aug. 31, 2012 Cash Flow Hedge [Member] Interest Rate Swap [Member] Other Liabilities [Member] Designated as hedges [Member] USD ($)	Nov. 30, 2011 Cash Flow Hedge [Member] Interest Rate Swap [Member] Other Liabilities [Member] Designated as hedges [Member] USD ($)	Aug. 31, 2012 Fair Value Hedge [Member] Interest Rate Swap [Member] Designated as hedges [Member] USD ($) transactions	Nov. 30, 2011 Fair Value Hedge [Member] Interest Rate Swap [Member] Designated as hedges [Member] USD ($)	Aug. 31, 2012 Fair Value Hedge [Member] Interest Rate Swap [Member] Other Assets [Member] Designated as hedges [Member] USD ($)	Nov. 30, 2011 Fair Value Hedge [Member] Interest Rate Swap [Member] Other Assets [Member] Designated as hedges [Member] USD ($)	Aug. 31, 2012 Fair Value Hedge [Member] Interest Rate Swap [Member] Other Liabilities [Member] Designated as hedges [Member] USD ($)	Nov. 30, 2011 Fair Value Hedge [Member] Interest Rate Swap [Member] Other Liabilities [Member] Designated as hedges [Member] USD ($)
Statement [Line Items]
Notional Amount of Interest Rate Swaps Cash Flow Hedge Derivatives																								$ 2,000,000,000	$ 2,000,000,000
Notional Amount of Interest Rate Swaps Fair Value Hedge Derivatives																														7,468,200,000	2,338,276,000
Notional Amount of Foreign Exchange Forward Contracts Derivatives Not Designated as Hedging Instruments							17,700,000	1,900,000	1,500,000	14,000,000	1,700,000	26,375,000	[1]	21,453,000	[1]
Notional Amount of Interest Rate Swap Derivatives Not Designated as Hedging Instruments	1,090,378,000	1,294,932,000
Number of Transactions	1											5	[1]											8						258
Interest Rate Swaps Cash Flow Hedge, Asset at Fair Value																										8,229,000	12,191,000
Interest Rate Swaps Fair Value Hedge, Asset at Fair Value																																108,948,000	44,171,000
Foreign Exchange Forward Contracts Derivative Instruments Not Designated as Hedging Instruments, Asset at Fair Value																0	[1]	0	[1]
Interest Rate Swaps Derivative Instruments Not Designated as Hedging Instruments, Asset at Fair Value			504,000	7,214,000
Interest Rate Swaps Cash Flow Hedge, Liability at Fair Value																												0	0
Interest Rate Swaps Fair Value Hedge, Liability at Fair Value																																		0	279,000
Foreign Exchange Forward Contracts Derivative Instruments Not Designated as Hedging Instruments, Liability at Fair Value																				68,000	[1]	169,000	[1]
Interest Rate Swaps Derivative Instruments Not Designated as Hedging Instrument, Liability at Fair Value					$ 0	$ 0

[1] The foreign exchange forward contracts have notional amounts of EUR 17.7 million, GBP 1.9 million and SGD 1.5 million as of August 31, 2012 and EUR 14.0 million and GBP 1.7 million as of November 30, 2011.

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Loan Receivables Loan Receivables (Loans that entered a modification program during the period) (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended		9 Months Ended
	Aug. 31, 2012 accounts	Aug. 31, 2011 accounts	Aug. 31, 2012 accounts	Aug. 31, 2011 accounts
Credit Card Receivable [Member] | InternalPrograms [Member]
Accounts that entered a loan modification program during the period, Number of accounts	11,781	16,680	41,279	50,011
Accounts that entered a loan modification program during the period, Balances	$ 78,607	$ 115,301	$ 283,126	$ 351,968
Credit Card Receivable [Member] | External Programs [Member]
Accounts that entered a loan modification program during the period, Number of accounts	9,781	12,951	30,596	39,046
Accounts that entered a loan modification program during the period, Balances	54,133	73,734	173,585	230,720
Student Loans [Member]
Accounts that entered a loan modification program during the period, Number of accounts	130	78	352	167
Accounts that entered a loan modification program during the period, Balances	3,351	1,461	8,164	3,234
Personal Loans [Member] | InternalPrograms [Member]
Accounts that entered a loan modification program during the period, Number of accounts	489	287	1,047	595
Accounts that entered a loan modification program during the period, Balances	$ 6,282	$ 3,641	$ 13,383	$ 7,337

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Capital Adequacy (Tables)

9 Months Ended

Aug. 31, 2012

Compliance With Regulatory Capital Requirements Under Banking Regulations [Abstract]

Schedule of Capital Adequacy

The following table shows the actual capital amounts and ratios of the Company and the Bank as of August 31, 2012 and November 30, 2011 and comparisons of each to the regulatory minimum and “well-capitalized” requirements (dollars in thousands):
	Actual				Minimum Capital Requirements			Capital Requirements To Be Classified as Well-Capitalized
	Amount		Ratio		Amount		Ratio	Amount		Ratio
August 31, 2012
Total capital (to risk-weighted assets)
Discover Financial Services	$	10,686,110	17.1	%	$	4,997,394	≥8.0%	$	6,246,742	≥10.0%
Discover Bank	$	9,311,085	15.2	%	$	4,905,887	≥8.0%	$	6,132,358	≥10.0%
Tier 1 capital (to risk-weighted assets)
Discover Financial Services	$	8,698,015	13.9	%	$	2,498,697	≥4.0%	$	3,748,045	≥6.0%
Discover Bank	$	7,337,118	12.0	%	$	2,452,943	≥4.0%	$	3,679,415	≥6.0%
Tier 1 capital (to average assets)
Discover Financial Services	$	8,698,015	11.9	%	$	2,933,514	≥4.0%	$	3,666,893	≥5.0%
Discover Bank	$	7,337,118	10.2	%	$	2,886,498	≥4.0%	$	3,608,122	≥5.0%
November 30, 2011
Total capital (to risk-weighted assets)
Discover Financial Services	$	9,808,660	16.5	%	$	4,764,887	≥8.0%	$	5,956,109	≥10.0%
Discover Bank	$	8,671,391	14.8	%	$	4,693,645	≥8.0%	$	5,867,056	≥10.0%
Tier 1 capital (to risk-weighted assets)
Discover Financial Services	$	7,850,451	13.2	%	$	2,382,444	≥4.0%	$	3,573,665	≥6.0%
Discover Bank	$	6,724,176	11.5	%	$	2,346,822	≥4.0%	$	3,520,234	≥6.0%
Tier 1 capital (to average assets)
Discover Financial Services	$	7,850,451	11.5	%	$	2,729,480	≥4.0%	$	3,411,851	≥5.0%
Discover Bank	$	6,724,176	10.0	%	$	2,690,135	≥4.0%	$	3,362,668	≥5.0%

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Credit Card and Student Loan Securitization Activities (Narrative) (Details) (USD $) In Millions, unless otherwise specified	9 Months Ended		0 Months Ended
	Aug. 31, 2012	Jan. 17, 2012 Series 2009-SD Certificates [Member]	Jan. 17, 2012 Class D (2009-1) Notes [Member]
Maturity of Investors Interests Held by Wholly Owned Subsidiaries		$ 346.4
Variable Interest Entity, Financial or Other Support, Amount			$ 241.7
Excess spread rate minimum	0.00%
Excess of the total investors' interests	7.00%
Excess spread rate trigger	4.50%
Increasing funding requirements as excess spread levels decline below preset levels	0.00%
Average excess spread rate calculation period, months	3 months

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Derivatives and Hedging Activities

9 Months Ended

Aug. 31, 2012

Derivative Instruments and Hedging Activities Disclosure [Abstract]

Derivatives and Hedging Activities

Derivatives and Hedging Activities

The Company uses derivatives to manage its exposure to various financial risks. The Company does not enter into derivatives for trading or speculative purposes. Certain derivatives used to manage the Company’s exposure to interest rate movements and other identified risks are not designated as hedges and do not qualify for hedge accounting. All derivatives are recorded in other assets at their gross positive fair values and in accrued expenses and other liabilities at their gross negative fair values.

Derivatives may give rise to counterparty credit risk, which generally is addressed through collateral arrangements as described under the sub-heading "Collateral Requirements and Credit-Risk Related Contingency Features." The Company enters into derivative transactions with established dealers that meet minimum credit criteria established by the Company. All counterparties must be pre-approved prior to engaging in any transaction with the Company. Counterparties are monitored on a regular basis by the Company to ensure compliance with the Company’s risk policies and limits.In determining the counterparty credit risk valuation adjustment for the fair values of derivatives, the Company considers collateral and legally enforceable master netting agreements that mitigate credit exposure to counterparties.

Derivatives Designated as Hedges

Derivatives designated and qualifying as a hedge of the exposure to variability in expected future cash flows, or other types of forecasted transactions, are considered cash flow hedges. Derivatives designated and qualifying as a hedge of the exposure to changes in the fair value of an asset, liability, or firm commitment attributable to a particular risk, such as interest rate risk, are considered fair value hedges.

Cash Flow Hedges. The Company uses interest rate swaps to manage its exposure to changes in interest rates related to future cash flows resulting from credit card loan receivables. The Company's current cash flow hedges are for a maximum period of three years. The derivatives are designated as a hedge of the risk of overall changes in cash flows on the Company’s portfolios of prime-based interest receipts and qualify for hedge accounting in accordance with ASC Topic 815, Derivatives and Hedging (“ASC 815”).

The effective portion of the change in the fair value of derivatives designated as cash flow hedges is recorded in other comprehensive income and is subsequently reclassified into earnings in the period that the hedged forecasted cash flows affect earnings. The ineffective portion of the change in fair value of the derivative, if any, is recognized directly in earnings. Amounts reported in accumulated other comprehensive income related to derivatives at August 31, 2012 will be reclassified to interest income as interest payments are received on certain of the Company's floating rate credit card loan receivables. During the next 12 months, the Company estimates it will reclassify to earnings $7.2 million of pretax gains related to its derivatives designated as cash flow hedges.

Fair Value Hedges. The Company is exposed to changes in fair value of certain of its fixed rate debt obligations due to changes in interest rates. During the three and nine months ended August 31, 2012, the Company used interest rate swaps to manage its exposure to changes in fair value of certain fixed rate senior notes, securitized debt and interest-bearing brokered deposits attributable to changes in LIBOR, a benchmark interest rate as defined by ASC 815. The interest rate swaps involve the receipt of fixed rate amounts from the respective counterparties in exchange for the Company making payments of variable rate amounts over the life of the agreements without exchange of the underlying notional amounts. These interest rate swaps qualify as fair value hedges in accordance with ASC 815. Changes in both (i) the fair values of the derivatives and (ii) the hedged fixed rate senior notes, securitized debt and interest-bearing brokered deposits relating to the risk being hedged were recorded in interest expense. The changes provided substantial offset to one another. Ineffectiveness related to these fair value hedges was recorded in interest expense. Any basis differences between the fair value and the carrying amount of the hedged fixed rate senior notes, securitized debt and interest-bearing brokered deposits at the inception of the hedging relationship is amortized and recorded in interest expense.

Derivatives Not Designated as Hedges

Interest rate lock commitments. The Company enters into commitments with consumers to originate loans at a specified interest rate. The Company reports IRLCs as derivative instruments at fair value with changes in fair value being recorded in other income.

Forward delivery contracts. The Company economically hedges the changes in fair value of IRLCs and mortgage loans held for sale caused by changes in interest rates by using TBA MBS and entering into best efforts forward delivery commitments. These hedging instruments are recorded at fair value with changes in fair value recorded in other income.

Interest rate swaps. The Company also may have from time to time interest rate swap agreements that are not designated as hedges. As part of its acquisition of SLC, the Company also acquired an interest rate swap related to the securitized debt assumed in the SLC transaction. Such agreements are not speculative and are also used to manage interest rate risk but are not designated for hedge accounting. Changes in the fair value of these contracts are recorded in other income.

Foreign exchange forward contracts. The Company has foreign exchange forward contracts that are economic hedges and are not designated as hedges for accounting purposes. The Company enters into foreign exchange forward contracts to manage foreign currency risk. Foreign exchange forward contracts involve the purchase or sale of a designated currency at an agreed upon rate for settlement on a specified date. Changes in the fair value of these contracts are recorded in other income.

The following table summarizes the fair value (including accrued interest) and related outstanding notional amounts of derivative instruments and indicates where within the statement of financial condition each is reported as of August 31, 2012 and November 30, 2011. See Note 14: Fair Value Disclosures for a description of the valuation methodologies of derivatives. (Dollars in thousands):
	August 31, 2012							November 30, 2011
				Balance Sheet Location						Balance Sheet Location
	Notional Amount		Number of Transactions	Other Assets (At Fair Value)		Accrued Expenses and Other Liabilities (At Fair Value)		Notional Amount		Other Assets (At Fair Value)		Accrued Expenses  and Other Liabilities (At Fair Value)
Derivatives designated as hedges:
Interest rate swaps—cash flow hedge	$	2,000,000	8	$	8,229	$	—	$	2,000,000	$	12,191	$	—
Interest rate swaps—fair value hedge	$	7,468,200	258	$	108,948	$	—	$	2,338,276	$	44,171	$	279
Derivatives not designated as hedges:
Foreign exchange forward contracts(1)	$	26,375	5	$	—	$	68	$	21,453	$	—	$	169
Interest rate swap	$	1,090,378	1	$	504	$	—	$	1,294,932	$	7,214	$	—
Forward delivery contracts	$	593,036	495	$	1,079	$	4,674	$	—	$	—	$	—
Interest rate lock commitments	$	622,153	3,013	$	17,448	$	34	$	—	$	—	$	—

____________________

(1) The foreign exchange forward contracts have notional amounts of EUR 17.7 million, GBP 1.9 million and SGD 1.5 million as of August 31, 2012 and EUR 14.0 million and GBP 1.7 million as of November 30, 2011.

The following table summarizes the impact of the derivative instruments on income, and indicates where within the condensed consolidated statements of income such impact is reported for the three and nine months ended August 31, 2012 and 2011 (dollars in thousands):
		For the Three Months Ended August 31,						For the Nine Months Ended August 31,
	Location	2012			2011			2012			2011
Derivatives designated as hedges:
Interest rate swaps—cash flow hedges:
Total (losses) gains recognized in other comprehensive income after amounts reclassified into earnings, pre-tax	Other Comprehensive Income	$	(383	)	$	13,113		$	(4,003	)	$	11,711
Total (losses) gains recognized in other comprehensive income		$	(383	)	$	13,113		$	(4,003	)	$	11,711
Amount reclassified from other comprehensive income into income	Interest Income	$	1,892		$	1,892		$	5,656		$	5,636
Interest rate swaps—fair value hedges:
Interest expense—ineffectiveness		35,303			34,715			60,452			38,924
Interest expense—other		8,479			4,087			20,333			8,090
Gain on interest rate swaps	Interest Expense	43,782			38,802			80,785			47,014
Interest expense—ineffectiveness		(33,880		)	(32,575		)	(56,394		)	(34,064		)
Interest expense—other		(1,524		)	(1,608		)	(4,619		)	(4,853		)
Loss on hedged item	Interest Expense	(35,404		)	(34,183		)	(61,013		)	(38,917		)
Total gains recognized in income		$	10,270		$	6,511		$	25,428		$	13,733
Derivatives not designated as hedges:
Gain (loss) on forward contracts	Other Income	$	(468	)	$	30		$	1,179		$	(703	)
Gain (loss) on interest rate swaps	Other Income	(3,375		)	(2,037		)	(6,348		)	(7,518		)
Gain on forward delivery contracts	Other Income	(2,375		)	—			(2,375		)	—
Gain on interest rate lock commitments	Other Income	49,437			—			49,437			—
Total gains (losses) on derivatives not designated as hedges recognized in income		$	43,219		$	(2,007	)	$	41,893		$	(8,221	)

Collateral Requirements and Credit-Risk Related Contingency Features. For its interest rate swaps, the Company has master netting arrangements and minimum collateral posting thresholds with its counterparties. Collateral is required by either the Company or the counterparty depending on the net fair value position of all interest rate swaps held with that counterparty. The Company may also be required to post collateral with a counterparty depending on the credit rating it or Discover Bank receives from specified major credit rating agencies. Collateral amounts recorded in the condensed consolidated statement of financial condition are based on the net collateral receivable or payable position for each counterparty. Collateral receivable or payable amounts are not offset against the fair value of the interest rate swap, but are recorded separately in other assets or deposits.

As of August 31, 2012, DFS had a right to reclaim $4.0 million of cash collateral that had been posted (net of amounts required to be posted by the counterparty) because the credit rating of DFS did not meet specified thresholds. At August 31, 2012, Discover Bank’s credit rating met specified thresholds set by its counterparties. However, if Discover Bank’s credit rating is reduced by one ratings notch, Discover Bank would be required to post additional collateral, which would have been $112.1 million as of August 31, 2012. The Company had an obligation to return $99.9 million cash collateral deposited with the Company (net of $4.0 million referenced above) as of August 31, 2012.

As of August 31, 2012, the Company had interest rate swaps in a net asset position with all of its counterparties, inclusive of accrued interest. If the Company had breached any provisions of the derivative agreements, there would have been no obligation to settle termination values since none of the derivative agreements were in net liability positions as of August 31, 2012.

The Company also has agreements with certain of its derivative counterparties that contain a provision where if the Company defaults on any of its indebtedness, including default where repayment of the indebtedness has not been accelerated by the lender, then the Company could also be declared in default on its derivative obligations.

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Commitments, Contingencies and Guarantees (Tables)

9 Months Ended

Aug. 31, 2012

Lease Commitments

Lease commitments. The Company leases various office space and equipment under capital and non-cancelable operating leases which expire at various dates through 2022. At August 31, 2012, future minimum payments on leases with original terms in excess of one year consist of the following (dollars in thousands):
	Capitalized Leases		Operating Leases
2012	$	127	$	4,093
2013	508		14,906
2014	508		13,088
2015	489		9,316
2016	178		8,348
Thereafter	—		16,642
Total minimum lease payments	1,810		$	66,393
Less: Amount representing interest	142
Present value of net minimum least payments	$	1,668

Settlement Withholdings and Escrow Deposits

The Company has not recorded any contingent liability in the condensed consolidated financial statements for merchant chargeback guarantees on August 31, 2012 and November 30, 2011. The Company mitigates the risk of potential loss exposure by withholding settlement from merchants, obtaining third-party guarantees, or obtaining escrow deposits or letters of credit from certain merchant acquirers or merchants that are considered higher risk due to various factors such as time delays in the delivery of products or services. The table below provides information regarding settlement withholdings and escrow deposits, which are recorded in interest-bearing deposit accounts, and accrued expenses and other liabilities on the Company’s condensed consolidated statements of financial condition (dollars in thousands):
	August 31, 2012		November 30, 2011
Settlement withholdings and escrow deposits	$	21,084	$	24,297

Counterparty Settlement Guarantees [Member]

Maximum Potential Counterparty Exposures Related to Settlement Guarantees

The maximum potential amount of future payments related to such contingent obligations is dependent upon the transaction volume processed between the time a counterparty defaults on its settlement and the time at which the Company disables the settlement of any further transactions for the defaulting party, which could be up to one month depending on the type of guarantee/counterparty. However, there is no limitation on the maximum amount the Company may be liable to pay. The actual amount of the potential exposure cannot be quantified as the Company cannot determine whether particular counterparties will fail to meet their settlement obligations. While the Company has some contractual remedies to offset these counterparty settlement exposures (such as letters of credit or pledged deposits), in the event that all licensees and/or issuers were to become unable to settle their transactions, the Company estimates its maximum potential counterparty exposures to these settlement guarantees, based on historical transaction volume of up to one month, would be as follows:
	August 31, 2012
Diners Club:
Merchant guarantee (in millions)	$	262
PULSE:
ATM guarantee (in thousands)	$	1,045

Merchant Chargeback Guarantees [Member]

Maximum Potential Counterparty Exposures Related to Settlement Guarantees

The table below summarizes certain information regarding merchant chargeback guarantees:
	For the Three Months Ended August 31,					For the Nine Months Ended August 31,
	2012			2011		2012			2011
Losses related to merchant chargebacks (in thousands)(1)	$	(166	)	$	291	$	(65	)	$	1,625
Aggregate sales transaction volume (in millions)(2)	$	29,592		$	28,416	$	85,816		$	81,051

____________________

(1) Gain in three and nine months ended 2012 is due to recoveries in the current quarter which offset losses.

(2) Represents period transactions processed on the Discover Network for which a potential liability exists that, in aggregate, can differ from credit card sales volume.

The Company has not recorded any contingent liability in the condensed consolidated financial statements for merchant chargeback guarantees on August 31, 2012 and November 30, 2011. The Company mitigates the risk of potential loss exposure by withholding settlement from merchants, obtaining third-party guarantees, or obtaining escrow deposits or letters of credit from certain merchant acquirers or merchants that are considered higher risk due to various factors such as time delays in the delivery of products or services. The table below provides information regarding settlement withholdings and escrow deposits, which are recorded in interest-bearing deposit accounts, and accrued expenses and other liabilities on the Company’s condensed consolidated statements of financial condition (dollars in thousands):
	August 31, 2012		November 30, 2011
Settlement withholdings and escrow deposits	$	21,084	$	24,297

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Subsequent Events (Details) (Subsequent Event [Member], USD $) In Millions, except Per Share data, unless otherwise specified	0 Months Ended
	Sep. 15, 2012	Sep. 24, 2012 Refund Required to be Paid to Customers [Member] Unfavorable Regulatory Action [Member]	Sep. 24, 2012 Civil Monetary Penalty to be Paid to Cfpb and Fdic [Member] Unfavorable Regulatory Action [Member]	Oct. 27, 2012 Discover Card Execution Note Trust [Member]
Subsequent Event [Line Items]
Dividends payable, amount per share	$ 0.10
Dividends payable, date declared, day, month and year	Sep. 20, 2012
Dividends payable, date of record, day, month and year	Oct. 04, 2012
Dividends payable, date to be paid, day, month and year	Oct. 18, 2012
Loss Contingency, Settlement Agreement, Consideration		$ 200	$ 14
Debt Instrument, Face Amount				$ 500

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Subsequent Events

9 Months Ended

Aug. 31, 2012

Subsequent Events [Abstract]

Subsequent Events

Subsequent Events

Cash Dividend. On September 20, 2012, the Company announced a cash dividend of $0.10 per share of common stock, payable on October 18, 2012, to stockholders of record at the close of business on October 4, 2012.

Consent Order with the FDIC and the CFPB. On September 24, 2012, Discover Bank entered into a consent order with the FDIC and the CFPB for resolution of the agencies' joint investigation with respect to the marketing of the Bank's protection products. The order requires the Bank to provide refunds of approximately $200 million to eligible customers who purchased certain protection products between December 1, 2007 and August 31, 2011. In addition, the Bank agreed to pay a $14 million civil monetary penalty to the agencies. Adequate provision has been made to cover these costs in the financial statements as of August 31, 2012.

Long-Term Borrowings. On September 27, 2012, DCENT issued $500 million of credit card asset-backed securities through a private conduit provider.

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Credit Card and Student Loan Securitization Activities (Carrying Value of Assets of the Company's Student Loan Consolidated Variable Interest Entiities) (Details) (USD $) In Thousands, unless otherwise specified	Aug. 31, 2012	Nov. 30, 2011
Restricted cash	$ 301,349	$ 1,285,820
Purchased credit-impaired loans, Carrying Amount, Net	4,867,010	5,250,388
Other assets	2,433,255	2,383,793
Variable Interest Entity, Primary Beneficiary [Member]
Restricted cash	295,439	1,274,175
Other assets	33,638	33,724
Variable Interest Entity, Primary Beneficiary [Member] | Student Loan Securitization Trusts [Member]
Restricted cash	84,667	109,875
Purchased credit-impaired loans, Carrying Amount, Net	2,631,970	2,839,871
Other assets	515	7,218
Carrying value of assets of consolidated variable interest entities	$ 2,717,152	$ 2,956,964

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Condensed Consolidated Statements of Cash Flows (USD $) In Thousands, unless otherwise specified	9 Months Ended
	Aug. 31, 2012	Aug. 31, 2011
Cash flows from operating activities
Net income	$ 1,794,283	$ 1,714,129
Adjustments to reconcile net income to net cash provided by operating activities:
Provision for loan losses	510,401	692,763
Deferred income taxes	159,001	351,854
Depreciation and amortization on premises and equipment	70,931	66,274
Amortization of deferred revenues	(154,008)	(191,290)
Other depreciation and amortization	(102,927)	(35,346)
(Gain) loss on investments	(28)	3,622
Loss on equity method and other investments	8,061	0
(Gain) loss on premises and equipment	(494)	3,242
Loss on sale of other assets	314	0
Gain on origination and sale of loans	(48,541)	(6,154)
Stock-based compensation expense	36,108	33,690
Gain on purchase of business	0	(15,917)
Proceeds from sale of mortgage loans originated for sale	550,815	0
Net principal disbursed on mortgage loans originated for sale	(782,677)	0
Changes in assets and liabilities:
(Increase) decrease in other assets	(129,661)	32,339
Increase in accrued expenses and other liabilities	247,626	106,908
Net cash provided by operating activities	2,159,204	2,756,114
Cash flows from investing activities
Maturities of other short-term investments	0	375,000
Purchases of other short-term investments	(250)	0
Maturities and sales of available-for-sale investment securities	1,558,449	786,463
Purchases of available-for-sale investment securities	(1,708,935)	(1,627,215)
Maturities of held-to-maturity investment securities	9,101	17,466
Purchases of held-to-maturity invetment securities	(51,285)	(550)
Proceeds from sale of student loans held for sale	270,020	21,859
Net principal disbursed on loans originated for investment	(2,532,687)	(3,040,152)
Purchase of loan receivables	(390,075)	(596,163)
Purchase of net assets of a business	(48,886)	0
Purchase of business, net of cash acquired	0	(401,158)
Purchase of other investments	(27,168)	(15,000)
Decrease in restricted cash	985,338	623,794
Proceeds from sale of premises and equipment	515	13
Purchases of premises and equipment	(104,685)	(70,053)
Net cash used for investing activities	(2,040,548)	(3,925,696)
Cash flows from financing activities
Net increase in short-term borrowings	200,139	100,000
Proceeds from issuance of securitized debt	5,099,617	2,500,000
Maturities and repayment of securitized debt	(3,648,040)	(5,114,986)
Repayment of long-term borrowings and bank notes	(12,681)	(345,048)
Premium paid on debt exchange	(114,493)	0
Proceeds from issuance of common stock	16,231	17,928
Purchases of treasury stock	(813,896)	(207,560)
Net increase in deposits	2,701,115	3,147,752
Dividends paid on common stock	(158,881)	(69,712)
Net cash provided by financing activities	3,269,111	28,374
Net increase (decrease) in cash and cash equivalents	3,387,767	(1,141,208)
Cash and cash equivalents, at beginning of period	2,849,843	5,098,733
Cash and cash equivalents, at end of period	6,237,610	3,957,525
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Interest expense	898,126	1,045,370
Income taxes, net of income tax refunds	967,774	635,360
Non-cash transactions:
Initial fair value of contingent consideration to be paid for purchase of net assets of a business	8,541	0
Assumption of debt by buyer related to loans sold	424,993	0
Assumption of SLC debt	$ 0	$ 2,921,372

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Condensed Consolidated Statements of Financial Condition (Parenthetical) (USD $) In Thousands, except Share data, unless otherwise specified	Aug. 31, 2012		Nov. 30, 2011
Statement of Financial Position [Abstract]
Held-to-maturity, fair value	$ 92,268	[1]	$ 96,042	[1]
Common stock, par value	$ 0.01		$ 0.01
Common stock, shares authorized	2,000,000,000		2,000,000,000
Common stock, shares issued	552,572,624		549,748,783
Treasury stock, shares	45,086,760		20,918,354

[1] Held-to-maturity investment securities are reported at amortized cost.

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Earnings Per Share

9 Months Ended

Aug. 31, 2012

Earnings Per Share [Abstract]

Earnings Per Share

Earnings Per Share

The following table presents the calculation of basic and diluted earnings per share ("EPS") (in thousands, except per share amounts):
	For the Three Months Ended August 31,						For the Nine Months Ended August 31,
	2012			2011			2012			2011
Numerator:
Net income	$	626,686		$	648,818		$	1,794,283		$	1,714,129
Income allocated to participating securities	(5,916		)	(7,046		)	(17,513		)	(19,493		)
Net income allocated to common stockholders	$	620,770		$	641,772		$	1,776,770		$	1,694,636
Denominator:
Weighted average shares of common stock outstanding	512,793			544,438			523,462			544,997
Effect of dilutive common stock equivalents	1,169			743			1,181			701
Weighted average shares of common stock outstanding and common stock equivalents	513,962			545,181			524,643			545,698
Basic earnings per share	$	1.21		$	1.18		$	3.39		$	3.11
Diluted earnings per share	$	1.21		$	1.18		$	3.39		$	3.11

The following securities were considered anti-dilutive and therefore were excluded from the denominator in the computation of diluted EPS (shares in thousands):
	For the Three Months Ended August 31,		For the Nine Months Ended August 31,
	2012	2011	2012	2011
Unexercised stock options	—	348	2	374

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Derivatives and Hedging Activities (Narrative) (Details) (USD $) In Millions, unless otherwise specified	9 Months Ended
	Aug. 31, 2012 credit_rating_levels
Cash flow hedge gain (loss) to be reclassified within twelve months	$ 7.2
Change in rating levels	1
Additional collateral securities	112.1
Derivative, Collateral, Obligation to Return Cash	99.9
Credit Rating [Member]
Derivative, Collateral, Right to Reclaim Cash	$ 4.0

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Fair Value Disclosures Fair Value Disclosures (Significant Unobservable Inputs Related to Level 3 Assets and Liabilities) (Details) (USD $) In Thousands, unless otherwise specified	9 Months Ended
	Aug. 31, 2012
Interest Rate Lock Commitments [Member]
Fair Value, Measurement with Unobservable Inputs Reconciliation, Recurring Basis, Asset Value	17,414
Forward Delivery Commitments [Member]
Fair Value, Measurement with Unobservable Inputs Reconciliation, Recurring Basis, Asset Value	89
Fair Value, Inputs, Level 3 [Member] | Interest Rate Lock Commitments [Member] | Quantitative Risk Model [Member]
Fair Value Measurements, Valuation Techniques	Quantitative risk models
Fair Value, Inputs, Level 3 [Member] | Interest Rate Lock Commitments [Member] | Loan Funding Probability [Member] | Quantitative Risk Model [Member]
Fair Value Measurements, Significant Assumptions	Loan funding probability
Fair Value, Inputs, Level 3 [Member] | Forward Delivery Commitments [Member] | Quantitative Risk Model [Member]
Fair Value Measurements, Valuation Techniques	Quantitative risk models
Fair Value, Inputs, Level 3 [Member] | Forward Delivery Commitments [Member] | Loan Funding Probability [Member] | Quantitative Risk Model [Member]
Fair Value Measurements, Significant Assumptions	Loan funding probability
Minimum [Member] | Fair Value, Inputs, Level 3 [Member] | Interest Rate Lock Commitments [Member] | Loan Funding Probability [Member] | Quantitative Risk Model [Member]
Range of Inputs, Significant Unobservable Inputs	20.00%
Minimum [Member] | Fair Value, Inputs, Level 3 [Member] | Forward Delivery Commitments [Member] | Loan Funding Probability [Member] | Quantitative Risk Model [Member]
Range of Inputs, Significant Unobservable Inputs	28.00%
Maximum [Member] | Fair Value, Inputs, Level 3 [Member] | Interest Rate Lock Commitments [Member] | Loan Funding Probability [Member] | Quantitative Risk Model [Member]
Range of Inputs, Significant Unobservable Inputs	95.00%
Maximum [Member] | Fair Value, Inputs, Level 3 [Member] | Forward Delivery Commitments [Member] | Loan Funding Probability [Member] | Quantitative Risk Model [Member]
Range of Inputs, Significant Unobservable Inputs	99.00%

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Document and Entity Information Document	9 Months Ended
	Aug. 31, 2012	Sep. 28, 2012
Document Information [Line Items]
Document Type	10-Q
Amendment Flag	false
Document Period End Date	Aug. 31, 2012
Document Fiscal Year Focus	2012
Document Fiscal Period Focus	Q3
Entity Registrant Name	Discover Financial Services
Entity Central Index Key	0001393612
Current Fiscal Year End Date	--11-30
Entity Filer Category	Large Accelerated Filer
Entity Common Stock, Shares Outstanding		504,775,854

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Capital Adequacy

9 Months Ended

Aug. 31, 2012

Compliance With Regulatory Capital Requirements Under Banking Regulations [Abstract]

Capital Adequacy

Capital Adequacy

The Company is subject to capital adequacy guidelines of the Federal Reserve, and Discover Bank (the “Bank”), the Company’s main banking subsidiary, is subject to various regulatory capital requirements as administered by the Federal Deposit Insurance Corporation (the “FDIC”). Failure to meet minimum capital requirements can result in the initiation of certain mandatory and possibly additional discretionary actions by regulators that, if undertaken, could have a direct material effect on the financial position and results of the Company and the Bank. Under capital adequacy guidelines and the regulatory framework for prompt corrective action, the Company and the Bank must meet specific capital guidelines that involve quantitative measures of assets, liabilities, and certain off-balance sheet items, as calculated under regulatory accounting practices. Capital amounts and classification are also subject to qualitative judgments by the regulators about components, risk weightings and other factors.

Quantitative measures established by regulation to ensure capital adequacy require the Company and the Bank to maintain minimum amounts and ratios (as defined in the regulations) of total risk-based capital and Tier 1 capital to risk-weighted assets, and of Tier 1 capital to average assets. As of August 31, 2012, the Company and the Bank met all capital adequacy requirements to which they were subject.

Under regulatory capital requirements, the Company and the Bank must maintain minimum levels of capital that are dependent upon the risk-weighted amount or average level of the financial institution’s assets, specifically (a) 8% to 10% of total risk-based capital to risk-weighted assets (“total risk-based capital ratio”), (b) 4% to 6% of Tier 1 capital to risk-weighted assets (“Tier 1 risk-based capital ratio”) and (c) 4% to 5% of Tier 1 capital to average assets (“Tier 1 leverage ratio”). To be categorized as “well-capitalized,” the Company and the Bank must maintain minimum total risk-based, Tier 1 risk-based, and Tier 1 leverage ratios as set forth in the table below. As of August 31, 2012, the Company and the Bank met the requirements for well-capitalized status and there have been no conditions or events that management believes have changed the Company’s or the Bank’s category.

The following table shows the actual capital amounts and ratios of the Company and the Bank as of August 31, 2012 and November 30, 2011 and comparisons of each to the regulatory minimum and “well-capitalized” requirements (dollars in thousands):
	Actual				Minimum Capital Requirements			Capital Requirements To Be Classified as Well-Capitalized
	Amount		Ratio		Amount		Ratio	Amount		Ratio
August 31, 2012
Total capital (to risk-weighted assets)
Discover Financial Services	$	10,686,110	17.1	%	$	4,997,394	≥8.0%	$	6,246,742	≥10.0%
Discover Bank	$	9,311,085	15.2	%	$	4,905,887	≥8.0%	$	6,132,358	≥10.0%
Tier 1 capital (to risk-weighted assets)
Discover Financial Services	$	8,698,015	13.9	%	$	2,498,697	≥4.0%	$	3,748,045	≥6.0%
Discover Bank	$	7,337,118	12.0	%	$	2,452,943	≥4.0%	$	3,679,415	≥6.0%
Tier 1 capital (to average assets)
Discover Financial Services	$	8,698,015	11.9	%	$	2,933,514	≥4.0%	$	3,666,893	≥5.0%
Discover Bank	$	7,337,118	10.2	%	$	2,886,498	≥4.0%	$	3,608,122	≥5.0%
November 30, 2011
Total capital (to risk-weighted assets)
Discover Financial Services	$	9,808,660	16.5	%	$	4,764,887	≥8.0%	$	5,956,109	≥10.0%
Discover Bank	$	8,671,391	14.8	%	$	4,693,645	≥8.0%	$	5,867,056	≥10.0%
Tier 1 capital (to risk-weighted assets)
Discover Financial Services	$	7,850,451	13.2	%	$	2,382,444	≥4.0%	$	3,573,665	≥6.0%
Discover Bank	$	6,724,176	11.5	%	$	2,346,822	≥4.0%	$	3,520,234	≥6.0%
Tier 1 capital (to average assets)
Discover Financial Services	$	7,850,451	11.5	%	$	2,729,480	≥4.0%	$	3,411,851	≥5.0%
Discover Bank	$	6,724,176	10.0	%	$	2,690,135	≥4.0%	$	3,362,668	≥5.0%

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Earnings Per Share (Schedule of Anti-Dilutive Securities Excluded from Computation of EPS) (Details) (Unexercised Stock Options [Member]) In Thousands, unless otherwise specified	3 Months Ended		9 Months Ended
	Aug. 31, 2012	Aug. 31, 2011	Aug. 31, 2012	Aug. 31, 2011
Unexercised Stock Options [Member]
Unexercised stock options	0	348	2	374

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Fair Value Disclosures (Changes in Level 3 Assets and Liabilities Measured at Fair Value on a Recurring Basis) (Details) (USD $) In Thousands, unless otherwise specified	9 Months Ended	3 Months Ended	9 Months Ended	3 Months Ended	9 Months Ended
	Aug. 31, 2011 Equity Securities [Member]	Aug. 31, 2012 Interest Rate Lock Commitments [Member]	Aug. 31, 2012 Interest Rate Lock Commitments [Member]	Aug. 31, 2012 Forward Delivery Commitments [Member]	Aug. 31, 2012 Forward Delivery Commitments [Member]
Fair Value, Assets Measured on Recurring Basis, Unobservable Input Reconciliation [Line Items]
Beginning Balance	$ 17	$ 0	$ 0	$ 0	$ 0
Transfers into Level 3	0	0	0	0	0
Transfers out of Level 3	0	0	0	734	(734)
Total net gains (losses) included in earnings (realized and unrealized)	144	49,437	49,437	802	802
Purchases	0	4,757	4,757	21	21
Sales	(161)	0	0	0	0
Settlements	0	202	(202)	0	0
Transfers of IRLC's to Closed Loans	0	(36,578)	(36,578)	0	0
Ending Balance	$ 0	$ 17,414	$ 17,414	$ 89	$ 89

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Condensed Consolidated Statements of Income (USD $) In Thousands, except Per Share data, unless otherwise specified	3 Months Ended		9 Months Ended
	Aug. 31, 2012	Aug. 31, 2011	Aug. 31, 2012	Aug. 31, 2011
Interest income:
Credit card loans	$ 1,451,836	$ 1,423,496	$ 4,296,757	$ 4,243,803
Other loans	217,433	157,424	630,313	428,762
Investment securities	21,371	15,676	58,869	42,535
Other interest income	4,329	2,496	11,207	10,234
Total interest income	1,694,969	1,599,092	4,997,146	4,725,334
Interest expense:
Deposits	204,982	241,719	650,213	749,584
Short-term borrowings	423	33	424	116
Long-term borrowings	119,905	120,301	368,472	375,060
Total interest expense	325,310	362,053	1,019,109	1,124,760
Net interest income	1,369,659	1,237,039	3,978,037	3,600,574
Provision for loan losses	126,288	99,514	510,401	692,763
Net interest income after provision for loan losses	1,243,371	1,137,525	3,467,636	2,907,811
Other income:
Discount and interchange revenue, net	265,531	282,889	795,166	809,631
Protection products revenue	104,201	107,858	310,256	321,527
Loan fee income	80,012	84,243	241,719	250,596
Transaction processing revenue	59,168	43,931	163,823	131,792
Merchant fees	4,426	4,110	11,654	12,981
Gain (loss) on investments	0	(3,614)	28	(3,622)
Other income	80,912	32,546	154,247	135,526
Total other income	594,250	551,963	1,676,893	1,658,431
Other expense:
Employee compensation and benefits	274,366	241,881	770,448	684,782
Marketing and business development	160,534	133,398	410,975	393,244
Information processing and communications	68,812	63,547	210,723	194,852
Professional fees	107,749	106,042	317,334	301,122
Premises and equipment	19,562	18,063	55,728	53,268
Other expense	194,884	79,476	486,194	245,431
Total other expense	825,907	642,407	2,251,402	1,872,699
Income before income tax expense	1,011,714	1,047,081	2,893,127	2,693,543
Income tax expense	385,028	398,263	1,098,844	979,414
Net income	626,686	648,818	1,794,283	1,714,129
Net income allocated to common stockholders	$ 620,770	$ 641,772	$ 1,776,770	$ 1,694,636
Basic earnings per share (in dollars per share)	$ 1.21	$ 1.18	$ 3.39	$ 3.11
Diluted earnings per share (in dollars per share)	$ 1.21	$ 1.18	$ 3.39	$ 3.11
Dividends paid per share (in dollars per share)	$ 0.1	$ 0.06	$ 0.3	$ 0.14

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Credit Card and Student Loan Securitization Activities

9 Months Ended

Aug. 31, 2012

Transfers and Servicing of Financial Assets [Abstract]

Credit Card and Student Loan Securitization Activities

Credit Card and Student Loan Securitization Activities

Credit Card Securitization Activities

The Company accesses the term asset securitization market through the Discover Card Master Trust I (“DCMT”) and the Discover Card Execution Note Trust (“DCENT”), which are trusts into which credit card loan receivables are transferred (or, in the case of DCENT, into which beneficial interests in DCMT are transferred) and from which beneficial interests are issued to investors.

The DCMT structure consists of Class A, triple-A rated certificates and Class B, single-A rated certificates held by third parties. Credit enhancement is provided by the subordinated Class B certificates, cash collateral accounts, and more subordinated Series 2009-CE certificates that are held by a wholly-owned subsidiary of Discover Bank. The DCENT debt structure consists of four classes of securities (DiscoverSeries Class A, B, C and D notes), with the most senior class generally receiving a triple-A rating. In this structure, in order to issue senior, higher rated classes of notes, it is necessary to obtain the appropriate amount of credit enhancement, generally through the issuance of junior, lower rated or more highly subordinated classes of notes. The majority of these more highly subordinated classes of notes are held by subsidiaries of Discover Bank. In addition, during the nine months ended August 31, 2012, there was another outstanding series of certificates (Series 2009-SD), issued by DCMT, that provided increased excess spread levels to all other outstanding securities of the trusts. The Series 2009-SD certificates were held by a wholly-owned subsidiary of Discover Bank. The Series 2009-SD balance of $346.4 million matured on January 17, 2012, automatically triggering a higher required level of the Class D (2009-1) note. Accordingly, the size of the Class D (2009-1) note was increased by $241.7 million. The credit-related risk of loss associated with trust assets as of the balance sheet date to which the Company is exposed through the retention of these subordinated interests is fully captured in the allowance for loan losses recorded by the Company.

The Company’s credit card securitizations are accounted for as secured borrowings and the trusts are treated as consolidated subsidiaries of the Company. The Company’s retained interests in the assets of the trusts, principally consisting of investments in DCMT certificates and DCENT notes held by subsidiaries of Discover Bank, constitute intercompany positions which are eliminated in the preparation of the Company’s consolidated statement of financial condition.

Upon transfer of credit card loan receivables to the trust, the receivables and certain cash flows derived from them become restricted for use in meeting obligations to the trusts’ creditors. The trusts have ownership of cash balances that also have restrictions, the amounts of which are reported in restricted cash. Investment of trust cash balances is limited to investments that are permitted under the governing documents of the trusts and which have maturities no later than the related date on which funds must be made available for distribution to trust investors. With the exception of the seller’s interest in trust receivables, the Company’s interests in trust assets are generally subordinate to the interests of third-party investors and, as such, may not be realized by the Company if needed to absorb deficiencies in cash flows that are allocated to the investors in the trusts’ debt. The carrying values of these restricted assets, which are presented on the Company’s condensed consolidated statement of financial condition as relating to securitization activities, are shown in the table below (dollars in thousands):
	August 31, 2012			November 30, 2011
Cash collateral accounts	$	147,632		$	187,105
Collections and interest funding accounts	63,140			977,195
Restricted cash	210,772			1,164,300
Investors’ interests held by third-party investors	15,068,423			13,294,739
Investors’ interests held by wholly owned subsidiaries of Discover Bank	4,805,402			5,157,536
Seller’s interest	13,643,757			15,363,585
Loan receivables (1)	33,517,582			33,815,860
Allowance for loan losses allocated to securitized loan receivables (1)	(1,074,058		)	(1,510,730		)
Net loan receivables	32,443,524			32,305,130
Other	33,123			26,506
Carrying value of assets of consolidated variable interest entities	$	32,687,419		$	33,495,936

 ____________________

(1) The Company maintains its allowance for loan losses at an amount sufficient to absorb probable losses inherent in all loan receivables, which includes all loan receivables in the trusts. Therefore, credit risk associated with the transferred receivables is fully reflected on the Company’s balance sheet in accordance with GAAP.

The debt securities issued by the consolidated VIEs are subject to credit, payment and interest rate risks on the transferred credit card loan receivables. To protect investors, the securitization structures include certain features that could result in earlier-than-expected repayment of the securities. The primary investor protection feature relates to the availability and adequacy of cash flows in the securitized pool of receivables to meet contractual requirements. Insufficient cash flows would trigger the early repayment of the securities. This is referred to as the “economic early amortization” feature.

Investors are allocated cash flows derived from activities related to the accounts comprising the securitized pool of receivables, the amounts of which reflect finance charges billed, certain fee assessments, allocations of merchant discount and interchange, and recoveries on charged-off accounts. From these cash flows, investors are reimbursed for charge-offs occurring within the securitized pool of receivables and receive a contractual rate of return and Discover Bank is paid a servicing fee as servicer. Any cash flows remaining in excess of these requirements are reported to investors as excess spread. An excess spread rate of less than 0% for a contractually specified period, generally a three-month average, would trigger an economic early amortization event. In such an event, the Company would be required to seek immediate sources of replacement funding. Apart from the restricted assets related to securitization activities, the investors and the securitization trusts have no recourse to the Company’s other assets or the Company's general credit for a shortage in cash flows.

The Company is required to maintain a contractual minimum level of receivables in the trust in excess of the face value of outstanding investors’ interests. This excess is referred to as the minimum seller’s interest requirement. The required minimum seller’s interest in the pool of trust receivables, which is included in credit card loan receivables restricted for securitization investors, is set at approximately 7% in excess of the total investors’ interests (which includes interests held by third parties as well as those certificated interests held by the Company). If the level of receivables in the trust was to fall below the required minimum, the Company would be required to add receivables from the unrestricted pool of receivables, which would increase the amount of credit card loan receivables restricted for securitization investors. A decline in the amount of the excess seller’s interest could occur if balance repayments and charge-offs exceeded new lending on the securitized accounts or as a result of changes in total outstanding investors’ interests. If the Company could not add enough receivables to satisfy the requirement, an early amortization (or repayment) of investors’ interests would be triggered. We retain significant exposure to the performance of trust assets through holdings of the seller's interest and subordinated security classes of DCMT and DCENT.

Another feature of the Company’s credit card securitization structure that is designed to protect investors’ interests from loss, which is applicable only to the notes issued from DCENT, is a reserve account funding requirement in which excess cash flows generated by the transferred loan receivables are held at the trust. This funding requirement is triggered when DCENT’s three-month average excess spread rate decreases to below 4.5%, with increasing funding requirements as excess spread levels decline below preset levels to 0%.

In addition to performance measures associated with the transferred credit card loan receivables or the inability to add receivable to satisfy the seller's interest requirement, there are other events or conditions which could trigger an early amortization event., such as non-payment of principal at expected maturity. As of August 31, 2012, no economic or other early amortization events have occurred.

The tables below provide information concerning investors’ interests and related excess spreads at August 31, 2012 (dollars in thousands):
	Investors’ Interests(1)		# of Series Outstanding
Discover Card Master Trust I	$	2,288,598	4
Discover Card Execution Note Trust (DiscoverSeries notes)	17,585,227		37
Total investors’ interests	$	19,873,825	41

____________________ 

(1) Investors’ interests include third-party interests and subordinated interests held by wholly-owned subsidiaries of Discover Bank.

	3-Month Rolling Average Excess Spread(1)
Group excess spread percentage	13.41	%
DiscoverSeries excess spread percentage	13.32	%

 ____________________

(1) DCMT certificates refer to the higher of the Group excess spread or their applicable series excess spread (not shown) and DiscoverSeries notes refer to the higher of the Group or DiscoverSeries excess spread in assessing whether an economic early amortization has been triggered.

The Company continues to own and service the accounts that generate the loan receivables held by the trusts. Discover Bank receives servicing fees from the trusts based on a percentage of the monthly investor principal balance outstanding. Although the fee income to Discover Bank offsets the fee expense to the trusts and thus is eliminated in consolidation, failure to service the transferred loan receivables in accordance with contractual requirements could lead to a termination of the servicing rights and the loss of future servicing income, net of related expenses.

Student Loan Securitization Activities

The Company’s student loan securitizations are accounted for as secured borrowings and the trusts are treated as consolidated subsidiaries of the Company. Trust receivables underlying third-party investors’ interests are recorded in purchased credit-impaired loans, and the related debt issued by the trusts is reported in long-term borrowings. The assets of the Company’s consolidated VIEs are restricted from being sold or pledged as collateral for other borrowings and the cash flows from these restricted assets may be used only to pay obligations of the trust.

Currently there are three trusts from which securities were issued to investors. Principal payments on the long-term secured borrowings are made as cash is collected on the underlying loans that are used as collateral on the secured borrowings. The Company does not have access to cash collected by the securitization trusts until cash is released in accordance with the trust indenture agreements and, for certain securitizations, no cash will be released to the Company until all outstanding trust borrowings have been repaid. Similar to the credit card securitizations, the Company continues to own and service the accounts that generate the student loan receivables held by the trusts and receives servicing fees from the trusts based on either a percentage of the principal balance outstanding or a flat fee per borrower. Although the servicing fee income offsets the fee expense related to the trusts, failure to service the transferred loan receivables in accordance with contractual requirements could lead to a termination of the servicing rights and the loss of future servicing income.

Under terms of all the trust arrangements, the Company has the option, but not the obligation, to provide financial support to the trusts, but has never provided such support. A substantial portion of the credit risk associated with the securitized loans has been transferred to third parties under private credit insurance or indemnification arrangements. See Note 2: Business Combinations.

The carrying values of these restricted assets, which are presented on the Company’s condensed consolidated statement of financial condition as relating to securitization activities, are shown in the table below (dollars in thousands):
	August 31, 2012		November 30, 2011
Restricted cash	$	84,667	$	109,875
Student loan receivables	2,631,970		2,839,871
Other assets	515		7,218
Carrying value of assets of consolidated variable interest entities	$	2,717,152	$	2,956,964

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Loan Receivables

9 Months Ended

Aug. 31, 2012

Loans and Leases Receivable Disclosure [Abstract]

Loan Receivables

Loan Receivables

The Company has three portfolio segments: credit card loans, other loans and PCI student loans acquired in the SLC transaction (See Note 2: Business Combinations) and in a separate portfolio acquisition from Citibank. Within these portfolio segments, the Company has classes of receivables which are depicted in the table below (dollars in thousands):

	August 31, 2012			November 30, 2011
Student loans held for sale(1)	$	—		$	714,180
Mortgage loans held for sale(2)	272,082			—
Loan portfolio:
Credit card loans:
Discover card(3)	47,915,177			46,419,544
Discover business card	209,291			219,081
Total credit card loans	48,124,468			46,638,625
Other loans:
Personal loans	3,114,408			2,648,051
Private student loans	2,752,715			2,069,001
Other	26,829			16,690
Total other loans	5,893,952			4,733,742
PCI student loans(4)	4,867,010			5,250,388
Total loan portfolio	58,885,430			56,622,755
Total loan receivables	59,157,512			57,336,935
Allowance for loan losses	(1,687,664		)	(2,205,196		)
Net loan receivables	$	57,469,848		$	55,131,739

____________________________

(1) Amount represents federal student loans. At November 30, 2011, $446.6 million of federal student loan receivables were pledged as collateral against a long-term borrowing. During first quarter 2012, Discover Bank sold these loans and recorded a loss of $518 thousand. As a part of this transaction, the related borrowings were assumed by the purchaser.

(2) All mortgage loans held for sale are pledged as collateral against the warehouse line of credit used to fund consumer residential loans. See Note 7: Borrowings.

(3) Amounts include $19.9 billion and $18.5 billion underlying investors’ interest in trust debt at August 31, 2012 and November 30, 2011, respectively, and $13.6 billion and $15.4 billion in seller’s interest at August 31, 2012 and November 30, 2011, respectively. See Note 5: Credit Card and Student Loan Securitization Activities for further information.

(4) Amounts include $2.6 billion and $2.8 billion of loans pledged as collateral against the notes issued from the SLC securitization trusts at August 31, 2012 and November 30, 2011, respectively. See Note 5: Credit Card and Student Loan Securitization Activities. Of the remaining $2.3 billion and $2.5 billion at August 31, 2012 and November 30, 2011, respectively, that were not pledged as collateral, approximately $14.7 million and $12.8 million represent loans eligible for reimbursement through an indemnification claim. Discover Bank must purchase such loans from the trust before a claim may be filed.

Credit Quality Indicators. The Company regularly reviews its collection experience (including delinquencies and net charge-offs) in determining its allowance for loan losses. Credit card and closed-end consumer loan receivables are placed on nonaccrual status upon receipt of notification of the bankruptcy or death of a customer or suspected fraudulent activity on an account. Upon completion of the fraud investigation, loan receivables may resume accruing interest.

Information related to the delinquencies and net charge-offs in the Company’s loan portfolio, which excludes loans held for sale, is shown below by each class of loan receivables except for PCI student loans, which is shown under the heading “Purchased Credit-Impaired Loans” (dollars in thousands):

Delinquent and Non-Accruing Loans:
	30-89 Days Delinquent		90 or More Days Delinquent		Total Past Due		90 or More Days Delinquent and Accruing		Total Non-accruing(2)
At August 31, 2012
Credit card loans:
Discover card(1)	$	441,545	$	424,514	$	866,059	$	374,035	$	179,716
Discover business card	1,803		2,483		4,286		2,377		489
Total credit card loans	443,348		426,997		870,345		376,412		180,205
Other loans:
Personal loans	16,395		6,784		23,179		6,021		4,229
Private student loans (excluding PCI)	29,314		5,876		35,190		4,832		1,237
Other	502		1,637		2,139		—		1,889
Total other loans (excluding PCI)	46,211		14,297		60,508		10,853		7,355
Total loan receivables (excluding PCI)	$	489,559	$	441,294	$	930,853	$	387,265	$	187,560
At November 30, 2011
Credit card loans:
Discover card(1)	$	554,354	$	556,126	$	1,110,480	$	498,305	$	200,208
Discover business card	2,823		3,548		6,371		3,335		860
Total credit card loans	557,177		559,674		1,116,851		501,640		201,068
Other loans:
Personal loans	15,604		7,362		22,966		6,636		3,628
Private student loans (excluding PCI)	10,073		2,992		13,065		2,883		125
Other	507		2,091		2,598		—		2,317
Total other loans (excluding PCI)	26,184		12,445		38,629		9,519		6,070
Total loan receivables (excluding PCI)	$	583,361	$	572,119	$	1,155,480	$	511,159	$	207,138

______________________ 

(1) Consumer credit card loans that are 90 or more days delinquent and accruing interest include $31.8 million and $37.9 million of loans accounted for as troubled debt restructurings at August 31, 2012 and November 30, 2011, respectively.

(2) The Company estimates that the gross interest income that would have been recorded in accordance with the original terms of these credit card loans was $7.8 million and $24.5 million for the three and nine months ended August 31, 2012, respectively. The Company does not separately track the amount of gross interest income that would have been recorded in accordance with the original terms of loans. These amounts were estimated based on customers' current balances and most recent rates.

Net Charge-offs. The Company's net charge-offs include the principal amount of losses charged off less principal recoveries and exclude charged-off interest and fees, recoveries of interest and fees and fraud losses. Charged-off and recovered interest and fees are recorded in interest and loan fee income, respectively, which is effectively a reclassification of the loan loss provision, while fraud losses are recorded in other expense. Credit card loan receivables are charged off at the end of the month during which an account becomes 180 days contractually past due. Closed-end consumer loan receivables are generally charged off at the end of the month during which an account becomes 120 days contractually past due. Generally, customer bankruptcies and probate accounts are charged off at the end of the month 60 days following the receipt of notification of the bankruptcy or death but not later than the 180-day or 120-day contractual time frame.

Net Charge-Offs:	For the Three Months Ended August 31,
	2012					2011
	Net Charge-offs			Net Charge-off Rate		Net Charge-offs		Net Charge-off Rate
Credit card loans:
Discover card	$	285,345		2.42	%	$	436,242	3.84	%
Discover business card	1,741			3.34	%	3,506		6.01	%
Total credit card loans	287,086			2.43	%	439,748		3.85	%
Other loans:
Personal loans	16,214			2.14	%	16,000		2.73	%
Private student loans (excluding PCI)	4,674			0.73	%	2,618		0.62	%
Other	(97		)	(0.26	)%	410		13.41	%
Total other loans (excluding PCI)	20,791			1.45	%	19,028		0.98	%
Net charge-offs as a percentage of total loans (excluding PCI)	$	307,877		2.32	%	$	458,776	3.63	%
Net charge-offs as a percentage of total loans (including PCI)	$	307,877		2.12	%	$	458,776	3.43	%
	For the Nine Months Ended August 31,
	2012					2011
	Net Charge-offs			Net Charge-off Rate		Net Charge-offs		Net Charge-off Rate
Credit card loans:
Discover card	$	960,403		2.76	%	$	1,651,311	4.91	%
Discover business card	5,941			3.75	%	14,937		8.26	%
Total credit card loans	966,344			2.76	%	1,666,248		4.93	%
Other loans:
Personal loans	49,869			2.32	%	50,980		3.19	%
Private student loans (excluding PCI)	11,650			0.64	%	5,573		0.49	%
Other	70			0.14	%	1,022		10.35	%
Total other loans (excluding PCI)	61,589			1.48	%	57,575		1.09	%
Net charge-offs as a percentage of total loans (excluding PCI)	$	1,027,933		2.63	%	$	1,723,823	4.64	%
Net charge-offs as a percentage of total loans (including PCI)	$	1,027,933		2.39	%	$	1,723,823	4.41	%

As part of credit risk management activities, on an ongoing basis the Company reviews information related to the performance of a customer’s account with the Company as well as information from credit bureaus, such as a FICO or other credit scores, relating to the customer’s broader credit performance. Credit scores are generally obtained at origination of the account and are refreshed monthly or quarterly thereafter to assist in predicting customer behavior.  Historically, the Company has noted that a significant proportion of delinquent accounts have FICO scores below 660. The following table provides FICO scores available for the Company’s customers as a percentage of each class of loan receivables:
	August 31, 2012				November 30, 2011
	660 and Above		Less than 660 or No Score		660 and Above		Less than 660 or No Score
Discover card	83	%	17	%	81	%	19	%
Discover business card	91	%	9	%	89	%	11	%
Personal loans	97	%	3	%	97	%	3	%
Private student loans (excluding PCI)(1)	95	%	5	%	95	%	5	%

____________________

(1) PCI loans are discussed under the heading "Purchased Credit-Impaired Loans."

For private student loans, additional credit risk management activities include monitoring the amount of loans in forbearance. Forbearance allows borrowers experiencing temporary financial difficulties and willing to make payments the ability to temporarily suspend payments. Eligible borrowers have a lifetime cap on forbearance of 12 months. At August 31, 2012 and November 30, 2011, there were $105.5 million and $75.9 million of loans in forbearance, respectively. In addition, at August 31, 2012 and November 30, 2011, there were 2.0% and 1.5% of private student loans in forbearance as a percentage of student loans in repayment and forbearance.

Allowance for Loan Losses. The Company maintains an allowance for loan losses at an appropriate level to absorb probable losses inherent in the loan portfolio. The Company considers the collectibility of all amounts contractually due on its loan receivables, including those components representing interest and fees. Accordingly, the allowance for loan losses represents the estimated uncollectible principal, interest and fee components of loan receivables. The allowance is evaluated monthly and is maintained through an adjustment to the provision for loan losses. Charge-offs of principal amounts of loans outstanding are deducted from the allowance and subsequent recoveries of such amounts increase the allowance. Charge-offs of loan balances representing unpaid interest and fees result in a reversal of interest and fee income, respectively, which is effectively a reclassification of provision for loan losses.

The Company bases its allowance for loan losses on several analyses that help estimate incurred losses as of the balance sheet date. While the Company’s estimation process includes historical data and analysis, there is a significant amount of judgment applied in selecting inputs and analyzing the results produced by the models to determine the allowance. The Company uses a migration analysis to estimate the likelihood that a loan will progress through the various stages of delinquency. The loan balances used in the migration analysis represent all amounts contractually due and, as a result, the migration analysis captures principal, interest and fee components in estimating uncollectible accounts. The Company uses other analyses to estimate losses incurred on non-delinquent accounts. The considerations in these analyses include past performance, risk management techniques applied to various accounts, historical behavior of different account vintages, current economic conditions, recent trends in delinquencies, bankruptcy filings, account collection management, policy changes, account seasoning, loan volume and amounts, payment rates, and forecasting uncertainties. The Company does not evaluate loans for impairment on an individual basis, but instead estimates its allowance for loan losses on a pooled basis, which includes loans that are delinquent and/or no longer accruing interest and/or certain loans that have defaulted from a loan modification program, as discussed below under the section entitled "Impaired Loans and Troubled Debt Restructurings."

The following table provides changes in the Company’s allowance for loan losses for the three and nine months ended August 31, 2012 and 2011 (dollars in thousands):

	For the Three Months Ended August 31,						For the Nine Months Ended August 31,
	2012			2011			2012			2011
Balance at beginning of period	$	1,869,253		$	2,632,320		$	2,205,196		$	3,304,118
Additions:
Provision for loan losses	126,288			99,514			510,401			692,763
Deductions:
Charge-offs:
Discover card	(428,935		)	(584,534		)	(1,400,273		)	(2,085,452		)
Discover business card	(2,623		)	(4,416		)	(8,540		)	(17,672		)
Total credit card loans	(431,558		)	(588,950		)	(1,408,813		)	(2,103,124		)
Personal loans	(17,341		)	(16,458		)	(52,474		)	(52,438		)
Private student loans	(4,793		)	(2,663		)	(11,956		)	(5,646		)
Other	(22		)	(411		)	(194		)	(1,025		)
Total other loans	(22,156		)	(19,532		)	(64,624		)	(59,109		)
Total charge-offs	(453,714		)	(608,482		)	(1,473,437		)	(2,162,233		)
Recoveries:
Discover card	143,590			148,292			439,870			434,141
Discover business card	882			910			2,599			2,735
Total credit card loans	144,472			149,202			442,469			436,876
Personal loans	1,127			458			2,605			1,458
Private student loans	119			45			306			73
Other	119			1			124			3
Total other loans	1,365			504			3,035			1,534
Total recoveries	145,837			149,706			445,504			438,410
Net charge-offs	(307,877		)	(458,776		)	(1,027,933		)	(1,723,823		)
Balance at end of period	$	1,687,664		$	2,273,058		$	1,687,664		$	2,273,058

Net charge-offs of principal are recorded against the allowance for loan losses, as shown in the table above. Information regarding net charge-offs of interest and fee revenues on credit card and other loans is as follows (dollars in thousands):
	For the Three Months Ended August 31,				For the Nine Months Ended August 31,
	2012		2011		2012		2011
Interest accrued subsequently charged off, net of recoveries (recorded as a reduction of interest income)	$	76,942	$	128,329	$	272,345	$	480,044
Fees accrued subsequently charged off, net of recoveries (recorded as a reduction to other income)	$	14,845	$	22,807	$	52,503	$	86,762

The following table provides additional detail of the Company’s allowance for loan losses and recorded investment in its loan portfolio (which excludes loans held for sale) by impairment methodology (dollars in thousands):

	Credit Card		Personal Loans		Student Loans		Other Loans		Total
At August 31, 2012
Allowance for loans evaluated for impairment as:
Collectively evaluated for impairment(1)	$	1,331,282	$	92,069	$	65,203	$	783	$	1,489,337
Troubled debt restructurings(2)	190,981		4,287		3,059		—		198,327
Purchased credit-impaired(3)	—		—		—		—		—
Total allowance for loan losses	$	1,522,263	$	96,356	$	68,262	$	783	$	1,687,664
Recorded investment in loans evaluated for impairment as:
Collectively evaluated for impairment(1)	$	47,007,109	$	3,098,013	$	2,740,212	$	26,829	$	52,872,163
Troubled debt restructurings(2)	1,117,359		16,395		12,503		—		1,146,257
Purchased credit-impaired(3)	—		—		4,867,010		—		4,867,010
Total recorded investment	$	48,124,468	$	3,114,408	$	7,619,725	$	26,829	$	58,885,430
At November 30, 2011
Allowance for loans evaluated for impairment as:
Collectively evaluated for impairment(1)	$	1,865,797	$	81,838	$	52,601	$	220	$	2,000,456
Troubled debt restructurings(2)	204,364		237		139		—		204,740
Purchased credit-impaired(3)	—		—		—		—		—
Total allowance for loan losses	$	2,070,161	$	82,075	$	52,740	$	220	$	2,205,196
Recorded investment in loans evaluated for impairment as:
Collectively evaluated for impairment(1)	$	45,421,887	$	2,640,416	$	2,063,562	$	16,690	$	50,142,555
Troubled debt restructurings(2)	1,216,738		7,635		5,439		—		1,229,812
Purchased credit-impaired(3)	—		—		5,250,388		—		5,250,388
Total recorded investment	$	46,638,625	$	2,648,051	$	7,319,389	$	16,690	$	56,622,755

 ____________________

(1) Represents loans evaluated for impairment in accordance with ASC 450-20, Loss Contingencies.

(2) Represents loans evaluated for impairment in accordance with ASC 310-40, Receivables, which consists of modified loans accounted for as troubled debt restructurings. The unpaid principal balance of credit card loans was $955.4 million and $1.0 billion at August 31, 2012 and November 30, 2011 respectively. The unpaid principal balance of personal loans was $16.1 million and $7.5 million at August 31, 2012 and November 30, 2011, respectively. The unpaid principal balance of student loans was $11.7 million and $5.4 million at August 31, 2012 and November 30, 2011, respectively. All loans accounted for as troubled debt restructurings have a related allowance for loan losses.

(3) Represents loans evaluated for impairment in accordance with ASC 310-30, Receivables-Loans and Debt Securities Acquired with Deteriorated Credit Quality.

Impaired Loans and Troubled Debt Restructurings. Permanent and certain temporary modifications on credit card loans, certain grants of student loan forbearance and certain modifications to personal loans are considered troubled debt restructurings and are accounted for in accordance with ASC 310-40, Troubled Debt Restructurings by Creditors. Generally loans included in a loan modification program are considered to be individually impaired and are accounted for as troubled debt restructurings. The Company has both internal and external loan modification programs that provide relief to credit card and personal loan borrowers who are experiencing financial hardship. The internal loan modification programs include both temporary and permanent programs.

For our credit card customers, the temporary hardship program primarily consists of a reduced minimum payment and an interest rate reduction, both lasting for a period no longer than 12 months. The permanent workout program involves changing the structure of the loan to a fixed payment loan with a maturity no longer than 60 months and reducing the interest rate on the loan. The permanent program does not normally provide for the forgiveness of unpaid principal, but may allow for the reversal of certain unpaid interest or fee assessments. The Company also makes loan modifications for customers who request financial assistance through external sources, such as a consumer credit counseling agency program (referred to here as external programs). These loans typically receive a reduced interest rate but continue to be subject to the original minimum payment terms and do not normally include waiver of unpaid principal, interest or fees.

To assist student loan borrowers who are experiencing temporary financial difficulties and are willing to resume making payments, the Company may offer forbearance periods of up to 12 months over the life of the loan. The Company does not anticipate significant shortfalls in the contractual amount due for borrowers using a first forbearance period as the historical performance of these borrowers is not significantly different from the overall portfolio. However, when a delinquent borrower is granted a second forbearance period, the forbearance is considered a troubled debt restructuring.

For our personal loan customers, the temporary programs normally consist of a reduction of the minimum payment for a period of no longer than 12 months with a final balloon payment required at the end of the loan term. The permanent program involves changing the terms of the loan in order to pay off the outstanding balance over the new term for a period no longer than four years. The total term generally does not exceed nine years. The Company also allows loan modifications for personal loan customers who request financial assistance through external sources, similar to our credit card customers discussed above. Payments are modified based on the new terms agreed upon with the credit counseling agency. Personal loans modified through temporary and permanent internal programs are accounted for as troubled debt restructurings.

Loans classified as troubled debt restructurings are recorded at their present value with impairment measured as the difference between the loan balance and the discounted present value of cash flows expected to be collected. Consistent with the Company’s measurement of impairment of modified loans on a pooled basis, the discount rate used for credit card loans in internal programs is the average current annual percentage rate it applies to non-impaired credit card loans, which approximates what would have applied to the pool of modified loans prior to impairment. The discount rate used for credit card loans in external programs reflects a rate that is consistent with rates offered to lower risk cardmembers. For private student and personal loans, the discount rate used is the average contractual rate prior to modification.

Interest income from loans accounted for as troubled debt restructurings is accounted for in the same manner as other accruing loans. Cash collections on these loans are allocated according to the same payment hierarchy methodology applied to loans that are not in such programs. Additional information about modified loans is shown below (dollars in thousands):
	Average recorded investment in loans		Interest income recognized on impaired loans(1)		Gross interest income that would have been recorded with original terms(2)
For the Three Months Ended August 31, 2012
Credit card loans
Modified credit card loans that have reverted to pre-modification payment terms(3)	$	240,895	$	12,350	N/A
Internal programs	$	560,327	$	4,168	$	18,388
External programs	$	586,547	$	12,694	$	2,035
Personal loans(4)	$	15,370	$	454	N/A
Student loans(4)	$	11,058	$	204	N/A
For the Three Months Ended August 31, 2011
Credit card loans
Internal programs	$	519,884	$	4,518	$	16,411
External programs	$	709,211	$	15,391	$	2,467

	Average recorded investment in loans		Interest income recognized on impaired loans(1)		Gross interest income that would have been recorded with original terms(2)
For the Nine Months Ended August 31, 2012
Credit card loans
Modified credit card loans that have reverted to pre-modification payment terms(3)	$	248,118	$	35,456	N/A
Internal programs	$	564,650	$	13,162	$	54,922
External programs	$	618,120	$	39,905	$	6,396
Personal loans(4)	$	13,349	$	1,222	N/A
Student loans(4)	$	8,563	$	469	N/A
For the Nine Months Ended August 31, 2011
Credit card loans
Internal programs	$	534,479	$	16,660	$	47,950
External programs	$	727,113	$	46,974	$	7,535

____________________

(1) The Company does not separately track interest income on all of its loans modification programs. Amounts shown are estimated by applying an average interest rate to the average loans in the various modification programs.

(2) The Company does not separately track the amount of gross interest income that would have been recorded if the loans in modification programs had not been restructured and interest had instead been recorded in accordance with the original terms. Amounts shown are estimated by applying the difference between the average interest rate earned on non-impaired credit card loans and the average interest rate earned on loans in the modification programs to the average loans in the modification programs.

(3) This balance is considered impaired, but is excluded from the internal and external program amounts reflected in this table. Represents credit card loans that were modified in troubled debt restructurings but that have subsequently reverted back to the loans' pre-modification payment terms either due to noncompliance with the terms of the modification or successful completion of a temporary modification program.

(4) As interest rates for personal loan customers in modification programs and student loan customers that have been granted forbearance periods are rarely modified, gross interest income that would have been recorded with original terms is not significant.

In order to evaluate the primary financial effects which resulted from loans entering into a loan modification program during the three and nine months ended August 31, 2012 and 2011, the Company quantified the amount by which interest and fees were reduced during the period. During the three and nine months ended August 31, 2012, the Company forgave approximately $10.2 million and $34.5 million, respectively, of interest and fees as a result of accounts entering into a loan modification program. During the three and nine months ended August 31, 2011, the Company forgave approximately $15.0 million and $49.1 million, respectively, of interest and fees as a result of accounts entering into a loan modification program.

The following table provides information on loans that entered a loan modification program during the period (dollars in thousands):
	For the Three Months Ended August 31,
	2012			2011
	Number of Accounts	Balances		Number of Accounts	Balances
Accounts that entered a loan modification program during the period:
Credit card:
Internal programs	11,781	$	78,607	16,680	$	115,301
External programs	9,781	$	54,133	12,951	$	73,734
Personal loans	489	$	6,282	287	$	3,641
Student loans	130	$	3,351	78	$	1,461
	For the Nine Months Ended August 31,
	2012			2011
	Number of Accounts	Balances		Number of Accounts	Balances
Accounts that entered a loan modification program during the period:
Credit card:
Internal programs	41,279	$	283,126	50,011	$	351,968
External programs	30,596	$	173,585	39,046	$	230,720
Personal loans	1,047	$	13,383	595	$	7,337
Student loans	352	$	8,164	167	$	3,234

The following table presents the carrying value of loans that experienced a payment default during the three and nine months ended August 31, 2012 and 2011 that had been modified in a troubled debt restructuring during the 15 months preceding the end of each period (dollars in thousands):
	For the Three Months Ended August 31,
	2012			2011
	Number of Accounts	Aggregated Outstanding Balances Upon Default		Number of Accounts	Aggregated Outstanding Balances Upon Default
Troubled debt restructurings that subsequently defaulted:
Credit card (1)(2)(3):
Internal programs	3,721	$	24,761	4,027	$	28,191
External programs	2,509	$	11,551	2,763	$	13,912
Personal loans	77	$	882	37	$	468
Student loans	28	$	691	1	$	13
	For the Nine Months Ended August 31,
	2012			2011
	Number of Accounts	Aggregated Outstanding Balances Upon Default		Number of Accounts	Aggregated Outstanding Balances Upon Default
Troubled debt restructurings that subsequently defaulted:
Credit card (1)(2)(3):
Internal programs	12,331	$	83,859	14,233	$	102,113
External programs	6,122	$	29,253	9,558	$	49,956
Personal loans	228	$	2,770	86	$	1,083
Student loans	63	$	1,459	6	$	118

____________________

(1) The outstanding balance upon default is the loan balance at the end of the month prior to default.

(2) A customer defaults from a modification program after two consecutive missed payments.

(3) Terms revert back to the pre-modification terms for customers who default from a temporary program and charging privileges remain revoked.

Of the account balances that defaulted as shown above for the three and nine months ended August 31, 2012, approximately 45% and 47%, respectively, of the total balances charged off at the end of the month in which they defaulted. Of the account balances that defaulted as shown above for the three and nine months ended August 31, 2011, approximately 42% and 39%, respectively, of the total balances charged off at the end of the month in which they defaulted. For accounts that have defaulted from a loan modification program and that have not subsequently charged off, the balances are included in the allowance for loan loss analysis discussed above under the section entitled "Allowance for Loan Losses."

Purchased Credit-Impaired Loans. Purchased loans with evidence of credit deterioration since origination for which it is probable that not all contractually required payments will be collected are considered impaired at acquisition and are reported as PCI loans. The private student loans acquired in the SLC transaction as well as the additional private student loan portfolio acquired from Citibank comprise the Company’s only PCI loans at August 31, 2012 and November 30, 2011. Total PCI student loans had an outstanding balance of $5.4 billion and $5.7 billion, including accrued interest, and a related carrying amount of $4.9 billion and $5.3 billion, as of August 31, 2012 and November 30, 2011, respectively.

Management concluded it is probable that the Company will be unable to collect all contractually required payments due but the Company is unable to specifically identify which loans the Company will be unable to collect. Therefore, the Company has elected to apply ASC 310-30, Receivables-Loans and Debt Securities Acquired with Deteriorated Credit Quality by analogy to the entire pool of acquired loans.

At the time of acquisition, these loans were recorded at fair value. The Company estimated the initial fair value of the acquired loans based on the cash flows expected to be collected, discounted at a market rate of interest. Expected cash flows used in the initial fair value measurements reflect the effect of expected losses and prepayments as well as anticipated changes in the interest rate indices applicable to these variable rate loans.

As of the acquisition date of December 31, 2010, the PCI student loans acquired in the SLC transaction had an aggregate outstanding balance of approximately $3.8 billion, including accrued interest, and a fair value (initial carrying value) of approximately $3.1 billion. Of the $3.8 billion aggregate outstanding balance of loans acquired, loans with an aggregate outstanding balance of approximately $31 million were non-accruing as of the acquisition date.

As of the acquisition date of September 30, 2011, the private student loans acquired from Citibank had an aggregate outstanding balance and an estimated fair value of approximately $2.4 billion. These loans were acquired at a discount which reflects a decline in the credit quality of the loans after their origination. The discount is partially offset by a premium which reflects the value in certain loans that carry interest rates above prevailing market rates at the acquisition date. Of the $2.4 billion aggregate outstanding balance of loans acquired, loans with an outstanding balance of approximately $16 million were non-performing as of the acquisition date. There has not been any significant incremental credit deterioration on either portfolio since the respective acquisition dates and, therefore, no allowance has been established for the PCI student loans at August 31, 2012.

Certain PCI student loans in one of the three SLC securitization trusts are covered by an indemnification agreement with Citibank for credit losses. The indemnified loans are presented along with all other PCI student loans and the related indemnification asset is recognized as a separate asset on the Company’s condensed consolidated statement of financial condition. See Note 2: Business Combinations for a description of the indemnification asset.

The following table shows contractually required payments receivable, cash flows expected to be collected and fair value of loans acquired as of the acquisition date (dollars in millions):
	At December 31, 2010
Contractually required payments receivable (1)	$	5,673
Less: Non-accretable difference (2)	(683		)
Cash flows expected to be collected	4,990
Less: Accretable yield (3)	(1,920		)
Fair value of loans acquired	$	3,070

 ____________________

(1) Amount represents principal and interest payments, both currently due and due in the future, adjusted for the effect of estimated prepayments.

(2) Charge-offs on acquired loans will be written off against non-accretable difference.

(3) Amount accreted into interest income over the estimated lives of the acquired loans.

The following table shows contractually required payments receivable, cash flows expected to be collected and fair value of the additional private student loans acquired from Citibank for the loans acquired as of September 30, 2011 (dollars in millions):
	At September 30, 2011
Contractually required payments receivable (1)	$	3,861
Less: Non-accretable difference (2)	(573		)
Cash flows expected to be collected	3,288
Less: Accretable yield (3)	(855		)
Fair value of loans acquired	$	2,433

____________________

(1) Amount represents principal and interest payments, both currently due and due in the future, adjusted for the effect of estimated prepayments.

(2) Charge-offs on acquired loans will be written off against non-accretable difference.

(3) Amount to be accreted into interest income over the estimated lives of the acquired loans.

The following table provides changes in accretable yield for the acquired loans for the three and nine month periods ended August 31, 2012 and 2011 (dollars in millions):
	For the Three Months Ended August 31,						For the Nine Months Ended August 31,
	2012			2011			2012			2011
Balance at beginning of period	$	2,313		$	1,772		$	2,580		$	—
Acquisition of The Student Loan Corporation	—			—			—			1,776
Accretion into interest income	(75		)	(54		)	(229		)	(149		)
Other changes in expected cash flows	(13		)	—			(126		)	91
Balance at end of period	$	2,225		$	1,718		$	2,225		$	1,718

During the three and nine months ended August 31, 2012, the Company adjusted accretable yield by $13 million and $126 million, respectively, because of a decrease in expected cash flows. These decreases related primarily to changes in borrower prepayments, and were not a result of credit deterioration. During the nine months ended August 31, 2011, the Company adjusted accretable yield by $91 million because of an increase in expected cash flows based on a change in prepayment assumptions. These amounts will be recognized prospectively as an adjustment to yield over the remaining life of the pools.

At August 31, 2012, the 30 or more days delinquency and 90 or more days delinquency rates on PCI student loans (which includes loans not yet in repayment) were 2.63% and 0.69%, respectively. At August 31, 2011, the 30 or more days delinquency and 90 or more days delinquency rates on PCI student loans (which includes loans not yet in repayment) were 2.60% and 0.83%, respectively. These rates include private student loans that are greater than 120 days delinquent that are covered by an indemnification agreement or insurance arrangements through which the Company expects to recover a substantial portion of the loan. The net charge-off rate on PCI student loans for the three and nine months ended August 31, 2012 was 1.13% and 1.32%, respectively. The net charge-off rate on PCI student loans for the three and nine months ended August 31, 2011 was 1.23% and 1.22%, respectively.

Mortgage loans held for sale. The Company originates all of its residential real estate loans with the intent to sell them in the secondary market. Loans held for sale consist primarily of residential first mortgage loans that are secured by residential real estate throughout the United States. Mortgage loans are funded through a warehouse line of credit and are recorded at fair value. Changes in the fair value of mortgage loans are recorded through revenue prior to the sale of the loans to investors. The gain or loss on the sale of loans is recognized on the date the loans are sold and is based on the difference between the sale proceeds received and the fair value of the loans, adjusted for the impact of the related hedges (see Note 15: Derivatives and Hedging Activities for further discussion of the mortgage loan related hedging activities). The Company sells its loans on a servicing released basis in which the Company gives up the right to service the loans.

The following table provides a summary of the initial unpaid principal balance of mortgage loans sold by type of loan for the quarter ended August 31, 2012 (dollars in millions):
	For the Three Months Ended August 31, 2012
	Amount		%
Conforming(1)	$	396.5	75.09	%
FHA(2)	131.5		24.91	%
Total	$	528.0	100.00	%

____________________

(1) Conforming loans are loans that conform to Government Sponsored Enterprises guidelines.

(2) FHA loans are loans that are insured by the Federal Housing Administration typically for borrowers with low down payments and loan amounts meeting certain limits.

The following table represents the loans held for sale by type of loan as of August 31, 2012 (dollars in thousands):
	At August 31, 2012
	Amount		%
Conforming(1)	$	183,666	67.50	%
FHA(2)	88,416		32.50	%
Total	$	272,082	100.00	%

____________________

(1) Conforming loans are loans that conform to Government Sponsored Enterprises guidelines.

(2) FHA loans are loans that are insured by the Federal Housing Administration typically for borrowers with low down payments and loan amounts meeting certain limits.

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Segment Disclosures

9 Months Ended

Aug. 31, 2012

Segment Reporting [Abstract]

Segment Disclosures

Segment Disclosures

The Company’s business activities are managed in two segments: Direct Banking and Payment Services.

• Direct Banking. The Direct Banking segment includes Discover card-branded credit cards issued to individuals and small businesses and other consumer products and services, including home loans, personal loans, private student loans, prepaid cards and other consumer lending and deposit products. The majority of the Direct Banking revenues relate to interest income earned on each of its loan products. Additionally, the Company’s credit card products generate substantially all of the Company’s revenues related to discount and interchange, protection products (previously referred to as "fee products") and loan fee income.

• Payment Services. The Payment Services segment includes PULSE, an automated teller machine, debit and electronic funds transfer network; Diners Club, a global payments network; and the Company’s third-party issuing business, which includes credit, debit and prepaid cards issued on the Discover Network by third parties. The majority of the Payment Services revenues relate to transaction processing revenue from PULSE and royalty and licensee revenue (included in other income) from Diners Club.

The business segment reporting provided to and used by the Company’s chief operating decision maker is prepared using the following principles and allocation conventions:

• Corporate overhead is not allocated between segments; all corporate overhead is included in the Direct Banking segment.

• Through its operation of the Discover Network, the Direct Banking segment incurs fixed marketing, servicing and infrastructure costs that are not specifically allocated among the segments.

• The assets of the Company are not allocated among the operating segments in the information reviewed by the Company’s chief operating decision maker.

• The revenues of each segment are derived from external sources. The segments do not earn revenue from intercompany sources.

• Income taxes are not specifically allocated among the operating segments in the information reviewed by the Company’s chief operating decision maker.

The following table presents segment data for the three months ended August 31, 2012 and 2011 (dollars in thousands):
For the Three Months Ended	Direct Banking		Payment Services			Total
August 31, 2012
Interest income
Credit card	$	1,451,836	$	—		$	1,451,836
Private student loans	46,964		—			46,964
PCI student loans	75,243		—			75,243
Personal loans	93,912		—			93,912
Other	27,014		—			27,014
Total interest income	1,694,969		—			1,694,969
Interest expense	325,310		—			325,310
Net interest income (expense)	1,369,659		—			1,369,659
Provision for loan losses	126,288		—			126,288
Other income	505,960		88,290			594,250
Other expense	786,900		39,007			825,907
Income before income tax expense	$	962,431	$	49,283		$	1,011,714
August 31, 2011
Interest income
Credit card	$	1,423,496	$	—		$	1,423,496
Private student loans	30,014		—			30,014
PCI student loans	54,304		—			54,304
Personal loans	70,052		—			70,052
Other	21,209		17			21,226
Total interest income	1,599,075		17			1,599,092
Interest expense	362,017		36			362,053
Net interest income (expense)	1,237,058		(19		)	1,237,039
Provision for loan losses	99,514		—			99,514
Other income	481,134		70,829			551,963
Other expense	609,202		33,205			642,407
Income before income tax expense	$	1,009,476	$	37,605		$	1,047,081

The following table presents segment data for the nine months ended August 31, 2012 and 2011 (dollars in thousands):
For the Nine Months Ended	Direct Banking		Payment Services			Total
August 31, 2012
Interest income
Credit card	$	4,296,757	$	—		$	4,296,757
Private student loans	132,028		—			132,028
PCI student loans	229,678		—			229,678
Personal loans	264,882		—			264,882
Other	73,797		4			73,801
Total interest income	4,997,142		4			4,997,146
Interest expense	1,019,057		52			1,019,109
Net interest income (expense)	3,978,085		(48		)	3,978,037
Provision for loan losses	510,401		—			510,401
Other income	1,419,046		257,847			1,676,893
Other expense	2,141,892		109,510			2,251,402
Income before income tax expense	$	2,744,838	$	148,289		$	2,893,127
August 31, 2011
Interest income
Credit card	$	4,243,803	$	—		$	4,243,803
Private student loans	80,473		—			80,473
PCI student loans	149,460		—			149,460
Personal loans	189,525		—			189,525
Other	62,044		29			62,073
Total interest income	4,725,305		29			4,725,334
Interest expense	1,124,597		163			1,124,760
Net interest income (expense)	3,600,708		(134		)	3,600,574
Provision for loan losses	692,763		—			692,763
Other income	1,436,764		221,667			1,658,431
Other expense	1,774,915		97,784			1,872,699
Income before income tax expense	$	2,569,794	$	123,749		$	2,693,543

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Commitments, Contingencies and Guarantees

9 Months Ended

Aug. 31, 2012

Commitments Contingencies and Guarantees [Abstract]

Commitments, Contingencies and Guarantees

Commitments, Contingencies and Guarantees

Lease commitments. The Company leases various office space and equipment under capital and non-cancelable operating leases which expire at various dates through 2022. At August 31, 2012, future minimum payments on leases with original terms in excess of one year consist of the following (dollars in thousands):
	Capitalized Leases		Operating Leases
2012	$	127	$	4,093
2013	508		14,906
2014	508		13,088
2015	489		9,316
2016	178		8,348
Thereafter	—		16,642
Total minimum lease payments	1,810		$	66,393
Less: Amount representing interest	142
Present value of net minimum least payments	$	1,668

Unused commitments to extend credit. At August 31, 2012, the Company had unused commitments to extend credit for consumer loans and commercial loans of approximately $162.3 billion. Such commitments arise primarily from agreements with customers for unused lines of credit on certain credit cards and certain other consumer loan products, provided there is no violation of conditions in the related agreement. These commitments, substantially all of which the Company can terminate at any time and which do not necessarily represent future cash requirements, are periodically reviewed based on account usage, customer creditworthiness and loan qualification.

Commitments to purchase private student loans. On December 31, 2010, Discover Bank entered into an agreement with Citibank to purchase any private student loans originated subsequent to the contract date including a premium equal to 0.125%. Discover Bank completed the first purchase of loan participations under this agreement on January 3, 2011. The agreement has been amended to extend to December 31, 2012, effective upon the closing of Discover Bank's purchase of private student loans from Citibank on September 30, 2011. Although the agreement does not set forth a minimum or maximum amount of loans to be purchased, Discover Bank must purchase all eligible loans originated by Citibank, which the Company estimates to be $250.0 million to $300.0 million over the remaining life of the agreement, as amended. As of August 31, 2012, Discover Bank had an outstanding commitment to purchase $71.8 million of loans under this agreement. For the loans purchased under the agreement, the Company has limited involvement with respect to the underwriting and setting credit terms. The underwriting standards for these loans are based on Citibank's credit policy, and those standards are not substantially different than the Company's own underwriting criteria.  Based on this and by virtue of the fact that the loans are newly originated at the time that the Company acquires them, the loans are not considered purchased credit-impaired.

Securitizations Representations and Warranties. As part of the Company’s financing activities, the Company provides representations and warranties that certain assets pledged as collateral in secured borrowing arrangements conform to specified guidelines. Due diligence is performed by the Company which is intended to ensure that asset guideline qualifications are met. If the assets pledged as collateral do not meet certain conforming guidelines, the Company may be required to replace, repurchase or sell such assets. In its credit card securitization activities, the Company would replace nonconforming receivables through the allocation of excess seller’s interest or from additional transfers from the unrestricted pool of receivables. If the Company could not add enough receivables to satisfy the requirement, an early amortization (or repayment) of investors’ interests would be triggered. In its student loan securitizations, the Company would generally repurchase the loans from the trust at the outstanding principal amount plus interest.

The maximum potential amount of future payments the Company could be required to make would be equal to the current outstanding balances of third-party investor interests in credit card asset-backed securities plus the principal amount of any other outstanding secured borrowings. The Company has recorded substantially all of the maximum potential amount of future payments in long-term borrowings on the Company’s statement of financial condition. The Company has not recorded any incremental contingent liability associated with its secured borrowing representations and warranties. Management believes that the probability of having to replace, repurchase or sell assets pledged as collateral under secured borrowing arrangements, including an early amortization event, is low.

Mortgage Loans Representations and Warranties. The Company sells loans it originates to investors on a servicing released basis and the risk of loss or default by the borrower is generally transferred to the investor. However, the Company is required by these investors to make certain representations relating to credit information, loan documentation and collateral. These representations and warranties may extend through the contractual life of the mortgage loan. Subsequent to the sale, if underwriting deficiencies, borrower fraud or documentation defects are discovered in individual mortgage loans, the Companymay beobligated to repurchase the respective mortgage loan or indemnify the investors for any losses from borrower defaults if such deficiency or defect cannot be cured within the specified period following discovery. The Company has established a repurchase reserve based on expected losses. At August 31, 2012, this amount was not material and was included in other income on the condensed consolidated statements of income.

Guarantees. The Company has obligations under certain guarantee arrangements, including contracts and indemnification agreements, which contingently require the Company to make payments to the guaranteed party based on changes in an underlying asset, liability or equity security of a guaranteed party, rate or index. Also included as guarantees are contracts that contingently require the Company to make payments to a guaranteed party based on another entity’s failure to perform under an agreement. The Company’s use of guarantees is disclosed below by type of guarantee.

Counterparty Settlement Guarantees. Diners Club and DFS Services LLC, on behalf of PULSE, have various counterparty exposures, which are listed below.

• Merchant Guarantee. Diners Club has entered into contractual relationships with certain international merchants, which generally include travel-related businesses, for the benefit of all Diners Club licensees. The licensees hold the primary liability to settle the transactions of their customers with these merchants. However, Diners Club retains a counterparty exposure if a licensee fails to meet its financial payment obligation to one of these merchants.

• ATM Guarantee. PULSE entered into contractual relationships with certain international ATM acquirers in which DFS Services LLC retains counterparty exposure if an issuer fails to fulfill its settlement obligation.

The maximum potential amount of future payments related to such contingent obligations is dependent upon the transaction volume processed between the time a counterparty defaults on its settlement and the time at which the Company disables the settlement of any further transactions for the defaulting party, which could be up to one month depending on the type of guarantee/counterparty. However, there is no limitation on the maximum amount the Company may be liable to pay. The actual amount of the potential exposure cannot be quantified as the Company cannot determine whether particular counterparties will fail to meet their settlement obligations. While the Company has some contractual remedies to offset these counterparty settlement exposures (such as letters of credit or pledged deposits), in the event that all licensees and/or issuers were to become unable to settle their transactions, the Company estimates its maximum potential counterparty exposures to these settlement guarantees, based on historical transaction volume of up to one month, would be as follows:
	August 31, 2012
Diners Club:
Merchant guarantee (in millions)	$	262
PULSE:
ATM guarantee (in thousands)	$	1,045

With regard to the counterparty settlement guarantees discussed above, the Company believes that the estimated amounts of maximum potential future payments are not representative of the Company’s actual potential loss exposure given Diners Club’s and PULSE’s insignificant historical losses from these counterparty exposures. As of August 31, 2012, the Company had not recorded any contingent liability in the condensed consolidated financial statements for these counterparty exposures, and management believes that the probability of any payments under these arrangements is low.

The Company also retains counterparty exposure for the obligations of Diners Club licensees that participate in the Citishare network, an electronic funds processing network. Through the Citishare network, Diners Club customers are able to access certain ATMs directly connected to the Citishare network. The Company’s maximum potential future payment under this counterparty exposure is limited to $15 million, subject to annual adjustment based on actual transaction experience. However, as of August 31, 2012, the Company had not recorded any contingent liability in the condensed consolidated financial statements related to this counterparty exposure, and management believes that the probability of any payments under this arrangement is low.

Merchant Chargeback Guarantees. The Company issues and permits third parties to issue payment cards and owns and operates the Discover Network. The Company is contingently liable for certain transactions processed on the Discover Network in the event of a dispute between the payment card customer and a merchant. The contingent liability arises if the disputed transaction involves a merchant or merchant acquirer with whom the Discover Network has a direct relationship. If a dispute is resolved in the customer’s favor, the Discover Network will credit or refund the disputed amount to the Discover Network card issuer, who in turn credits its customer’s account. The Discover Network will then charge back the disputed amount of the payment card transaction to the merchant or merchant acquirer, where permitted by the applicable agreement, to seek recovery of amounts already paid to the merchant for payment card transactions. If the Discover Network is unable to collect the amount subject to dispute from the merchant or merchant acquirer (e.g., in the event of merchant default or dissolution) or after expiration of the time period for chargebacks in the applicable agreement, the Discover Network will bear the loss for the amount credited or refunded to the customer. In most instances, a loss by the Discover Network is unlikely to arise in connection with payments on card transactions because most products or services are delivered when purchased, and credits are issued by merchants on returned items in a timely fashion, thus minimizing the likelihood of cardholder disputes with respect to amounts paid by the Discover Network. However, where the product or service is not scheduled to be provided to the customer until a later date following the purchase, the likelihood of a contingent payment obligation by the Discover Network increases.

The maximum potential amount of obligations of the Discover Network arising as a result of such contingent obligations is estimated to be the portion of the total Discover Network transaction volume processed to date for which timely and valid disputes may be raised under applicable law and relevant issuer and customer agreements. There is no limitation on the maximum amount the Company may be liable to pay to issuers. However, the Company believes that such amount is not representative of the Company’s actual potential loss exposure based on the Company’s historical experience. The actual amount of the potential exposure cannot be quantified as the Company cannot determine whether the current or cumulative transaction volumes may include or result in disputed transactions.

The table below summarizes certain information regarding merchant chargeback guarantees:
	For the Three Months Ended August 31,					For the Nine Months Ended August 31,
	2012			2011		2012			2011
Losses related to merchant chargebacks (in thousands)(1)	$	(166	)	$	291	$	(65	)	$	1,625
Aggregate sales transaction volume (in millions)(2)	$	29,592		$	28,416	$	85,816		$	81,051

____________________

(1) Gain in three and nine months ended 2012 is due to recoveries in the current quarter which offset losses.

(2) Represents period transactions processed on the Discover Network for which a potential liability exists that, in aggregate, can differ from credit card sales volume.

The Company has not recorded any contingent liability in the condensed consolidated financial statements for merchant chargeback guarantees on August 31, 2012 and November 30, 2011. The Company mitigates the risk of potential loss exposure by withholding settlement from merchants, obtaining third-party guarantees, or obtaining escrow deposits or letters of credit from certain merchant acquirers or merchants that are considered higher risk due to various factors such as time delays in the delivery of products or services. The table below provides information regarding settlement withholdings and escrow deposits, which are recorded in interest-bearing deposit accounts, and accrued expenses and other liabilities on the Company’s condensed consolidated statements of financial condition (dollars in thousands):
	August 31, 2012		November 30, 2011
Settlement withholdings and escrow deposits	$	21,084	$	24,297

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Commitments, Contingencies and Guarantees (Guarantee Settlement) (Details) (USD $) In Thousands, unless otherwise specified	Aug. 31, 2012
Merchant Guarantee [Member] | Diners Club [Member]
Statement [Line Items]
Guarantor Obligations, Maximum Exposure, Undiscounted	$ 262,000
ATM Guarantee [Member] | PULSE [Member]
Statement [Line Items]
Guarantor Obligations, Maximum Exposure, Undiscounted	$ 1,045

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Accumulated Other Comprehensive Income (Loss)

9 Months Ended

Aug. 31, 2012

Accumulated Other Comprehensive Income (Loss), Net of Tax [Abstract]

Comprehensive Income (Loss) Note [Text Block]

Accumulated Other Comprehensive Income

Changes in each component of accumulated other comprehensive income (loss) were as follows (dollars in thousands):

	Net Unrealized Gains on securities		Derivatives			Adjustments Related to Pension and Other Post Retirement Benefits			Accumulated Other Comprehensive Income (Loss)
For the Three Months Ended August 31, 2012
Balance at May 31, 2012	$	69,583	$	4,749		$	(115,348	)	$	(41,016	)
Unrealized gain on available-for-sale investment securities, net of tax expense of $5,988	9,931		—			—			9,931
Unrealized (loss) on cash flow hedges, net of tax benefit of $142	—		(241		)	—			(241		)
Balance at August 31, 2012	$	79,514	$	4,508		$	(115,348	)	$	(31,326	)
For the Three Months Ended August 31, 2011
Balance at May 31, 2011	$	24,648	$	1,647		$	(92,653	)	$	(66,358	)
Unrealized gain on available-for-sale investment securities, net of tax expense of $22,810	38,170		—			—			38,170
Unrealized gain on cash flow hedges, net of tax expense of $4,905	—		8,208			—			8,208
Unrealized pension and post retirement benefit (loss)	$	—	$	—		$	1		$	1
Balance at August 31, 2011	$	62,818	$	9,855		$	(92,652	)	$	(19,979	)
For the Nine Months Ended August 31, 2012
Balance at November 30, 2011	$	54,888	$	7,005		$	(113,572	)	$	(51,679	)
Unrealized gain on available-for-sale investment securities, net of tax expense of $14,849	24,626		—			—			24,626
Unrealized (loss) on cash flow hedges, net of tax benefit of $1,506	—		(2,497		)	—			(2,497		)
Unrealized pension and post retirement benefit (loss), net of tax benefit of $1,920	—		—			(1,776		)	(1,776		)
Balance at August 31, 2012	$	79,514	$	4,508		$	(115,348	)	$	(31,326	)
For the Nine Months Ended August 31, 2011
Balance at November 30, 2010	$	7,921	$	2,525		$	(92,994	)	$	(82,548	)
Unrealized gain on available-for-sale investment securities, net of tax expense of $32,806	54,897		—			—			54,897
Unrealized gain on cash flow hedges, net of tax expense of $4,381	—		7,330			—			7,330
Unrealized pension and post retirement benefit gain, net of tax expense of $202	—		—			342			342
Balance at August 31, 2011	$	62,818	$	9,855		$	(92,652	)	$	(19,979	)

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Loan Receivables Loan Receivables (Troubled Debt Restructurings that Subsequently Defaulted) (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended				9 Months Ended
	Aug. 31, 2012 accounts		Aug. 31, 2011 accounts		Aug. 31, 2012 accounts		Aug. 31, 2011 accounts
Student Loans [Member]
Financing Receivable, Modifications [Line Items]
Troubled debt restructurings that subsequently defaulted, Number of accounts	28		1		63		6
Troubled debt restructurings that subsequently defaulted, Aggregated outstanding balances upon default	$ 691		$ 13		$ 1,459		$ 118
InternalPrograms [Member] | Credit Card Receivable [Member]
Financing Receivable, Modifications [Line Items]
Troubled debt restructurings that subsequently defaulted, Number of accounts	3,721	[1],[2],[3]	4,027	[1],[2],[3]	12,331	[1],[2],[3]	14,233	[1],[2],[3]
Troubled debt restructurings that subsequently defaulted, Aggregated outstanding balances upon default	24,761	[1],[2],[3]	28,191	[1],[2],[3]	83,859	[1],[2],[3]	102,113	[1],[2],[3]
InternalPrograms [Member] | Personal Loans [Member]
Financing Receivable, Modifications [Line Items]
Troubled debt restructurings that subsequently defaulted, Number of accounts	77		37		228		86
Troubled debt restructurings that subsequently defaulted, Aggregated outstanding balances upon default	882		468		2,770		1,083
External Programs [Member] | Credit Card Receivable [Member]
Financing Receivable, Modifications [Line Items]
Troubled debt restructurings that subsequently defaulted, Number of accounts	2,509	[1],[2],[3]	2,763	[1],[2],[3]	6,122	[1],[2],[3]	9,558	[1],[2],[3]
Troubled debt restructurings that subsequently defaulted, Aggregated outstanding balances upon default	$ 11,551	[1],[2],[3]	$ 13,912	[1],[2],[3]	$ 29,253	[1],[2],[3]	$ 49,956	[1],[2],[3]

[1] The outstanding balance upon default is the loan balance at the end of the month prior to default.

[2] Terms revert back to the pre-modification terms for customers who default from a temporary program and charging privileges remain revoked.

[3] A customer defaults from a modification program after two consecutive missed payments.

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Deposits

9 Months Ended

Aug. 31, 2012

Deposits [Abstract]

Deposits

Deposits

The Company offers its deposit products, including certificates of deposit, money market accounts, online savings accounts and Individual Retirement Account (IRA) certificates of deposit to customers through two channels: (i) directly through marketing, internet origination and affinity relationships (“direct-to-consumer deposits”); and (ii) indirectly through contractual arrangements with securities brokerage firms (“brokered deposits”). As of August 31, 2012 and November 30, 2011, the Company had approximately $27.7 billion and $26.2 billion, respectively, of direct-to-consumer deposits and approximately $14.5 billion and $13.3 billion, respectively, of brokered deposits.

A summary of interest-bearing deposit accounts is as follows (dollars in thousands):
	August 31, 2012			November 30, 2011
Certificates of deposit in amounts less than $100,000(1)	$	21,301,782		$	20,114,121
Certificates of deposit from amounts of $100,000(1)to less than $250,000(1)	5,352,917			5,290,405
Certificates of deposit in amounts of $250,000(1)or greater	1,216,105			1,189,779
Savings deposits, including money market deposit accounts	14,304,228			12,869,582
Total interest-bearing deposits	$	42,175,032		$	39,463,887
Average annual interest rate	2.00		%	2.57		%

____________________

(1) $100,000 represents the basic insurance amount previously covered by the FDIC. Effective July 21, 2010, the basic insurance per depositor was permanently increased to $250,000.

At August 31, 2012, certificates of deposit maturing during the remainder of 2012, over each of the next four years, and thereafter were as follows (dollars in thousands):
Year	Amount
2012	$	3,367,953
2013	$	11,499,477
2014	$	5,454,427
2015	$	3,292,971
2016	$	1,825,914
Thereafter	$	2,430,062

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Borrowings

9 Months Ended

Aug. 31, 2012

Debt Disclosure [Abstract]

Debt Disclosure

Borrowings

Long-term borrowings consist of borrowings and capital leases having original maturities of one year or more. The following table provides a summary of the Company’s long-term borrowings and weighted average interest rates on balances outstanding at period end (dollars in thousands):
	August 31, 2012				November 30, 2011
	Outstanding		Interest Rate		Outstanding		Interest Rate		Interest Rate Terms	Maturity
Securitized Debt
Fixed rate asset-backed securities
Principal value (including discount of $1,344)	$	4,548,656	2.87	%	$	1,748,742	5.65	%	Various fixed rates	Various June 2013— July 2019
Fair value adjustment(1)	7,965				—
Book value	4,556,621				1,748,742
Floating rate asset-backed securities	9,018,423		0.51	%	10,044,739		0.81	%	1-month LIBOR(2) + 8 to 65 basis points	Various December 2012— May 2017
Floating rate asset-backed securities	1,250,000		0.81	%	1,250,000		0.69	%	3-month LIBOR(2) + 34 basis points	December 2012
Floating rate asset-backed securities and other borrowings	250,000		0.91	%	250,000		0.91	%	Commercial Paper rate + 70 basis points	April 2013
Total Discover Card Master Trust I and Discover Card Execution Note Trust	15,075,044				13,293,481
Floating rate asset-backed securities (including discount of $188,798)	1,243,672		0.67	%	1,390,066		0.60	%	3-month LIBOR(2) + 12 to 45 basis points	Various January 2019— July 2036(3)
Floating rate asset-backed securities (including discount of $3,136)	558,316		4.25	%	627,072		4.25	%	Prime rate +100 basis points	June 2031(3)
Floating rate asset-backed securities (including premium of $2,139)	135,024		4.00	%	157,338		4.00	%	Prime rate + 75 basis points	July 2042(3)
Floating rate asset-backed securities (including premium of $5,162)	325,858		3.74	%	374,555		3.75	%	1-month LIBOR(2) + 350 basis points	July 2042(3)
Total SLC Private Student Loan Trusts	2,262,870				2,549,031
Total Long-Term Borrowings—owed to securitization investors	17,337,914				15,842,512
Discover Financial Services (Parent Company)
Fixed rate senior notes due 2017
Principal value (including discount of $390)	399,610		6.45	%	399,549		6.45	%	Fixed	June 2017
Fair value adjustment(1)	23,167				9,855
Book value	422,777				409,404
Fixed rate senior notes due 2019(4)	78,484		10.25	%	400,000		10.25	%	Fixed	July 2019
Fixed rate senior notes due 2022 (including discount of $112,303)(4)	209,213		5.20	%	—		—	%	Fixed	April 2022
Discover Bank
Subordinated bank notes due 2019 (including discount of $1,302)	698,698		8.70	%	698,563		8.70	%	Fixed	November 2019
Subordinated bank notes due 2020 (including discount of $2,641)	497,359		7.00	%	497,099		7.00	%	Fixed	April 2020
Floating rate secured borrowings(5)	—		—	%	437,613		0.70	%	Commercial Paper rate + 50 basis points	February 2012
Capital lease obligations	1,668		4.51	%	1,987		4.51	%	Fixed	April 2016
Total long-term borrowings	$	19,246,113			$	18,287,178

___________________

(1) The Company uses interest rate swaps to hedge portions of these long-term borrowings against changes in fair value attributable to changes in LIBOR. See Note 15: Derivatives and Hedging Activities.

(2) London Interbank Offered Rate (“LIBOR”).

(3) Repayment of this debt is dependent upon the timing of principal and interest payments on the underlying student loans. The dates shown represent final maturity dates.

(4) During second quarter 2012, the Company exchanged $321.5 million outstanding aggregate principal amount of 10.25% Senior Notes due 2019 for the same aggregate principal amount of new 5.20% Senior Notes due 2022 and a cash premium. The new 5.20% Senior Notes due 2022 are carried at a discount as a result of the cash premium paid.

(5) Under a program established by the U.S. Department of Education, this loan facility was entered into to fund certain federal student loans, which were held for sale at November 30, 2011. Upon sale of the loans during the first quarter 2012, this loan facility was assumed by the buyer.

Maturities. Long-term borrowings had the following maturities at August 31, 2012 (dollars in thousands):

Year	Amount
Due in 2012	$	109
Due in 2013	5,179,286
Due in 2014	3,789,941
Due in 2015	3,058,178
Due in 2016	400,177
Thereafter	6,818,422
Total	$	19,246,113

During the second quarter, the Company completed a private exchange offer, resulting in the exchange of $321.5 million outstanding aggregate principal amount of 10.25% Senior Notes due 2019 for the same aggregate principal amount of new 5.20% Senior Notes due 2022 and a cash premium paid of $114.5 million. On April 27, 2012, the Company issued $307.5 million aggregate principal amount and, on May 8, 2012, the Company issued $14 million aggregate principal amount, respectively, of the 5.20% Senior Notes due 2022. The Company entered into a registration rights agreement with respect to the new notes. During the three and nine months ended August 31, 2012, $1.6 million and $2.2 million of the premium paid was amortized and included in interest expense on the condensed consolidated statement of income.

The Company has access to committed undrawn capacity through private securitizations to support the funding of its credit card loan receivables. As of August 31, 2012, the total commitment of secured credit facilities through private providers was $7.5 billion, of which $250 million had been used and was included in long-term borrowings at August 31, 2012. Access to the unused portions of the secured credit facilities is dependent upon the agreement with each of the providers which have various expirations in fiscal years 2013, 2014 and 2015. Borrowings outstanding under each facility bear interest at a margin above LIBOR or the asset-backed commercial paper costs of each individual conduit provider. The terms of each agreement provide for a commitment fee to be paid on the unused capacity, and include various affirmative and negative covenants, including performance metrics and legal requirements similar to those required to issue any term securitization transaction.

Short-Term Borrowings. Short-term borrowings typically consist of overnight Federal Fundspurchased with original maturities less than one year and a warehouse line of credit. There were no outstanding Federal Funds at August 31, 2012, or at any time during the three month period. In conjunction with business activities relating to the acquisition of the assets of the Home Loan Center, the Company has a $300.0 million warehouse line of credit used to fund residential loans that are held for sale and will be secured by such loans. The term of the warehouse line of credit agreement is through May 24, 2013. The terms of the agreement includes various affirmative and negative covenants. The total outstanding borrowings on the warehouse line of credit at August 31, 2012 were$250.1 million.The weighted-average interest rate on short term borrowings was 1.13% and 1.04% for the three and nine months ended August 31, 2012. At November 30, 2011, the short-term borrowing balance outstanding was $50 million. The weighted-average interest rate on short term borrowings was 0.06% and 0.11% for the three and nine months ended August 31, 2011, respectively.

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Income Taxes

9 Months Ended

Aug. 31, 2012

Income Tax Disclosure [Abstract]

Income Taxes

Income Taxes

Income tax expense consisted of the following (dollars in thousands):
	For the Three Months Ended August 31,				For the Nine Months Ended August 31,
	2012		2011		2012			2011
Current:
U.S. federal	$	306,999	$	213,765	$	815,833		$	550,250
U.S. state and local	43,698		38,576		120,844			74,292
International	984		747		3,166			3,018
Total	351,681		253,088		939,843			627,560
Deferred:
U.S. federal	30,578		135,145		146,795			332,965
U.S. state and local	2,759		10,024		12,215			18,882
International	10		6		(9		)	7
Total	33,347		145,175		159,001			351,854
Income tax expense	$	385,028	$	398,263	$	1,098,844		$	979,414

The following table reconciles the Company’s effective tax rate to the U.S. federal statutory income tax rate:
	For the Three Months Ended August 31,				For the Nine Months Ended August 31,
	2012		2011		2012		2011
U.S. federal statutory income tax rate	35.0	%	35.0	%	35.0	%	35.0	%
U.S. state, local and other income taxes, net of U.S. federal income tax benefits	3.2		3.4		3.2		2.6
Valuation allowance - capital loss	—		—		—		(0.8	)
Other	(0.1	)	(0.4	)	(0.2	)	(0.4	)
Effective income tax rate	38.1	%	38.0	%	38.0	%	36.4	%

The Company is subject to examination by the IRS and the tax authorities in various states. The tax years under examination vary by jurisdiction. The Company is pursuing an administrative appeal of the IRS’s proposed assessment for the years 1999 through 2005, when Discover was a subsidiary of Morgan Stanley. With respect to the issues still pending on appeal for the years 1999 through 2005, the ultimate outcome remains uncertain. It is reasonably possible that a settlement related to these timing issues may be made within twelve months of the reporting date. At this time, the Company believes it is reasonably possible that a reduction in the amount of unrecognized tax benefits of $85 million could be recognized as a result of such settlement.

The IRS is currently examining 2006 through June 20, 2007. This period is also part of a Morgan Stanley audit. A separate post-spin examination covers the years 2008 through 2010. The Company regularly assesses the likelihood of additional assessments or settlements in each of the taxing jurisdictions resulting from these and subsequent years' examinations. The Company believes that its reserves are sufficient to cover any tax, penalties and interest that could result from such examinations.

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Loan Receivables Loan Receivables (Mortgage Loans Held for Sale) (Details) (USD $) In Thousands, unless otherwise specified	9 Months Ended
	Aug. 31, 2012		Nov. 30, 2011
Mortgage Loans on Real Estate [Line Items]
Loans Held-for-sale, Mortgages	$ 272,082		$ 0
Loans Held for Sale, Mortgages, Percent	100.00%
Conforming Loans [Member]
Mortgage Loans on Real Estate [Line Items]
Loans Held-for-sale, Mortgages	183,666	[1]
Loans Held for Sale, Mortgages, Percent	67.50%	[1]
FHA Loans [Member]
Mortgage Loans on Real Estate [Line Items]
Loans Held-for-sale, Mortgages	$ 88,416	[2]
Loans Held for Sale, Mortgages, Percent	32.50%	[2]

[1] Conforming loans are loans that conform to Government Sponsored Enterprises guidelines.

[2] FHA loans are loans that are insured by the Federal Housing Administration typically for borrowers with low down payments and loan amounts meeting certain limits.

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Commitments, Contingencies and Guarantees (Merchant Chargeback Guarantee) (Details) (Merchant Chargebacks [Member], USD $)	3 Months Ended				9 Months Ended
	Aug. 31, 2012		Aug. 31, 2011		Aug. 31, 2012		Aug. 31, 2011
Merchant Chargebacks [Member]
Losses related to merchant chargebacks	$ (166,000)	[1]	$ 291,000		$ (65,000)	[1]	$ 1,625,000
Aggregate sales transaction volume	$ 29,592,000,000	[2]	$ 28,416,000,000	[2]	$ 85,816,000,000	[2]	$ 81,051,000,000	[2]

[1] Gain in three and nine months ended 2012 is due to recoveries in the current quarter which offset losses.

[2] Represents period transactions processed on the Discover Network for which a potential liability exists that, in aggregate, can differ from credit card sales volume.

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Credit Card and Student Loan Securitization Activities (Carrying Value of the Company's Credit Card Consolidated Variable Interest Entities) (Details) (USD $) In Thousands, unless otherwise specified	Aug. 31, 2012		May 31, 2012	Nov. 30, 2011		Aug. 31, 2011	May 31, 2011	Nov. 30, 2010
Restricted cash	$ 301,349			$ 1,285,820
Loan receivables	48,124,468			46,638,625
Allowance for loan losses allocated to securitized loan receivables	(1,687,664)		(1,869,253)	(2,205,196)		(2,273,058)	(2,632,320)	(3,304,118)
Other	2,433,255			2,383,793
Variable Interest Entity, Primary Beneficiary [Member]
Restricted cash	295,439			1,274,175
Other	33,638			33,724
Variable Interest Entity, Primary Beneficiary [Member] | Credit Card Securitization Trusts [Member]
Restricted cash	210,772			1,164,300
Investors' interests held by third-party investors	15,068,423			13,294,739
Investors' interests held by wholly owned subsidiaries of Discover Bank	4,805,402			5,157,536
Seller's interest	13,643,757			15,363,585
Loan receivables	33,517,582	[1]		33,815,860	[1]
Allowance for loan losses allocated to securitized loan receivables	(1,074,058)	[1]		(1,510,730)	[1]
Net loan receivables	32,443,524			32,305,130
Other	33,123			26,506
Carrying value of assets of consolidated variable interest entities	32,687,419			33,495,936
Variable Interest Entity, Primary Beneficiary [Member] | Credit Card Securitization Trusts [Member] | Cash Collateral Accounts [Member]
Restricted cash	147,632			187,105
Variable Interest Entity, Primary Beneficiary [Member] | Credit Card Securitization Trusts [Member] | Collections and Interest Funding Accounts [Member]
Restricted cash	$ 63,140			$ 977,195

[1] The Company maintains its allowance for loan losses at an amount sufficient to absorb probable losses inherent in all loan receivables, which includes all loan receivables in the trusts. Therefore, credit risk associated with the transferred receivables is fully reflected on the Company’s balance sheet in accordance with GAAP.

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Loan Receivables Loan Receivables (Initial Unpaid Principal Balance of Mortgage Loans Sold) (Details) (USD $) In Millions, unless otherwise specified	9 Months Ended
	Aug. 31, 2012
Mortgage Loans on Real Estate [Line Items]
Mortgage Loans on Real Estate, Initial Unpaid Principal Balance of Mortgages Sold	$ 528.0
Mortgage Loans on Real Estate, Initial Unpaid Principal Balance of Mortgages Sold, Percent	100.00%
Conforming Loans [Member]
Mortgage Loans on Real Estate [Line Items]
Mortgage Loans on Real Estate, Initial Unpaid Principal Balance of Mortgages Sold	396.5	[1]
Mortgage Loans on Real Estate, Initial Unpaid Principal Balance of Mortgages Sold, Percent	75.09%	[1]
FHA Loans [Member]
Mortgage Loans on Real Estate [Line Items]
Mortgage Loans on Real Estate, Initial Unpaid Principal Balance of Mortgages Sold	$ 131.5	[2]
Mortgage Loans on Real Estate, Initial Unpaid Principal Balance of Mortgages Sold, Percent	24.91%	[2]

[1] Conforming loans are loans that conform to Government Sponsored Enterprises guidelines.

[2] FHA loans are loans that are insured by the Federal Housing Administration typically for borrowers with low down payments and loan amounts meeting certain limits.The following table represents the loans held for sale by type of loan as of August 31, 2012 (dollars in thousands): At August 31, 2012 Amount %Conforming(1)$183,666 67.50%FHA(2)88,416 32.50%Total$272,082 100.00%

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Fair Value Disclosures Fair Value Disclosures (Assets and Liabilities Not Required to be Carried at Fair Value on a Recurring Basis) (Details) (Fair Value, Measurements, Nonrecurring [Member], USD $) In Thousands, unless otherwise specified	Aug. 31, 2012
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Held-to-maturity investment securities	$ 92,268
Cash and cash equivalents	6,237,610
Restricted cash	301,349
Net loans receivable	59,047,925
Other Assets	486,798
Deposits	42,854,843
Short-term Debt, Fair Value	250,139
Other liabilities	164,080
Variable Interest Entity, Primary Beneficiary [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Long-term borrowings	17,770,806
Consolidated Entity Excluding Variable Interest Entities (VIE) [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Long-term borrowings	2,360,016
U.S. Treasury Securities [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Held-to-maturity investment securities	550
States and Political Subdivisions of States [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Held-to-maturity investment securities	35,174
Agency Residential Mortgage-Backed Securities [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Held-to-maturity investment securities	56,544
Carrying (Reported) Amount, Fair Value Disclosure [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Held-to-maturity investment securities	90,005
Cash and cash equivalents	6,237,610
Restricted cash	301,349
Net loans receivable	57,469,848
Other Assets	486,798
Deposits	42,318,312
Short-term Debt, Fair Value	250,139
Other liabilities	164,080
Carrying (Reported) Amount, Fair Value Disclosure [Member] | Variable Interest Entity, Primary Beneficiary [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Long-term borrowings	17,337,914
Carrying (Reported) Amount, Fair Value Disclosure [Member] | Consolidated Entity Excluding Variable Interest Entities (VIE) [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Long-term borrowings	1,908,199
Carrying (Reported) Amount, Fair Value Disclosure [Member] | U.S. Treasury Securities [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Held-to-maturity investment securities	550
Carrying (Reported) Amount, Fair Value Disclosure [Member] | States and Political Subdivisions of States [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Held-to-maturity investment securities	35,242
Carrying (Reported) Amount, Fair Value Disclosure [Member] | Agency Residential Mortgage-Backed Securities [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Held-to-maturity investment securities	54,213
Level 1 [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Held-to-maturity investment securities	550
Cash and cash equivalents	6,237,610
Restricted cash	301,349
Net loans receivable	0
Other Assets	0
Deposits	0
Short-term Debt, Fair Value	0
Other liabilities	0
Level 1 [Member] | Variable Interest Entity, Primary Beneficiary [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Long-term borrowings	0
Level 1 [Member] | Consolidated Entity Excluding Variable Interest Entities (VIE) [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Long-term borrowings	0
Level 1 [Member] | U.S. Treasury Securities [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Held-to-maturity investment securities	550
Level 1 [Member] | States and Political Subdivisions of States [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Held-to-maturity investment securities	0
Level 1 [Member] | Agency Residential Mortgage-Backed Securities [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Held-to-maturity investment securities	0
Level 2 [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Held-to-maturity investment securities	91,718
Cash and cash equivalents	0
Restricted cash	0
Net loans receivable	0
Other Assets	486,798
Deposits	42,854,843
Short-term Debt, Fair Value	250,139
Other liabilities	164,080
Level 2 [Member] | Variable Interest Entity, Primary Beneficiary [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Long-term borrowings	15,365,667
Level 2 [Member] | Consolidated Entity Excluding Variable Interest Entities (VIE) [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Long-term borrowings	2,358,219
Level 2 [Member] | U.S. Treasury Securities [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Held-to-maturity investment securities	0
Level 2 [Member] | States and Political Subdivisions of States [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Held-to-maturity investment securities	35,174
Level 2 [Member] | Agency Residential Mortgage-Backed Securities [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Held-to-maturity investment securities	56,544
Level 3 [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Held-to-maturity investment securities	0
Cash and cash equivalents	0
Restricted cash	0
Net loans receivable	59,047,925
Other Assets	0
Deposits	0
Short-term Debt, Fair Value	0
Other liabilities	0
Level 3 [Member] | Variable Interest Entity, Primary Beneficiary [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Long-term borrowings	2,405,139
Level 3 [Member] | Consolidated Entity Excluding Variable Interest Entities (VIE) [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Long-term borrowings	1,797
Level 3 [Member] | U.S. Treasury Securities [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Held-to-maturity investment securities	0
Level 3 [Member] | States and Political Subdivisions of States [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Held-to-maturity investment securities	0
Level 3 [Member] | Agency Residential Mortgage-Backed Securities [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Held-to-maturity investment securities	$ 0

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Earnings Per Share (Tables)

9 Months Ended

Aug. 31, 2012

Earnings Per Share [Abstract]

Schedule of Basic and Diluted EPS

The following table presents the calculation of basic and diluted earnings per share ("EPS") (in thousands, except per share amounts):
	For the Three Months Ended August 31,						For the Nine Months Ended August 31,
	2012			2011			2012			2011
Numerator:
Net income	$	626,686		$	648,818		$	1,794,283		$	1,714,129
Income allocated to participating securities	(5,916		)	(7,046		)	(17,513		)	(19,493		)
Net income allocated to common stockholders	$	620,770		$	641,772		$	1,776,770		$	1,694,636
Denominator:
Weighted average shares of common stock outstanding	512,793			544,438			523,462			544,997
Effect of dilutive common stock equivalents	1,169			743			1,181			701
Weighted average shares of common stock outstanding and common stock equivalents	513,962			545,181			524,643			545,698
Basic earnings per share	$	1.21		$	1.18		$	3.39		$	3.11
Diluted earnings per share	$	1.21		$	1.18		$	3.39		$	3.11

Schedule of Anti-dilutive Securities Excluded from Computation of EPS

The following securities were considered anti-dilutive and therefore were excluded from the denominator in the computation of diluted EPS (shares in thousands):
	For the Three Months Ended August 31,		For the Nine Months Ended August 31,
	2012	2011	2012	2011
Unexercised stock options	—	348	2	374

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Loan Receivables (Loan Receivables) (Details) (USD $) In Thousands, unless otherwise specified	9 Months Ended
	Aug. 31, 2012		Aug. 31, 2011	May 31, 2012	Nov. 30, 2011		May 31, 2011	Nov. 30, 2010
Accounts, Notes, Loans and Financing Receivable [Line Items]
Student loans held for sale	$ 0				$ 714,180
Loans Held-for-sale, Mortgages	272,082				0
Credit card loans	48,124,468				46,638,625
Other loans	5,893,952				4,733,742
Purchased credit-impaired loans, Carrying Amount, Net	4,867,010				5,250,388
Total loan portfolio	58,885,430				56,622,755
Total loan receivables	59,157,512				57,336,935
Allowance for loan losses	(1,687,664)		(2,273,058)	(1,869,253)	(2,205,196)		(2,632,320)	(3,304,118)
Loans Receivable, Net	57,469,848				55,131,739
Loss on sale of loans and leases	48,541		6,154
Personal Loans [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Other loans	3,114,408				2,648,051
Private Student Loans (Excluding PCI) [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Other loans	2,752,715				2,069,001
Other Loans [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Other loans	26,829				16,690
Loans Held For Sale [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Student loans held for sale	0	[1]			714,180	[1]
Loans Held-for-sale, Mortgages	272,082	[2]			0	[2]
Loss on sale of loans and leases	(518)
Federal Student Loans Pledged as Collateral [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Student loans held for sale					446,600
Loan Portfolio [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total loan portfolio	58,885,430				56,622,755
Credit Card Receivable [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Credit card loans	48,124,468				46,638,625
Total loan portfolio	48,124,468				46,638,625
Allowance for loan losses	(1,522,263)				(2,070,161)
Credit Card Receivable [Member] | Discover Card [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Credit card loans	47,915,177	[3]			46,419,544	[3]
Credit Card Receivable [Member] | Investors Interest in Trust Debt [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Credit card loans	19,900,000				18,500,000
Credit Card Receivable [Member] | Discover Business Card [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Credit card loans	209,291				219,081
Total Other Loans [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Other loans	5,893,952				4,733,742
Total Other Loans [Member] | Personal Loans [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total loan portfolio	3,114,408				2,648,051
Allowance for loan losses	(96,356)				(82,075)
Total Other Loans [Member] | Other Loans [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total loan portfolio	26,829				16,690
Allowance for loan losses	(783)				(220)
PCI Student Loans [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Purchased credit-impaired loans, Carrying Amount, Net	4,867,010	[4]			5,250,388	[4]
Private Student Loans Eligible for Reimbursement [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Purchased credit-impaired loans, Carrying Amount, Net	14,700				12,800
Private Student Loans Pledged as Collateral [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Purchased credit-impaired loans, Carrying Amount, Net	2,600,000				2,800,000
Private Student Loans Not Pledged as Collateral [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Purchased credit-impaired loans, Carrying Amount, Net	2,300,000				2,500,000
Credit Card Securitization Trusts [Member] | Variable Interest Entity, Primary Beneficiary [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Credit card loans	33,517,582	[5]			33,815,860	[5]
Allowance for loan losses	(1,074,058)	[5]			(1,510,730)	[5]
Sellers' interest	$ 13,643,757				$ 15,363,585

[1] Amount represents federal student loans. At November 30, 2011, $446.6 million of federal student loan receivables were pledged as collateral against a long-term borrowing. During first quarter 2012, Discover Bank sold these loans and recorded a loss of $518 thousand. As a part of this transaction, the related borrowings were assumed by the purchaser.

[2] All mortgage loans held for sale are pledged as collateral against the warehouse line of credit used to fund consumer residential loans. See Note 7: Borrowings.

[3] Amounts include $19.9 billion and $18.5 billion underlying investors’ interest in trust debt at August 31, 2012 and November 30, 2011, respectively, and $13.6 billion and $15.4 billion in seller’s interest at August 31, 2012 and November 30, 2011, respectively. See Note 5: Credit Card and Student Loan Securitization Activities for further information.

[4] Amounts include $2.6 billion and $2.8 billion of loans pledged as collateral against the notes issued from the SLC securitization trusts at August 31, 2012 and November 30, 2011, respectively. See Note 5: Credit Card and Student Loan Securitization Activities. Of the remaining $2.3 billion and $2.5 billion at August 31, 2012 and November 30, 2011, respectively, that were not pledged as collateral, approximately $14.7 million and $12.8 million represent loans eligible for reimbursement through an indemnification claim. Discover Bank must purchase such loans from the trust before a claim may be filed.

[5] The Company maintains its allowance for loan losses at an amount sufficient to absorb probable losses inherent in all loan receivables, which includes all loan receivables in the trusts. Therefore, credit risk associated with the transferred receivables is fully reflected on the Company’s balance sheet in accordance with GAAP.

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Fair Value Disclosures

9 Months Ended

Aug. 31, 2012

Fair Value Disclosures [Abstract]

Fair Value Disclosures

Fair Value Disclosures

Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. ASC 820, fair value accounting guidance, provides a three-level hierarchy for classifying financial instruments, the hierarchy of which is based on whether the inputs to the valuation techniques used to measure the fair value of each financial instrument are observable or unobservable. ASC 820 defines fair value, establishes a fair value hierarchy that distinguishes between valuations that are based on observable inputs from those based on unobservable inputs, and requires certain disclosures about those measurements. The three level valuation hierarchy is as follows:

• Level 1: Fair values determined by Level 1 inputs are defined as those that utilize quoted prices (unadjusted) in active markets for identical assets or liabilities that the Company has the ability to access.

• Level 2: Fair values determined by Level 2 inputs are those that utilize inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly or indirectly. Level 2 inputs include quoted prices for similar assets and liabilities in active or inactive markets, quoted prices for the identical assets in an inactive market, and inputs other than quoted prices that are observable for the asset or liability, such as interest rates and yield curves that are observable at commonly quoted intervals. The Company evaluates factors such as the frequency of transactions, the size of the bid-ask spread and the significance of adjustments made when considering transactions involving similar assets or liabilities to assess the relevance of those observed prices. If relevant and observable prices are available, the fair values of the related assets or liabilities would be classified as Level 2.

• Level 3: Fair values determined by Level 3 inputs are those based on unobservable inputs, and include situations where there is little, if any, market activity for the asset or liability being valued. In instances in which the inputs used to measure fair value may fall into different levels of the fair value hierarchy, the level in the fair value hierarchy within which the fair value measurement in its entirety is classified is based on the lowest level input that is significant to the fair value measurement in its entirety. The Company may utilize both observable and unobservable inputs in determining the fair values of financial instruments classified within the Level 3 category.

The determination of classification of its financial instruments within the fair value hierarchy is performed at least quarterly by the Company. For transfers in and out of the levels of the fair value hierarchy, the Company discloses the fair value measurement based on the value immediately preceding the transfer.

The Company's assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment, and involves consideration of factors specific to the asset or liability. Furthermore, certain techniques used to measure fair value involve some degree of judgment and, as a result, are not necessarily indicative of the amounts the Company would realize in a current market exchange.

During the three and nine ended August 31, 2012, there were no changes to the Company valuation techniques that had, or are expected to have, a material impact on its condensed consolidated financial position or results of operations.

Assets and Liabilities Measured at Fair Value on a Recurring Basis.

Assets and liabilities measured at fair value on a recurring basis are as follows (dollars in thousands):
	Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Total
Balance at August 31, 2012
Assets
U.S Treasury securities	$	2,470,898	$	—	$	—	$	2,470,898
U.S government agency securities	2,319,285		—		—		2,319,285
Credit card asset-backed securities of other issuers	—		164,294		—		164,294
Corporate debt securities	—		145,529		—		145,529
Residential mortgage-backed securities - Agency	—		1,277,496		—		1,277,496
Available-for-sale investment securities	$	4,790,183	$	1,587,319	$	—	$	6,377,502
Mortgage loans held for sale	$	—	$	272,082	$	—	$	272,082
Interest rate lock commitments	$	—	$	—	$	17,448	$	17,448
Forward delivery contracts	—		984		95		1,079
Other derivative financial instruments	—		117,681		—		117,681
Derivative financial instruments	$	—	$	118,665	$	17,543	$	136,208
Liabilities
Interest rate lock commitments	$	—	$	—	$	34	$	34
Forward delivery contracts	—		4,668		6		4,674
Other derivative financial instruments	—		68		—		68
Derivative financial instruments	$	—	$	4,736	$	40	$	4,776
Balance at November 30, 2011
Assets
U.S Treasury securities	$	2,563,250	$	—	$	—	$	2,563,250
U.S government agency securities	2,795,223		—		—		2,795,223
Credit card asset-backed securities of other issuers	—		299,889		—		299,889
Corporate debt securities	—		449,469		—		449,469
Available-for-sale investment securities	$	5,358,473	$	749,358	$	—	$	6,107,831
Derivative financial instruments	$	—	$	63,576	$	—	$	63,576
Liabilities
Derivative financial instruments	$	—	$	448	$	—	$	448

There were no transfers between Levels 1 and 2 within the fair value hierarchy for the three and nine months ended August 31, 2012 and August 31, 2011.

Available-for-sale investment securities. Investment securities classified as available-for-sale consist of U.S. Treasury and government agency securities, residential mortgage-backed securities, corporate debt and credit card asset-back securities issued by other financial institutions. The fair value estimates of investment securities classified as Level 1, consisting of U.S. Treasury and government agency securities, are determined based on quoted market prices for the same or similar securities. The Company classifies all other available-for-sale investment securities as Level 2, the fair value estimates of which are primarily obtained from pricing services, where fair values are estimated using pricing models based on observable market inputs or recent trades of similar securities. The fair value estimates of mortgage-backed and credit card asset-backed securities are based on the best information available. This data may consist of observed market prices, broker quotes or discounted cash flow models that incorporate assumptions such as benchmark yields, issuer spreads, prepayment speeds, credit ratings and losses, the priority of which may vary based on availability of information. The fair value estimates for corporate debt obligations issued under the Temporary Liquidity Guarantee Program (“TLGP”) are derived utilizing a spread relative to an underlying benchmark curve which reflects the terms and conditions of specific instruments being valued.

The Company validates the fair value estimates provided by the pricing services primarily by comparison to valuations obtained through other pricing sources. The Company evaluates pricing variances amongst different pricing sources to ensure that the valuations utilized are reasonable. The Company also corroborates the reasonableness of the fair value estimates with analysis of trends of significant inputs, such as market interest rate curves. The Company further performs due diligence in understanding the procedures and techniques performed by the pricing services to derive fair value estimates.

At August 31, 2012, amounts reported in credit card asset-backed securities issued by other institutions reflected senior-rated Class A securities having a par value of $139 million and more junior-rated Class B and Class C securities with par values of $22 million and $4 million, respectively. The Class A securities had a weighted-average coupon of 0.46% and a weighted-average remaining maturity of 8 months; the Class B, 0.55% and 8 months, respectively; and the Class C, 0.64% and 7 months, respectively. The assets underlying these securities are predominantly prime general-purpose credit card loan receivables. Amounts reported in corporate debt securities reflect government-rated corporate debt obligations issued under TLGP that are guaranteed by the FDIC with a par value of $145 million, a weighted-average coupon of 2.11% and a weighted-average remaining maturity of 2 months. Amounts reported in residential mortgage-backed securities reflect government-rated obligations issued by the Federal National Mortgage Association with a par value of $1.2 billion, a weighted-average coupon of 2.85% and a weighted-average remaining maturity of 4 years.

Mortgage loans held for sale and related derivative instruments. The Company enters into commitments with consumers to originate mortgage loans at a specified interest rate, known as interest rate lock commitments (“IRLCs”). The Company reports IRLCs as derivative instruments at fair value with changes in fair value being recorded in other income and other expense. IRLCs and mortgage loans held for sale under certain loan programs are hedged in aggregate using “to be announced mortgage-backed securities” (“TBA MBS”). IRLCs and mortgage loans held for sale under loan programs that generally have lower volume are hedged on an individual loan level using best-efforts forward delivery contracts.

Fair values for each of these instruments are determined using quantitative risk models. The Company has various monitoring processes in place to validate these valuations, including valuations of Level 3 assets. Valuation results are reviewed in comparison to expected results, recent activity, and historical trends. Any significant or unusual fluctuations in value are analyzed.

•Mortgage loans held for sale. Valuations of mortgage loans held for sale are based on the loan amount, note rate, loan program, expected sale date of the loan and, most significantly, investor pricing tables stratified by product, note rate and term, adjusted for current market conditions. Mortgage loans held for sale are classified as Level 2 as the investor pricing tables used to value them are an observable input. The Company recognizes interest income separately from changes in fair value.

•Interest rate lock commitments. IRLCs for loans to be sold to investors using a mandatory or assignment of trade method derive their base value from an underlying loan type with similar characteristics using the TBA MBS market, which is actively quoted and easily validated through external sources. The data inputs used in this valuation include, but are not limited to, loan type, underlying loan amount, note rate, loan program, and expected sale date of the loan. IRLCs for loans to be sold to investors on a best-efforts basis derive their base value from the value of the underlying loans using investor pricing tables stratified by product, note rate and term, adjusted for current market conditions. These valuations are adjusted at the loan level to consider the servicing release premium and loan pricing adjustments specific to each loan. For all IRLCs, this base value is then adjusted for the anticipated loan funding probability, or pull through rate. The anticipated loan funding probability is an unobservable input based on historical experience, which results in classification of IRLCs as Level 3.

•Forward delivery contracts.Under the Company's risk management policy, the Company economically hedges the changes in fair value of IRLCs and mortgage loans held for sale caused by changes in interest rates by using TBA MBS and entering into best-efforts forward delivery contracts. These hedging instruments are recorded at fair value with changes in fair value recorded in other income. TBA MBS used to hedge both IRLCs and loans held for sale are valued based primarily on observable inputs related to characteristics of the underlying MBS stratified by product, coupon and settlement date. Therefore, these derivatives are classified as Level 2. Best-efforts forward delivery contracts are valued based on investor pricing tables, which are observable inputs, stratified by product, note rate, and term, adjusted for current market conditions. An anticipated loan funding probability is applied to value best-efforts contracts hedging IRLCs, which results in the classification of these contracts as Level 3. The current base loan price and, for best-efforts contracts hedging IRLCs, the anticipated loan funding probability, are the most significant assumptions affecting the value of the best-efforts contracts. The best-efforts forward delivery contracts hedging loans held for sale are classified as Level 2, so such contracts are transferred from Level 3 to Level 2 at the time the underlying loan is originated. For the purposes of the tables below, we refer to TBA MBA and best-efforts forward delivery contracts as “Forward delivery contracts”.

Other derivative financial instruments. The Company's other derivative financial instruments consist of interest rate swaps and foreign currency forward contracts. The fair value of these instruments is estimated by a third-party valuation service that uses proprietary pricing models, where certain inputs to those models are readily observable market-based inputs, including interest rate curves and option volatility. In determining fair values, the pricing models use widely accepted valuation techniques including discounted cash flow analysis on the expected cash flows of each derivative. This analysis reflects the contractual terms of the derivatives, including the period to maturity and uses observable market-based inputs. The fair values of the interest rate swaps are determined using the market standard methodology of netting the discounted future fixed cash receipts (or payments) and the discounted expected variable cash payments (or receipts). The variable cash payments are based on an expectation of future interest rates derived from observable market interest rate curves. The Company considers collateral and legally enforceable master netting agreements that mitigate credit exposure to counterparties in determining the counterparty credit risk valuation adjustment.

The Company validates the fair value estimates of interest rate swaps primarily through comparison to the fair value estimates computed by the counterparty's to each the derivative transactions. The Company evaluates pricing variances amongst different pricing sources to ensure that the valuations utilized are reasonable. The Company also corroborates the reasonableness of the fair value estimates with analysis of trends of significant inputs, such as market interest rate curves. The Company performs due diligence in understanding the impact to any changes to the valuation techniques performed by proprietary pricing models prior to implementation, working closely with the third-party valuation service, and reviews the control objectives of the service at least annually. The Company corroborates the fair value of foreign currency forward contracts through independent calculation of the fair value estimates.

Assets and liabilities under the fair value option. Beginning in June 2012, the Company elected to account for mortgage loans held for sale at fair value. Electing the fair value option allows a better offset of the changes in fair values of the loans and the forward delivery contracts used to economically hedge them without the burden of complying with the requirements for hedge accounting. At August 31, 2012, the aggregate unpaid principal balance of loans held for sale for which the fair value option had been elected was $259.9 million. The same loans had a fair value of $272.1 million at August 31, 2012.

Level 3 Financial Instruments Only

The following tables provide changes in the Company’s Level 3 assets and liabilities measured at fair value on a recurring basis. There were no Level 3 assets or liabilities measured at fair value on a recurring basis at any point during the three months ended August 31, 2011.
Changes in Level 3 Assets and Liabilities Measured at Fair Value on a Recurring Basis (dollars in thousands)
For the Three Months Ended August 31, 2012
	Balance at May 31, 2012		Transfers into Level 3		Transfers out of Level 3			Total net gains (losses) included in earnings		Purchases		Sales			Settlements			Transfers of IRLCs to closed loans			Balance at August 31, 2012
Interest rate lock commitments	$	—	$	—	$	—		$	49,437	$	4,757	$	—		$	(202	)	$	(36,578	)	$	17,414
Forward delivery contracts	$	—	$	—	$	(734	)	$	802	$	21	$	—		$	—		$	—		$	89
For the Nine Months Ended August 31, 2012
	Balance at November 30, 2011		Transfers into Level 3		Transfers out of Level 3			Total net gains (losses) included in earnings		Purchases		Sales			Settlements			Transfers of IRLCs to closed loans			Balance at August 31, 2012
Interest rate lock commitments	$	—	$	—	$	—		$	49,437	$	4,757	$	—		$	(202	)	$	(36,578	)	$	17,414
Forward delivery contracts	$	—	$	—	$	(734	)	$	802	$	21	$	—		$	—		$	—		$	89
For the Nine Months Ended August 31, 2011
	Balance at November 30, 2010		Transfers into Level 3		Transfers out of Level 3			Total net gains (losses) included in earnings		Purchases		Sales			Settlements			Transfers of IRLCs to closed loans			Balance at August 31, 2011
Equity securities	$	17	$	—	$	—		$	144	$	—	$	(161	)	$	—		$	—		$	—

Unobservable inputs and sensitivities

The following table presents information about significant unobservable inputs related to the Company's Level 3 financial assets and liabilities measured at fair value on a recurring and non-recurring basis as of August 31, 2012.
	Fair Value		Valuation Technique	Significant Unobservable Input	Ranges of Inputs
					Low		High
Interest rate lock commitments	$	17,414	Quantitative risk models	Loan funding probability	20	%	95	%
Forward delivery contracts	$	89	Quantitative risk models	Loan funding probability	28	%	99	%

The anticipated loan funding probability represents the Company's expectation regarding the percentage of IRLCs that will ultimately be funded. Generally, an increase in the anticipated loan funding probability would result in an increase in the magnitude of fair value measurements.

Assets and Liabilities Measured at Fair Value on a Non-Recurring Basis. The Company also has assets that under certain conditions are subject to measurement at fair value on a non-recurring basis. These assets include those associated with acquired businesses, including goodwill and other intangible assets. For these assets, measurement at fair value in periods subsequent to their initial recognition is applicable if one or more is determined to be impaired. During the three and nine months ended August 31, 2012 and August 31, 2011, the Company had no impairments related to these assets. Fair value adjustments for student loans held for sale were periodically recorded in other income in the consolidated statements of income. There were no gains or losses related to student loans held for sale during the three months ended August 31, 2012. During the nine months ended August 31, 2012, the Company recorded a loss of $518 thousand related to the sale of student loans held for sale. During the three and nine months ended August 31, 2011, the Company recorded gains related to student loans held for sale of $0.1 million and $6.2 million, respectively.

Financial Instruments Measured at Other Than Fair Value

The following table discloses the estimated fair value of the Company's financial assets and financial liabilities that are not required to be carried at fair value, as of August 31, 2012 (dollars in thousands):
	Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Total		Carrying Value
Balance at August 31, 2012
Assets
U.S Treasury securities	$	550	$	—	$	—	$	550	$	550
States and political subdivisions of states	—		35,174		—		35,174		35,242
Residential mortgage-backed securities - Agency	—		56,544		—		56,544		54,213
Held-to-maturity investment securities	$	550	$	91,718	$	—	$	92,268	$	90,005
Cash and cash equivalents	$	6,237,610	$	—	$	—	$	6,237,610	$	6,237,610
Restricted cash	$	301,349	$	—	$	—	$	301,349	$	301,349
Net loan receivables	$	—	$	—	$	59,047,925	$	59,047,925	$	57,469,848
Accrued interest receivables	$	—	$	486,798	$	—	$	486,798	$	486,798
Liabilities
Deposits	$	—	$	42,854,843	$	—	$	42,854,843	$	42,318,312
Short-term borrowings	$	—	$	250,139	$	—	$	250,139	$	250,139
Long-term borrowings - owed to securitization investors	$	—	$	15,365,667	$	2,405,139	$	17,770,806	$	17,337,914
Other long-term borrowings	$	—	$	2,358,219	$	1,797	$	2,360,016	$	1,908,199
Accrued interest payables	$	—	$	164,080	$	—	$	164,080	$	164,080

The fair values of these financial assets and liabilities, which are not carried at fair value on the condensed consolidated statements of financial condition, were determined applying the fair value provisions discussed herein. The use of different assumptions or estimation techniques may have a material effect on these estimated fair value amounts. The following describes the valuation techniques of these financial instruments measured at other than fair values.

Cash and cash equivalents. The carrying value of cash and cash equivalents approximates fair value due to the low level of risk these assets present to the Company as well as the relatively liquid nature of these assets, particularly given their short maturities.

Restricted cash. The carrying value of restricted cash approximates fair value due to the low level of risk these assets present to the Company as well as relatively liquid nature of these assets, particularly given their short maturities.

Held-to-maturity investment securities. Held-to-maturity investment securities consist of residential mortgage-backed securities issued by agencies and municipal bonds. The fair value of residential mortgage-backed securities included in the held-to-maturity portfolio is estimated similarly to residential mortgage-backed securities carried at fair value on a recurring basis discussed herein. Municipal bonds are valued based on quoted market prices for the same or similar securities.

Total loan portfolio. The Company's loan receivables are comprised of credit card and installment loans, including the PCI student loans. Fair value estimates are derived utilizing discounted cash flow analyses, the calculations of which are performed on groupings of loan receivables that are similar in terms of loan type and characteristics. Inputs to the cash flow analysis of each grouping consider recent pre-payment and interest accrual trends and leverage forecasted loss estimates. The expected future cash flows of each grouping are discounted at rates at which similar loans within each grouping could be made under current market conditions. Significant inputs to the fair value measurement of the loan portfolio are unobservable, and as such are classified as Level 3.

Accrued interest receivable. For the Company's accrued interest receivable, which is included in other assets on the statement of financial condition, the carrying value approximates fair value as it is short-term in nature and is due in less than one year.

Deposits. The carrying values of money market deposits, savings deposits and demand deposits approximate fair value due to the potentially liquid nature of these deposits. For time deposits for which readily available market rates do not exist, fair values are estimated by discounting expected future cash flows using market rates currently offered for deposits with similar remaining maturities.

Short-term borrowings. The carrying values of short-term borrowings approximate fair value as they are short term in nature and have maturities of less than one year.

Long-term borrowings-owed to securitization investors. Fair values of long-term borrowings owed to credit card securitization investors are determined utilizing quoted market prices of the same transactions, and as such are classified as Level 2. Fair values of long-term borrowings owed to student loan securitization investors are calculated by discounting cash flows using estimated assumptions including, among other things, maturity and market discount rates. Significant inputs to these fair value measurements are unobservable, and as such, are classified as Level 3.

Other long-term borrowings. Fair values of other long-term borrowings, consisting of subordinated debt and unsecured debt, are determined utilizing current observable market prices for those transactions, and as such are classified as Level 2. Fair values of other long-term borrowing for which there are no observable market transactions, namely capitalized leases, are determined by discounting cash flows of future interest accruals at market rates currently offered for borrowings with similar credit risks, remaining maturities and repricing terms. As the significant inputs to these fair value measurements are unobservable, they are classified as Level 3.

Accrued interest payable. The Company's accrued interest payable, which is included in other liabilities on the statement of financial condition, carrying value approximates fair value as it is short term in nature and is payable in less than one year.

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Business Combinations (Tables)

9 Months Ended

Aug. 31, 2012

Business Combinations [Abstract]

Calculation of Trust Certificate Purchase Price

Net cash consideration paid. The following table provides a calculation of the amount paid by the Company for SLC based on the net assets of the SLC securitization trusts acquired after applying an 8.5% discount to the trust assets (the “Trust Certificate Purchase Price”) (dollars in millions):
	Actual
Gross trust assets	$	3,977
Less: 8.5% discount	(338		)
Net trust assets	3,639
Less: Principal amount of and accrued interest on trust debt	(3,193		)
Trust Certificate Purchase Price	$	446

Summary of Total Consideration Paid

Although the Company paid SLC shareholders $600 million for the acquisition of SLC (“Aggregate Merger Consideration”), the Company received a purchase price adjustment from Citibank, N.A. (“Citibank”) equivalent to the amount by which the Aggregate Merger Consideration exceeded the value of the Trust Certificate Purchase Price. In addition, Citibank agreed to adjust the cash consideration paid by the Company to compensate it for (i) agreeing to commute certain insurance policies covering certain of the loans acquired and (ii) the value of non-trust related liabilities assumed by the Company. The following table provides a summary of total consideration paid by Discover including post-closing adjustments (dollars in millions):
	Actual
Aggregate Merger Consideration	$	600
Less: Purchase price adjustment	(154		)
Trust Certificate Purchase Price	446
Less: Further adjustments provided for by Citibank
Cash received for consent to insurance commutation	(16		)
Cash received related to reimbursable liabilities	(29		)
Net cash consideration paid	$	401

Fair Value of Assets Acquired and Liabilities Assumed

The following table summarizes the fair values of the assets acquired and liabilities assumed at the date of the SLC acquisition (dollars in thousands):
	At December 31, 2010
Student loan receivables	$	3,070,042
Cash	155,347
Indemnification asset	74,571
Student relationships intangible	2,400
Trade name intangible	3,800
Total intangible assets	6,200
Other assets	217,441
Total assets acquired	3,523,601
Securitized debt	2,921,372
Other liabilities	38,889
Total liabilities assumed	2,960,261
Net assets acquired	$	563,340

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Derivatives and Hedging Activities (Impact of the Derivative Instruments on Income) (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended		9 Months Ended
	Aug. 31, 2012	Aug. 31, 2011	Aug. 31, 2012	Aug. 31, 2011
Designated as hedges [Member] | Cash Flow Hedging [Member] | Interest Rate Swap [Member]
Statement [Line Items]
Total (losses) gains recognized in other comprehensive income after amounts reclassified into earnings, pretax, interest rate swaps, cash flow hedge	$ (383)	$ 13,113	$ (4,003)	$ 11,711
Designated as hedges [Member] | Cash Flow Hedging [Member] | Interest Rate Swap [Member] | Other Comprehensive Income [Member]
Statement [Line Items]
Total (losses) gains recognized in other comprehensive income after amounts reclassified into earnings, pretax, interest rate swaps, cash flow hedge	(383)	13,113	(4,003)	11,711
Designated as hedges [Member] | Cash Flow Hedging [Member] | Interest Rate Swap [Member] | Interest Income [Member]
Statement [Line Items]
Amount reclassified from other comprehensive income into income, interest rate swaps, cash flow hedge	1,892	1,892	5,656	5,636
Designated as hedges [Member] | Fair Value Hedging [Member] | Interest Expense [Member]
Statement [Line Items]
Gain (loss) on derivatives	10,270	6,511	25,428	13,733
Designated as hedges [Member] | Fair Value Hedging [Member] | Hedged Item [Member] | Interest Expense [Member]
Statement [Line Items]
Interest expense - ineffectiveness, interest rate swaps, fair value hedge	(33,880)	(32,575)	(56,394)	(34,064)
Interest expense - other, interest rate swaps, fair value hedge	(1,524)	(1,608)	(4,619)	(4,853)
Loss on hedged item	(35,404)	(34,183)	(61,013)	(38,917)
Designated as hedges [Member] | Fair Value Hedging [Member] | Interest Rate Swap [Member] | Interest Expense [Member]
Statement [Line Items]
Interest expense - ineffectiveness, interest rate swaps, fair value hedge	35,303	34,715	60,452	38,924
Interest expense - other, interest rate swaps, fair value hedge	8,479	4,087	20,333	8,090
Designated as hedges [Member] | Fair Value Hedging [Member] | Interest Rate Swap [Member] | Derivative [Member] | Interest Expense [Member]
Statement [Line Items]
Gain (loss) on derivatives	43,782	38,802	80,785	47,014
Not designated as hedges [Member]
Statement [Line Items]
Gain (loss) on derivatives	43,219	(2,007)	41,893	(8,221)
Not designated as hedges [Member] | Interest Rate Swap [Member] | Other Income [Member]
Statement [Line Items]
Gain (loss) on derivatives	(3,375)	(2,037)	(6,348)	(7,518)
Not designated as hedges [Member] | Foreign Exchange Forward [Member] | Other Income [Member]
Statement [Line Items]
Gain (loss) on derivatives	(468)	30	1,179	(703)
Not designated as hedges [Member] | Forward Delivery Contracts [Member] | Other Income [Member]
Statement [Line Items]
Gain (loss) on derivatives	(2,375)	0	(2,375)	0
Not designated as hedges [Member] | Interest Rate Lock Commitments [Member] | Other Income [Member]
Statement [Line Items]
Gain (loss) on derivatives	$ 49,437	$ 0	$ 49,437	$ 0

XML

Investment Securities (Maturities and Weighted Average Yields of Available-for-Sale Debt Securities and Held-to-Maturity Debt Securities) (Details) (USD $) In Thousands, unless otherwise specified	Aug. 31, 2012		Nov. 30, 2011
Available-for-sale securities, debt maturities, one year or less, amortized cost	$ 1,031,596	[1]
Available-for-sale securities, debt maturities, after one year through five years, amortized cost	3,960,307	[1]
Available-for-sale securities, debt maturities, after five years through ten years, amortized cost	326,189	[1]
Available-for-sale securities, debt maturities, after ten years, amortized cost	932,034	[1]
Available-for-sale securities, debt maturities, amortized cost	6,250,126	[1]
Held-to-maturity securities, debt maturities, one year or less, amortized cost	1,935	[2]
Held-to-maturity securities, debt maturities, after one year through five years, amortized cost	3,285	[2]
Held-to-maturity securities, debt maturities, after five years through ten years, amortized cost	0	[2]
Held-to-maturity securities, debt maturities, after ten years, amortized cost	84,785	[2]
Held-to-maturity securities, debt maturities, amortized cost	90,005	[2]
Available-for-sale securities, debt maturities, one year or less, fair value	1,036,413	[1]
Available-for-sale debt maturities, after one year through five years, fair value	4,063,593	[1]
Available-for-sale securities, debt maturities, after five years through ten years, fair value	329,418	[1]
Available-for-sale securities, debt maturities, after ten years, fair value	948,078	[1]
Available-for-sale securities, debt maturities, fair value	6,377,502	[1]	6,107,831	[1]
Held-to-maturity securities, debt maturities, one year or less, fair value	1,937	[2]
Held-to-maturity securities, debt maturities, after one year through five years, fair value	3,350	[2]
Held-to-maturity securities, debt maturities, after five years through ten years, fair value	0	[2]
Held-to-maturity securities, debt maturities, after ten years, fair value	86,981	[2]
Held-to-maturity securities, debt maturities, fair value	92,268	[2]
U.S. Treasury Securities [Member]
Available-for-sale securities, debt maturities, one year or less, amortized cost	175,393	[1]
Available-for-sale securities, debt maturities, after one year through five years, amortized cost	2,242,380	[1]
Available-for-sale securities, debt maturities, after five years through ten years, amortized cost	0	[1]
Available-for-sale securities, debt maturities, after ten years, amortized cost	0	[1]
Available-for-sale securities, debt maturities, amortized cost	2,417,773	[1]
Held-to-maturity securities, debt maturities, one year or less, amortized cost	550	[2]
Held-to-maturity securities, debt maturities, after one year through five years, amortized cost	0	[2]
Held-to-maturity securities, debt maturities, after five years through ten years, amortized cost	0	[2]
Held-to-maturity securities, debt maturities, after ten years, amortized cost	0	[2]
Held-to-maturity securities, debt maturities, amortized cost	550	[2]
Available-for-sale securities, debt maturities, one year or less, fair value	175,949	[1]
Available-for-sale debt maturities, after one year through five years, fair value	2,294,949	[1]
Available-for-sale securities, debt maturities, after five years through ten years, fair value	0	[1]
Available-for-sale securities, debt maturities, after ten years, fair value	0	[1]
Available-for-sale securities, debt maturities, fair value	2,470,898	[1]	2,563,250	[1]
Held-to-maturity securities, debt maturities, one year or less, fair value	550	[2]
Held-to-maturity securities, debt maturities, after one year through five years, fair value	0	[2]
Held-to-maturity securities, debt maturities, after five years through ten years, fair value	0	[2]
Held-to-maturity securities, debt maturities, after ten years, fair value	0	[2]
Held-to-maturity securities, debt maturities, fair value	550	[2]
U.S. Government Agency Securities [Member]
Available-for-sale securities, debt maturities, one year or less, amortized cost	567,952	[1]
Available-for-sale securities, debt maturities, after one year through five years, amortized cost	1,699,396	[1]
Available-for-sale securities, debt maturities, after five years through ten years, amortized cost	0	[1]
Available-for-sale securities, debt maturities, after ten years, amortized cost	0	[1]
Available-for-sale securities, debt maturities, amortized cost	2,267,348	[1]
Available-for-sale securities, debt maturities, one year or less, fair value	570,147	[1]
Available-for-sale debt maturities, after one year through five years, fair value	1,749,138	[1]
Available-for-sale securities, debt maturities, after five years through ten years, fair value	0	[1]
Available-for-sale securities, debt maturities, after ten years, fair value	0	[1]
Available-for-sale securities, debt maturities, fair value	2,319,285	[1]	2,795,223	[1]
Credit Card Asset-Backed Securities of Other Issuers [Member]
Available-for-sale securities, debt maturities, one year or less, amortized cost	142,855	[1]
Available-for-sale securities, debt maturities, after one year through five years, amortized cost	18,531	[1]
Available-for-sale securities, debt maturities, after five years through ten years, amortized cost	0	[1]
Available-for-sale securities, debt maturities, after ten years, amortized cost	0	[1]
Available-for-sale securities, debt maturities, amortized cost	161,386	[1]
Available-for-sale securities, debt maturities, one year or less, fair value	144,788	[1]
Available-for-sale debt maturities, after one year through five years, fair value	19,506	[1]
Available-for-sale securities, debt maturities, after five years through ten years, fair value	0	[1]
Available-for-sale securities, debt maturities, after ten years, fair value	0	[1]
Available-for-sale securities, debt maturities, fair value	164,294	[1]	299,889	[1]
Corporate Debt Securities [Member]
Available-for-sale securities, debt maturities, one year or less, amortized cost	145,396	[1]
Available-for-sale securities, debt maturities, after one year through five years, amortized cost	0	[1]
Available-for-sale securities, debt maturities, after five years through ten years, amortized cost	0	[1]
Available-for-sale securities, debt maturities, after ten years, amortized cost	0	[1]
Available-for-sale securities, debt maturities, amortized cost	145,396	[1]
Available-for-sale securities, debt maturities, one year or less, fair value	145,529	[1]
Available-for-sale debt maturities, after one year through five years, fair value	0	[1]
Available-for-sale securities, debt maturities, after five years through ten years, fair value	0	[1]
Available-for-sale securities, debt maturities, after ten years, fair value	0	[1]
Available-for-sale securities, debt maturities, fair value	145,529	[1]	449,469	[1]
Agency Residential Mortgage-Backed Securities [Member]
Available-for-sale securities, debt maturities, one year or less, amortized cost	0	[1]
Available-for-sale securities, debt maturities, after one year through five years, amortized cost	0	[1]
Available-for-sale securities, debt maturities, after five years through ten years, amortized cost	326,189	[1]
Available-for-sale securities, debt maturities, after ten years, amortized cost	932,034	[1]
Available-for-sale securities, debt maturities, amortized cost	1,258,223	[1]
Held-to-maturity securities, debt maturities, one year or less, amortized cost	0	[2],[3]
Held-to-maturity securities, debt maturities, after one year through five years, amortized cost	0	[2],[3]
Held-to-maturity securities, debt maturities, after five years through ten years, amortized cost	0	[2],[3]
Held-to-maturity securities, debt maturities, after ten years, amortized cost	54,213	[2],[3]
Held-to-maturity securities, debt maturities, amortized cost	54,213	[2],[3]
Available-for-sale securities, debt maturities, one year or less, fair value	0	[1]
Available-for-sale debt maturities, after one year through five years, fair value	0	[1]
Available-for-sale securities, debt maturities, after five years through ten years, fair value	329,418	[1]
Available-for-sale securities, debt maturities, after ten years, fair value	948,078	[1]
Available-for-sale securities, debt maturities, fair value	1,277,496	[1]
Held-to-maturity securities, debt maturities, one year or less, fair value	0	[2],[3]
Held-to-maturity securities, debt maturities, after one year through five years, fair value	0	[2],[3]
Held-to-maturity securities, debt maturities, after five years through ten years, fair value	0	[2],[3]
Held-to-maturity securities, debt maturities, after ten years, fair value	56,544	[2],[3]
Held-to-maturity securities, debt maturities, fair value	56,544	[2],[3]
States and Political Subdivisions of States [Member]
Held-to-maturity securities, debt maturities, one year or less, amortized cost	1,385	[2]
Held-to-maturity securities, debt maturities, after one year through five years, amortized cost	3,285	[2]
Held-to-maturity securities, debt maturities, after five years through ten years, amortized cost	0	[2]
Held-to-maturity securities, debt maturities, after ten years, amortized cost	30,572	[2]
Held-to-maturity securities, debt maturities, amortized cost	35,242	[2]
Held-to-maturity securities, debt maturities, one year or less, fair value	1,387	[2]
Held-to-maturity securities, debt maturities, after one year through five years, fair value	3,350	[2]
Held-to-maturity securities, debt maturities, after five years through ten years, fair value	0	[2]
Held-to-maturity securities, debt maturities, after ten years, fair value	30,437	[2]
Held-to-maturity securities, debt maturities, fair value	$ 35,174	[2]

[1] Available-for-sale investment securities are reported at fair value.

[2] Held-to-maturity investment securities are reported at amortized cost.

[3] Amounts represent residential mortgage-backed securities that were classified as held-to-maturity as they were entered into as a part of the Company's community reinvestment initiatives.

XML

Business Combinations (Narrative) (Details) (USD $)	9 Months Ended		1 Months Ended	3 Months Ended	12 Months Ended
	Aug. 31, 2012	Aug. 31, 2011	Dec. 31, 2010 Student Loan Corporation [Member]	Nov. 30, 2011 Student Loan Corporation [Member]	Nov. 30, 2011 Student Loan Corporation [Member]	Aug. 31, 2012 Student Loan Corporation [Member] Slc Trust 2010A [Member]	Dec. 31, 2010 Student Loan Corporation [Member] Slc Trust 2010A [Member]	Jun. 06, 2012 HLC Acquisition [Member]
Significant Acquisitions and Disposals, Acquisition Costs or Sale Proceeds								$ 48,900,000
Business Combination, Contingent Consideration Arrangements, Range of Outcomes, Value, High								10,000,000
Cash acquired from acquisition			155,000,000
Net assets acquired			563,340,000
Aggregate consideration			556,000,000
Gain on purchase of business	0	15,917,000	16,000,000		7,000,000
Indemification Asset Purchase Accounting Adjustment				27,000,000	27,000,000
Acquired Student Loans Purchase Accounting Adjustment				19,000,000	19,000,000
Bargain Purchase Gain Purchase Accounting Adjustment				9,000,000
Identifiable intangible assets acquired			6,200,000
Finite-Lived Intangible Assets, Useful Life					5 years
Business Combination, Indemnification Assets, Amount as of Acquisition Date			75,000,000
Business Combination, Recognized Identifiable Assets Acquired and Liabilities Assumed, Financial Assets			3,523,601,000			1,000,000,000	1,200,000,000
Indemnification payments			$ 166,800,000

XML

Condensed Consolidated Statements of Comprehensive Income (USD $) In Thousands, unless otherwise specified	3 Months Ended		9 Months Ended
	Aug. 31, 2012	Aug. 31, 2011	Aug. 31, 2012	Aug. 31, 2011
Net income	$ 626,686	$ 648,818	$ 1,794,283	$ 1,714,129
Unrealized gain on securities available for sale, net of tax	9,931	38,170	24,626	54,897
Unrealized (loss) gain on cash flow hedges, net of tax	(241)	8,208	(2,497)	7,330
Unrealized pension and post-retirement benefit gain (loss), net of tax	0	1	(1,776)	342
Other comprehensive income	9,690	46,379	20,353	62,569
Comprehensive income	$ 636,376	$ 695,197	$ 1,814,636	$ 1,776,698

XML

Fair Value Disclosures (Narrative) (Details) (USD $)	3 Months Ended			9 Months Ended
	Aug. 31, 2012	Aug. 31, 2011	May 31, 2010	Aug. 31, 2012	Aug. 31, 2011
StudentLoansHeldForSaleFairValueGainLossAdjustment	$ 0	$ 100,000		$ 518,000	$ 6,200,000
Aggregate Unpaid Principal Loans Held For Sale, Fair Value Option	259,900,000			259,900,000
Fair Value Loans Held for Sale, Fair Value Option	272,100,000			272,100,000
Impairment on Assets Measured at Fair Value on a Non-Recurring Basis	0		0	0	0
Fair Value, Liabilities, Level 1 to Level 2 Transfers, Amount	0	0		0	0
Fair Value, Liabilities, Level 2 to Level 1 Transfers, Amount	0	0		0	0
Corporate Debt Securities [Member]
Available for sale security, par value	145,000,000			145,000,000
Available for sale securities, weighted average coupon rate	2.11%			2.11%
Available for sale securities, Weighted Average Remaining Maturity				2 months
Agency Residential Mortgage-Backed Securities [Member]
Available for sale security, par value	1,200,000,000			1,200,000,000
Available for sale securities, weighted average coupon rate	2.85%			2.85%
Available for sale securities, Weighted Average Remaining Maturity				4 years
Class A [Member] | Asset-backed Securities, Securitized Loans and Receivables [Member]
Available for sale security, par value	139,000,000			139,000,000
Available for sale securities, weighted average coupon rate	0.46%			0.46%
Available for sale securities, Weighted Average Remaining Maturity				8 months
Class B [Member] | Asset-backed Securities, Securitized Loans and Receivables [Member]
Available for sale security, par value	22,000,000			22,000,000
Available for sale securities, weighted average coupon rate	0.55%			0.55%
Available for sale securities, Weighted Average Remaining Maturity				8 months
Class C [Member] | Asset-backed Securities, Securitized Loans and Receivables [Member]
Available for sale security, par value	4,000,000			4,000,000
Available for sale securities, weighted average coupon rate	0.64%			0.64%
Available for sale securities, Weighted Average Remaining Maturity				7 months
Fair Value, Measurements, Recurring [Member]
Fair Value, Assets, Level 1 to Level 2 Transfers, Amount	0	0		0	0
Fair Value, Assets, Level 2 to Level 1 Transfers, Amount	$ 0	$ 0		$ 0	$ 0

XML

Investment Securities

9 Months Ended

Aug. 31, 2012

Investments, Debt and Equity Securities [Abstract]

Investment Securities

Investments

The Company’s investment securities consist of the following (dollars in thousands):
	August 31, 2012		November 30, 2011
U.S. Treasury securities	$	2,471,448	$	2,563,800
U.S. government agency securities	2,319,285		2,795,223
States and political subdivisions of states	35,242		40,936
Other securities:
Credit card asset-backed securities of other issuers	164,294		299,889
Corporate debt securities(1)	145,529		449,469
To-be-announced investment securities	—		50,254
Residential mortgage-backed securities - Agency (2)	1,331,709		6,482
Total other securities	1,641,532		806,094
Total investment securities	$	6,467,507	$	6,206,053

____________________

(1) Amount represents corporate debt obligations issued under the Temporary Liquidity Guarantee Program (TLGP) that are guaranteed by the Federal Deposit Insurance Corporation (FDIC).

(2) Consists of residential mortgage-backed securities issued by Fannie Mae, Freddie Mac and Ginnie Mae.

The amortized cost, gross unrealized gains and losses, and fair value of available-for-sale and held-to-maturity investment securities are as follows (dollars in thousands):
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
At August 31, 2012
Available-for-Sale Investment Securities(1)
U.S. Treasury securities	$	2,417,773	$	53,125	$	—		$	2,470,898
U.S. government agency securities	2,267,348		51,937		—			2,319,285
Credit card asset-backed securities of other issuers	161,386		2,908		—			164,294
Corporate debt securities	145,396		133		—			145,529
Residential mortgage-backed securities - Agency	1,258,223		19,273		—			1,277,496
Total available-for-sale investment securities	$	6,250,126	$	127,376	$	—		$	6,377,502
Held-to-Maturity Investment Securities(2)
U.S. Treasury securities(3)	$	550	$	—	$	—		$	550
States and political subdivisions of states	35,242		234		(302		)	35,174
Residential mortgage-backed securities - Agency (4)	54,213		2,331		—			56,544
Total held-to-maturity investment securities	$	90,005	$	2,565	$	(302	)	$	92,268
At November 30, 2011
Available-for-Sale Investment Securities(1)
U.S. Treasury securities	$	2,516,008	$	47,242	$	—		$	2,563,250
U.S. government agency securities	2,762,265		34,166		(1,208		)	2,795,223
Credit card asset-backed securities of other issuers	293,231		6,658		—			299,889
Corporate debt securities	448,423		1,066		(20		)	449,469
Total available-for-sale investment securities	$	6,019,927	$	89,132	$	(1,228	)	$	6,107,831
Held-to-Maturity Investment Securities(2)
U.S. Treasury securities(3)	$	550	$	—	$	—		$	550
States and political subdivisions of states	40,936		197		(2,823		)	38,310
Residential mortgage-backed securities - Agency (4)	6,482		650		—			7,132
To-be-announced investment securities	50,254		—		(204		)	50,050
Total held-to-maturity investment securities	$	98,222	$	847	$	(3,027	)	$	96,042

_________________________

(1) Available-for-sale investment securities are reported at fair value.

(2) Held-to-maturity investment securities are reported at amortized cost.

(3) Amount represents securities pledged as collateral to a government-related merchant for which transaction settlement occurs beyond the normal 24-hour period.

(4) Amounts represent residential mortgage-backed securities that were classified as held-to-maturity as they were entered into as a part of the Company's community reinvestment initiatives.

The following table provides information about investment securities with aggregate gross unrealized losses and the length of time that individual investment securities have been in a continuous unrealized loss position as of August 31, 2012 and November 30, 2011 (dollars in thousands):
	Number of Securities in a Loss Position	Less than 12 months				More than 12 months
		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses
At August 31, 2012
Held-to-Maturity Investment Securities
State and political subdivisions of states	3	$	—	$	—	$	13,183	$	302
At November 30, 2011
Available-for-Sale Investment Securities
U.S. government agency securities	2	$	242,898	$	1,208	$	—	$	—
Corporate debt securities	3	$	100,041	$	20	$	—	$	—
Held-to-Maturity Investment Securities
State and political subdivisions of states	6	$	2,689	$	46	$	27,768	$	2,777
To-be-announced investment securities	2	$	50,050	$	204	$	—	$	—

During the three and nine months ended August 31, 2012, the Company received $473.7 million and $1.6 billion of proceeds related to maturities, redemptions, or liquidation of investment securities, as compared to $170.5 million and $803.9 million for the three and nine months ended August 31, 2011.

During the three and nine months ended August 31, 2012, and during the three months ended August 31, 2011, there were no sales of securities. During the nine months ended August 31, 2011, the Company received $161 thousand of proceeds and recorded $146 thousand of gross realized gains relating primarily to the sale of equity securities.

The Company records unrealized gains and losses on its available-for-sale investment securities in other comprehensive income. For the three and nine months ended August 31, 2012, the Company recorded net unrealized gains of $15.9 million ($9.9 million after tax) and $39.5 million ($24.6 million after tax), respectively, in other comprehensive income. For the three and nine months ended August 31, 2011, the Company recorded net unrealized gains of $61.0 million ($38.2 million after tax) and $87.7 million ($54.9 million after tax), respectively, in other comprehensive income.

At August 31, 2012 and November 30, 2011, the Company had $302 thousand and $2.8 million, respectively, of gross unrealized losses in a continuous loss position for more than 12 months on its held-to-maturity investment securities in states and political subdivisions of states. The Company believes the unrealized loss on these investments is the result of changes in interest rates subsequent to the Company’s acquisitions of these securities and that the reduction in value is temporary. The Company does not intend to sell these investments nor does it expect to be required to sell these investments before recovery of their amortized cost basis, as they were entered into as a part of the Company's community reinvestment initiatives. The Company expects to collect all amounts due according to the contractual terms of these securities.

Contractual maturities of available-for-sale debt securities and held-to-maturity debt securities at August 31, 2012 are provided in the table below (dollars in thousands):
	One Year or Less		After One Year Through Five Years		After Five Years Through Ten Years		After Ten Years		Total
Available-for-sale—Amortized Cost (1)
U.S. Treasury securities	$	175,393	$	2,242,380	$	—	$	—	$	2,417,773
U.S. government agency securities	567,952		1,699,396		—		—		2,267,348
Credit card asset-backed securities of other issuers	142,855		18,531		—		—		161,386
Corporate debt securities	145,396		—		—		—		145,396
Residential mortgage-backed securities - Agency	—		—		326,189		932,034		1,258,223
Total available-for-sale investment securities	$	1,031,596	$	3,960,307	$	326,189	$	932,034	$	6,250,126
Held-to-maturity—Amortized Cost (2)
U.S. Treasury securities	$	550	$	—	$	—	$	—	$	550
State and political subdivisions of states	1,385		3,285		—		30,572		35,242
Residential mortgage-backed securities - Agency(3)	—		—		—		54,213		54,213
Total held-to-maturity investment securities	$	1,935	$	3,285	$	—	$	84,785	$	90,005
Available-for-sale—Fair Values (1)
U.S. Treasury securities	$	175,949	$	2,294,949	$	—	$	—	$	2,470,898
U.S. government agency securities	570,147		1,749,138		—		—		2,319,285
Credit card asset-backed securities of other issuers	144,788		19,506		—		—		164,294
Corporate debt securities	145,529		—		—		—		145,529
Residential mortgage-backed securities - Agency	—		—		329,418		948,078		1,277,496
Total available-for-sale investment securities	$	1,036,413	$	4,063,593	$	329,418	$	948,078	$	6,377,502
Held-to-maturity—Fair Values (2)
U.S. Treasury securities	$	550	$	—	$	—	$	—	$	550
State and political subdivisions of states	1,387		3,350		—		30,437		35,174
Residential mortgage-backed securities - Agency(3)	—		—		—		56,544		56,544
Total held-to-maturity investment securities	$	1,937	$	3,350	$	—	$	86,981	$	92,268

____________________

(1) Available-for-sale investment securities are reported at fair value.

(2) Held-to-maturity investment securities are reported at amortized cost.

(3) Amounts represent residential mortgage-backed securities that were classified as held-to-maturity as they were entered into as a part of the Company's community reinvestment initiatives.

Other Investments.As a part of the Company's community reinvestment initiatives, the Company has made equity investments in certain limited partnerships and limited liability companies that finance the construction and rehabilitation of affordable rental housing, as well as stimulate economic development in low to moderate income communities. These investments are accounted for using the equity method of accounting, and are recorded within other assets, and the related commitment for future investments is recorded in other liabilities within the statement of financial condition. The portion of each investment's operating results allocable to the Company is recorded in other expense within the condensed consolidated statement of income. The Company earns a return primarily through the receipt of tax credits allocated to the affordable housing projects and the community revitalization projects. These investments are not consolidated as the Company does not have a controlling financial interest in the entities. As of August 31, 2012 and November 30, 2011, the Company had outstanding investments of $194.8 million and $137.9 million, respectively, in these entities, and the related contingent liability was $52.6 million and $6.3 million, respectively.

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Loan Receivables (Loans in the Company's Permanent Workout Program) (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended				9 Months Ended
	Aug. 31, 2012		Aug. 31, 2011		Aug. 31, 2012		Aug. 31, 2011
Credit Card Receivable [Member] | Loans no longer in a modification program [Member]
Average recorded investment in loans	$ 240,895	[1]			$ 248,118	[1]
Interest income recognized on impaired loans	12,350	[1],[2]			35,456	[1],[2]
Credit Card Receivable [Member] | InternalPrograms [Member]
Average recorded investment in loans	560,327		519,884		564,650		534,479
Interest income recognized on impaired loans	4,168	[2]	4,518	[2]	13,162	[2]	16,660	[2]
Gross interest income that would have been recorded with original terms	18,388	[3]	16,411	[3]	54,922	[3]	47,950	[3]
Credit Card Receivable [Member] | External Programs [Member]
Average recorded investment in loans	586,547		709,211		618,120		727,113
Interest income recognized on impaired loans	12,694	[2]	15,391	[2]	39,905	[2]	46,974	[2]
Gross interest income that would have been recorded with original terms	2,035	[3]	2,467	[3]	6,396	[3]	7,535	[3]
Personal Loans [Member] | InternalPrograms [Member]
Average recorded investment in loans	15,370	[4]			13,349	[4]
Interest income recognized on impaired loans	454	[2],[4]			1,222	[2],[4]
Student Loans [Member]
Average recorded investment in loans	11,058	[4]			8,563	[4]
Interest income recognized on impaired loans	$ 204	[2],[4]			$ 469	[2],[4]

[1] This balance is considered impaired, but is excluded from the internal and external program amounts reflected in this table. Represents credit card loans that were modified in troubled debt restructurings but that have subsequently reverted back to the loans' pre-modification payment terms either due to noncompliance with the terms of the modification or successful completion of a temporary modification program.

[2] The Company does not separately track interest income on all of its loans modification programs. Amounts shown are estimated by applying an average interest rate to the average loans in the various modification programs.

[3] The Company does not separately track the amount of gross interest income that would have been recorded if the loans in modification programs had not been restructured and interest had instead been recorded in accordance with the original terms. Amounts shown are estimated by applying the difference between the average interest rate earned on non-impaired credit card loans and the average interest rate earned on loans in the modification programs to the average loans in the modification programs.

[4] As interest rates for personal loan customers in modification programs and student loan customers that have been granted forbearance periods are rarely modified, gross interest income that would have been recorded with original terms is not significant.

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Commitments, Contingencies and Guarantees (Narrative) (Details) (USD $)	9 Months Ended
	Aug. 31, 2012
ATM Guarantee [Member] | Citishare Network Guarantee [Member]
Guarantor Obligations, Maximum Exposure, Undiscounted	$ 15,000,000
Private Student Loans [Member]
Premium on loans funded by seller	0.125%
Private Student Loans [Member] | Minimum [Member]
Off Balance Sheet Liability Amount	250,000,000
Private Student Loans [Member] | Maximum [Member]
Off Balance Sheet Liability Amount	300,000,000
Commitments to Extend Credit [Member]
Off Balance Sheet Liability Amount	162,300,000,000
Loan Purchase Commitments [Member] | Private Student Loans [Member]
Commitments to purchase future assets	$ 71,800,000

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Deposits (Narrative) (Details) (USD $) In Billions, unless otherwise specified	Aug. 31, 2012	Nov. 30, 2011
Deposits [Abstract]
Direct-to-consumer deposits	$ 27.7	$ 26.2
Brokered deposits	$ 14.5	$ 13.3

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Investment Securities (Tables)

9 Months Ended

Aug. 31, 2012

Investments, Debt and Equity Securities [Abstract]

Schedule of Investment Securities

The Company’s investment securities consist of the following (dollars in thousands):
	August 31, 2012		November 30, 2011
U.S. Treasury securities	$	2,471,448	$	2,563,800
U.S. government agency securities	2,319,285		2,795,223
States and political subdivisions of states	35,242		40,936
Other securities:
Credit card asset-backed securities of other issuers	164,294		299,889
Corporate debt securities(1)	145,529		449,469
To-be-announced investment securities	—		50,254
Residential mortgage-backed securities - Agency (2)	1,331,709		6,482
Total other securities	1,641,532		806,094
Total investment securities	$	6,467,507	$	6,206,053

____________________

(1) Amount represents corporate debt obligations issued under the Temporary Liquidity Guarantee Program (TLGP) that are guaranteed by the Federal Deposit Insurance Corporation (FDIC).

(2) Consists of residential mortgage-backed securities issued by Fannie Mae, Freddie Mac and Ginnie Mae.

Schedule of Fair Value, Amortized Cost, Gross Unrealized Gains and Gross Unrealized Losses

The amortized cost, gross unrealized gains and losses, and fair value of available-for-sale and held-to-maturity investment securities are as follows (dollars in thousands):
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
At August 31, 2012
Available-for-Sale Investment Securities(1)
U.S. Treasury securities	$	2,417,773	$	53,125	$	—		$	2,470,898
U.S. government agency securities	2,267,348		51,937		—			2,319,285
Credit card asset-backed securities of other issuers	161,386		2,908		—			164,294
Corporate debt securities	145,396		133		—			145,529
Residential mortgage-backed securities - Agency	1,258,223		19,273		—			1,277,496
Total available-for-sale investment securities	$	6,250,126	$	127,376	$	—		$	6,377,502
Held-to-Maturity Investment Securities(2)
U.S. Treasury securities(3)	$	550	$	—	$	—		$	550
States and political subdivisions of states	35,242		234		(302		)	35,174
Residential mortgage-backed securities - Agency (4)	54,213		2,331		—			56,544
Total held-to-maturity investment securities	$	90,005	$	2,565	$	(302	)	$	92,268
At November 30, 2011
Available-for-Sale Investment Securities(1)
U.S. Treasury securities	$	2,516,008	$	47,242	$	—		$	2,563,250
U.S. government agency securities	2,762,265		34,166		(1,208		)	2,795,223
Credit card asset-backed securities of other issuers	293,231		6,658		—			299,889
Corporate debt securities	448,423		1,066		(20		)	449,469
Total available-for-sale investment securities	$	6,019,927	$	89,132	$	(1,228	)	$	6,107,831
Held-to-Maturity Investment Securities(2)
U.S. Treasury securities(3)	$	550	$	—	$	—		$	550
States and political subdivisions of states	40,936		197		(2,823		)	38,310
Residential mortgage-backed securities - Agency (4)	6,482		650		—			7,132
To-be-announced investment securities	50,254		—		(204		)	50,050
Total held-to-maturity investment securities	$	98,222	$	847	$	(3,027	)	$	96,042

_________________________

(1) Available-for-sale investment securities are reported at fair value.

(2) Held-to-maturity investment securities are reported at amortized cost.

(3) Amount represents securities pledged as collateral to a government-related merchant for which transaction settlement occurs beyond the normal 24-hour period.

(4) Amounts represent residential mortgage-backed securities that were classified as held-to-maturity as they were entered into as a part of the Company's community reinvestment initiatives.

Schedule of Fair Value of Securities in a Continuous Unrealized Loss Position for Less than Twelve Months and more than Twelve Months

The following table provides information about investment securities with aggregate gross unrealized losses and the length of time that individual investment securities have been in a continuous unrealized loss position as of August 31, 2012 and November 30, 2011 (dollars in thousands):
	Number of Securities in a Loss Position	Less than 12 months				More than 12 months
		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses
At August 31, 2012
Held-to-Maturity Investment Securities
State and political subdivisions of states	3	$	—	$	—	$	13,183	$	302
At November 30, 2011
Available-for-Sale Investment Securities
U.S. government agency securities	2	$	242,898	$	1,208	$	—	$	—
Corporate debt securities	3	$	100,041	$	20	$	—	$	—
Held-to-Maturity Investment Securities
State and political subdivisions of states	6	$	2,689	$	46	$	27,768	$	2,777
To-be-announced investment securities	2	$	50,050	$	204	$	—	$	—

Maturities of Available-for-sale Debt Securities and Held-to-maturity Debt Securities

Contractual maturities of available-for-sale debt securities and held-to-maturity debt securities at August 31, 2012 are provided in the table below (dollars in thousands):
	One Year or Less		After One Year Through Five Years		After Five Years Through Ten Years		After Ten Years		Total
Available-for-sale—Amortized Cost (1)
U.S. Treasury securities	$	175,393	$	2,242,380	$	—	$	—	$	2,417,773
U.S. government agency securities	567,952		1,699,396		—		—		2,267,348
Credit card asset-backed securities of other issuers	142,855		18,531		—		—		161,386
Corporate debt securities	145,396		—		—		—		145,396
Residential mortgage-backed securities - Agency	—		—		326,189		932,034		1,258,223
Total available-for-sale investment securities	$	1,031,596	$	3,960,307	$	326,189	$	932,034	$	6,250,126
Held-to-maturity—Amortized Cost (2)
U.S. Treasury securities	$	550	$	—	$	—	$	—	$	550
State and political subdivisions of states	1,385		3,285		—		30,572		35,242
Residential mortgage-backed securities - Agency(3)	—		—		—		54,213		54,213
Total held-to-maturity investment securities	$	1,935	$	3,285	$	—	$	84,785	$	90,005
Available-for-sale—Fair Values (1)
U.S. Treasury securities	$	175,949	$	2,294,949	$	—	$	—	$	2,470,898
U.S. government agency securities	570,147		1,749,138		—		—		2,319,285
Credit card asset-backed securities of other issuers	144,788		19,506		—		—		164,294
Corporate debt securities	145,529		—		—		—		145,529
Residential mortgage-backed securities - Agency	—		—		329,418		948,078		1,277,496
Total available-for-sale investment securities	$	1,036,413	$	4,063,593	$	329,418	$	948,078	$	6,377,502
Held-to-maturity—Fair Values (2)
U.S. Treasury securities	$	550	$	—	$	—	$	—	$	550
State and political subdivisions of states	1,387		3,350		—		30,437		35,174
Residential mortgage-backed securities - Agency(3)	—		—		—		56,544		56,544
Total held-to-maturity investment securities	$	1,937	$	3,350	$	—	$	86,981	$	92,268

____________________

(1) Available-for-sale investment securities are reported at fair value.

(2) Held-to-maturity investment securities are reported at amortized cost.

(3) Amounts represent residential mortgage-backed securities that were classified as held-to-maturity as they were entered into as a part of the Company's community reinvestment initiatives.

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Borrowings Borrowings (Schedule of Maturities) (Details) (USD $) In Thousands, unless otherwise specified	Aug. 31, 2012	Nov. 30, 2011
Debt Disclosure [Abstract]
Due in 2012	$ 109
Due in 2013	5,179,286
Due in 2014	3,789,941
Due in 2015	3,058,178
Due in 2016	400,177
Thereafter	6,818,422
Total	$ 19,246,113	$ 18,287,178

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Derivatives and Hedging Activities (Tables)

9 Months Ended

Aug. 31, 2012

Derivative Instruments and Hedging Activities Disclosure [Abstract]

Fair Value and Related Outstanding Notional Amounts of Derivative Instruments

The following table summarizes the fair value (including accrued interest) and related outstanding notional amounts of derivative instruments and indicates where within the statement of financial condition each is reported as of August 31, 2012 and November 30, 2011. See Note 14: Fair Value Disclosures for a description of the valuation methodologies of derivatives. (Dollars in thousands):
	August 31, 2012							November 30, 2011
				Balance Sheet Location						Balance Sheet Location
	Notional Amount		Number of Transactions	Other Assets (At Fair Value)		Accrued Expenses and Other Liabilities (At Fair Value)		Notional Amount		Other Assets (At Fair Value)		Accrued Expenses  and Other Liabilities (At Fair Value)
Derivatives designated as hedges:
Interest rate swaps—cash flow hedge	$	2,000,000	8	$	8,229	$	—	$	2,000,000	$	12,191	$	—
Interest rate swaps—fair value hedge	$	7,468,200	258	$	108,948	$	—	$	2,338,276	$	44,171	$	279
Derivatives not designated as hedges:
Foreign exchange forward contracts(1)	$	26,375	5	$	—	$	68	$	21,453	$	—	$	169
Interest rate swap	$	1,090,378	1	$	504	$	—	$	1,294,932	$	7,214	$	—
Forward delivery contracts	$	593,036	495	$	1,079	$	4,674	$	—	$	—	$	—
Interest rate lock commitments	$	622,153	3,013	$	17,448	$	34	$	—	$	—	$	—

____________________

(1) The foreign exchange forward contracts have notional amounts of EUR 17.7 million, GBP 1.9 million and SGD 1.5 million as of August 31, 2012 and EUR 14.0 million and GBP 1.7 million as of November 30, 2011.

Impact of the Derivative Instruments on Income

The following table summarizes the impact of the derivative instruments on income, and indicates where within the condensed consolidated statements of income such impact is reported for the three and nine months ended August 31, 2012 and 2011 (dollars in thousands):
		For the Three Months Ended August 31,						For the Nine Months Ended August 31,
	Location	2012			2011			2012			2011
Derivatives designated as hedges:
Interest rate swaps—cash flow hedges:
Total (losses) gains recognized in other comprehensive income after amounts reclassified into earnings, pre-tax	Other Comprehensive Income	$	(383	)	$	13,113		$	(4,003	)	$	11,711
Total (losses) gains recognized in other comprehensive income		$	(383	)	$	13,113		$	(4,003	)	$	11,711
Amount reclassified from other comprehensive income into income	Interest Income	$	1,892		$	1,892		$	5,656		$	5,636
Interest rate swaps—fair value hedges:
Interest expense—ineffectiveness		35,303			34,715			60,452			38,924
Interest expense—other		8,479			4,087			20,333			8,090
Gain on interest rate swaps	Interest Expense	43,782			38,802			80,785			47,014
Interest expense—ineffectiveness		(33,880		)	(32,575		)	(56,394		)	(34,064		)
Interest expense—other		(1,524		)	(1,608		)	(4,619		)	(4,853		)
Loss on hedged item	Interest Expense	(35,404		)	(34,183		)	(61,013		)	(38,917		)
Total gains recognized in income		$	10,270		$	6,511		$	25,428		$	13,733
Derivatives not designated as hedges:
Gain (loss) on forward contracts	Other Income	$	(468	)	$	30		$	1,179		$	(703	)
Gain (loss) on interest rate swaps	Other Income	(3,375		)	(2,037		)	(6,348		)	(7,518		)
Gain on forward delivery contracts	Other Income	(2,375		)	—			(2,375		)	—
Gain on interest rate lock commitments	Other Income	49,437			—			49,437			—
Total gains (losses) on derivatives not designated as hedges recognized in income		$	43,219		$	(2,007	)	$	41,893		$	(8,221	)

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Litigation and Regulatory Matters

9 Months Ended

Aug. 31, 2012

Litigation Dislcosure [Abstract]

Litigation

Litigation and Regulatory Matters

In the normal course of business, from time to time, the Company has been named as a defendant in various legal actions, including arbitrations, class actions, and other litigation, arising in connection with its activities. Certain of the actual or threatened legal actions include claims for substantial compensatory and/or punitive damages or claims for indeterminate amounts of damages. The Company contests liability and/or the amount of damages as appropriate in each pending matter.

The Company has historically relied on the arbitration clause in its cardmember agreements, which has in some instances limited the costs of, and the Company’s exposure to, litigation, but there can be no assurance that the Company will continue to be successful in enforcing its arbitration clause in the future. Legal challenges to the enforceability of these clauses have led most card issuers and may cause the Company to discontinue their use. In addition, there are bills pending in Congress to directly or indirectly prohibit the use of pre-dispute arbitration clauses, and the 2010 Dodd-Frank Wall Street Reform and Consumer Protection Act authorized the Consumer Financial Protection Bureau (the "CFPB") to limit or ban pre-dispute arbitration clauses. Further, the Company is involved in pending legal actions challenging its arbitration clause.

The Company is also involved, from time to time, in other reviews, investigations and proceedings (both formal and informal) by governmental agencies regarding the Company’s business including, among other matters, accounting, tax and operational matters, some of which may result in significant adverse judgments, settlements, fines, penalties, injunctions, decreases in regulatory ratings or other relief, which could materially impact the Company's financial statements, increase its cost of operations, or limit its ability to execute its business strategies and engage in certain business activities. Such matters related to the IRS are discussed in Note 9: Income Taxes.

In accordance with applicable accounting guidance, the Company establishes an accrued liability for legal and regulatory matters when those matters present loss contingencies which are both probable and estimable. Litigation-related expense of $96.2 million and $212 million was recognized for the three and nine months ended August 31, 2012, compared to $1.9 million and $22.6 million for the same periods in 2011.

There may be an exposure to loss in excess of any amounts accrued. The Company believes the estimate of the aggregate range of reasonably possible losses (meaning those losses the likelihood of which is more than remote but less than likely) in excess of the amounts that the Company has accrued for legal and regulatory proceedings is up to $100 million. This estimated range of reasonably possible losses is based upon currently available information for those proceedings in which the Company is involved, takes into account the Company’s best estimate of such losses for those matters for which an estimate can be made, and does not represent the Company’s maximum potential loss exposure. Various aspects of the legal proceedings underlying the estimated range will change from time to time and actual results may vary significantly from the estimate.

The Company’s estimated range above involves significant judgment, given the varying stages of the proceedings, the existence of numerous yet to be resolved issues, the breadth of the claims (often spanning multiple years and, in some cases, a wide range of business activities), unspecified damages and/or the novelty of the legal issues presented. The outcome of pending matters could be material to the Company’s consolidated financial condition, operating results and cash flows for a particular future period, depending on, among other things, the level of the Company’s income for such period, and could adversely affect the Company’s reputation.

On August 16, 2011, the Attorney General of West Virginia filed a lawsuit against the Company in the Circuit Court of Mason County, West Virginia (West Virginia v. Discover Financial Services, Inc., Discover Bank, DFS Services LLC et al.). The lawsuit asserts various claims related to the Company's marketing and administration of various protection products under West Virginia law. The relief sought in the lawsuit includes an injunction prohibiting the Company from engaging in the alleged violations, restitution and disgorgement of monies received from the complained of practices, civil penalties and costs. The Company will seek to vigorously defend all claims asserted against it in this matter.

On August 26, 2011, the Attorney General of Missouri issued a request for information to the Company in connection with an investigation to determine whether the Company has engaged in conduct that violates Missouri law in the marketing of its payment protection product to its credit card customers. The Company is cooperating with the Attorney General in the investigation.

On November 30, 2011, a class action lawsuit was filed against the Company by a cardmember in the U.S. District Court for the Northern District of California (Walter Bradley, et al. v. Discover Financial Services). The plaintiff alleges that the Company contacted him, and members of the class he seeks to represent, on their cellular telephones without their express consent in violation of the Telephone Consumer Protection Act (“TCPA”). Plaintiff seeks statutory damages for alleged negligent and willful violations of the TCPA, attorneys' fees, costs and injunctive relief. The TCPA provides for statutory damages of $500 for each violation ($1,500 for willful violations). The Company will seek to vigorously defend against all claims asserted by the plaintiff.

On March 6, 2012, a class action lawsuit was filed against the Company by a cardmember in the U.S. District Court for the Northern District of California (Andrew Steinfeld, et al. v. Discover Financial Services, et al.). The plaintiff alleges that the Company contacted him, and members of the class he seeks to represent, on their cellular telephones without their express consent in violation of the TCPA. Plaintiff seeks statutory damages for alleged negligent and willful violations of the TCPA, attorneys' fees, costs and injunctive relief. The TCPA provides for statutory damages of $500 for each violation ($1,500 for willful violations). The Company will seek to vigorously defend against all claims asserted by the plaintiff.

On April 12, 2012, the Attorney General of Hawaii filed a lawsuit against the Company in the Circuit Court of the First Circuit, Hawaii (Hawaii v. Discover Financial Services, Inc., Discover Bank, DFS Services LLC et al.). The lawsuit asserts various claims related to the Company's marketing and administration of various protection products under Hawaii law. The relief sought in the lawsuit includes an injunction prohibiting named parties from engaging in the alleged violations, restitution and disgorgement of monies received from the complained of practices, civil penalties and costs. The Company will seek to vigorously defend against all claims asserted against it.

On June 28, 2012, the Attorney General of Mississippi filed a lawsuit against the Company in the Chancery Court of the First Judicial District of Hinds County, Mississippi (Mississippi v. Discover Financial Services, Inc., Discover Bank, DFS Services LLC et al.). The lawsuit asserts various claims related to the Company's marketing and administration of various protection products under Mississippi law. The relief sought in the lawsuit includes an injunction prohibiting the Company from engaging in the alleged violations, restitution and disgorgement of monies received from the complained-of practices, civil penalties and costs. The Company will seek to vigorously defend all claims asserted against it.

On July 5, 2012, the Antitrust Division of the United States Department of Justice (the “Division”) issued a Civil Investigative Demand (“CID”) to the Company seeking information regarding an investigation related to potential violations of Sections 1 and 2 of the Sherman Act, 15 U.S.C. §§1-2 by an unidentified party other than Discover. The CID seeks documents, data and narrative responses to several interrogatories and document requests, related to the debit card market. A CID is a request for information in the course of a civil investigation and does not constitute the commencement of legal proceedings. The Division is permitted by statute to issue a CID to anyone whom it believes may have information relevant to an investigation. The receipt of a CID does not presuppose that there is probable cause to believe that a violation of the antitrust laws has occurred or that a formal complaint ultimately will be filed. The Company is cooperating with the Division in connection with the CID.

On August 14, 2012, a purported shareholder, James Groen, filed a shareholder derivative action in the U.S. District Court for the Northern District of Illinois (Groen v. Nelms et al.) against the Company’s board of directors, certain current and former officers and directors, and the Company as nominal defendant. On August 27, 2012, a second purported shareholder, the Charter Township of Clinton Police and Fire Retirement System, filed a substantially identical shareholder derivative action in the same court against the same parties (Charter Township of Clinton Police and Fire Retirement System v. Nelms et al.). The complaints in both actions assert claims against the board of directors and certain current and former officers and directors for alleged breach of fiduciary duty, corporate waste, and unjust enrichment arising out of the Company’s alleged violations of the law in connection with the marketing and sale of its protection products. The relief sought in both actions includes changes to the Company’s corporate governance procedures; unspecified damages, injunctive relief, restitution, and disgorgement from the individual defendants; and attorneys’ fees.

On September 24, 2012, Discover Bank entered into a consent order with the FDIC and the CFPB for resolution of the agencies' joint investigation with respect to the marketing of the Bank's protection products. The order requires the Bank to provide refunds of approximately $200 million to eligible customers who purchased certain protection products between December 1, 2007 and August 31, 2011. In addition, the Bank agreed to pay a $14 million civil monetary penalty to the agencies. Adequate provision has been made to cover these costs in the financial statements as of August 31, 2012. The Bank also agreed to make further enhancements to its quality control and other processes related to the marketing, sale and administration of its protection products. The Bank agreed to enter into the consent order for the purpose of resolving this matter and, in doing so, did not admit or deny the findings of fact, conclusions of law, or any violations of law or regulation, set forth in the order.