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 March 31, 2018

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  x    No  o

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  x    No  o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and "emerging growth 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
	Emerging growth company o

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o

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

As of April 27, 2018, there were 348,977,139 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 March 31, 2018

TABLE OF CONTENTS

Part I	FINANCIAL INFORMATION
Item 1.	Financial Statements	1
Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	43
Item 3.	Quantitative and Qualitative Disclosures about Market Risk	64
Item 4.	Controls and Procedures	66
Part II	OTHER INFORMATION
Item 1.	Legal Proceedings	67
Item 1A.	Risk Factors	67
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	67
Item 3.	Defaults Upon Senior Securities	67
Item 4.	Mine Safety Disclosures	67
Item 5.	Other Information	67
Item 6.	Exhibits	67

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 Cashback Checking^®, Discover it^®, Freeze It^SM, College Covered^®, 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

	March 31, 2018			December 31, 2017
	(unaudited) (dollars in millions, except share amounts)
Assets
Cash and cash equivalents	$	17,011		$	13,306
Restricted cash	87			81
Investment securities (includes $1,340 and $1,395 at fair value at March 31, 2018 and December 31, 2017, respectively)	1,543			1,568
Loan receivables
Loan receivables	82,744			84,248
Allowance for loan losses	(2,736		)	(2,621		)
Net loan receivables	80,008			81,627
Premises and equipment, net	848			825
Goodwill	255			255
Intangible assets, net	162			163
Other assets	2,053			2,262
Total assets	$	101,967		$	100,087
Liabilities and Stockholders’ Equity
Deposits:
Interest-bearing deposit accounts	$	60,530		$	58,165
Non-interest bearing deposit accounts	600			599
Total deposits	61,130			58,764
Long-term borrowings	26,244			26,326
Accrued expenses and other liabilities	3,722			4,105
Total liabilities	91,096			89,195
Commitments, contingencies and guarantees (Notes 8, 11 and 12)
Stockholders’ Equity:
Common stock, par value $0.01 per share; 2,000,000,000 shares authorized; 564,510,213 and 563,497,702 shares issued at March 31, 2018 and December 31, 2017, respectively	6			6
Preferred stock, par value $0.01 per share; 200,000,000 shares authorized; 5,700 shares issued and outstanding and aggregate liquidation preference of $570 at March 31, 2018 and December 31, 2017	563			563
Additional paid-in capital	4,068			4,042
Retained earnings	17,211			16,687
Accumulated other comprehensive loss	(139		)	(152		)
Treasury stock, at cost; 213,093,774 and 205,577,507 shares at March 31, 2018 and December 31, 2017, respectively	(10,838		)	(10,254		)
Total stockholders’ equity	10,871			10,892
Total liabilities and stockholders’ equity	$	101,967		$	100,087

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.

	March 31, 2018			December 31, 2017
	(unaudited) (dollars in millions)
Assets
Restricted cash	$	87		$	81
Loan receivables	$	29,894		$	31,781
Allowance for loan losses allocated to securitized loan receivables	$	(1,006	)	$	(998	)
Other assets	$	6		$	5
Liabilities
Long-term borrowings	$	16,385		$	16,536
Accrued expenses and other liabilities	$	17		$	16

See Notes to the Condensed Consolidated Financial Statements.

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DISCOVER FINANCIAL SERVICES

Condensed Consolidated Statements of Income

	For the Three Months Ended March 31,
	2018		2017
	(unaudited) (dollars in millions, except per share amounts)
Interest income
Credit card loans	$	2,090	$	1,876
Other loans	417		367
Investment securities	7		7
Other interest income	55		28
Total interest income	2,569		2,278
Interest expense
Deposits	262		191
Long-term borrowings	207		195
Total interest expense	469		386
Net interest income	2,100		1,892
Provision for loan losses	751		586
Net interest income after provision for loan losses	1,349		1,306
Other income
Discount and interchange revenue, net	254		233
Protection products revenue	53		58
Loan fee income	96		89
Transaction processing revenue	43		39
Other income	29		28
Total other income	475		447
Other expense
Employee compensation and benefits	405		363
Marketing and business development	185		168
Information processing and communications	82		80
Professional fees	155		147
Premises and equipment	26		25
Other expense	115		102
Total other expense	968		885
Income before income tax expense	856		868
Income tax expense	190		304
Net income	$	666	$	564
Net income allocated to common stockholders	$	646	$	551
Basic earnings per common share	$	1.82	$	1.43
Diluted earnings per common share	$	1.82	$	1.43
Dividends declared per common share	$	0.35	$	0.30

See Notes to the Condensed Consolidated Financial Statements.

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DISCOVER FINANCIAL SERVICES

Condensed Consolidated Statements of Comprehensive Income

	For the Three Months Ended March 31,
	2018			2017
	(unaudited) (dollars in millions)
Net income	$	666		$	564
Other comprehensive income, net of taxes
Unrealized (loss) gain on available-for-sale investment securities, net of tax	(7		)	1
Unrealized gain on cash flow hedges, net of tax	19			5
Unrealized pension and post-retirement plan gain, net of tax	1			—
Other comprehensive income	13			6
Comprehensive income	$	679		$	570

See Notes to the Condensed Consolidated Financial Statements.

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DISCOVER FINANCIAL SERVICES

Condensed Consolidated Statements of Changes in Stockholders’ Equity

							Additional Paid-in Capital		Retained Earnings			Accumulated Other Comprehensive Loss			Treasury Stock			Total Stockholders’ Equity
	Preferred Stock			Common Stock
	Shares	Amount		Shares	Amount
	(unaudited) (dollars in millions, shares in thousands)
Balance at December 31, 2016	575	$	560	562,414	$	5	$	3,962	$	15,130		$	(161	)	$	(8,173	)	$	11,323
Net income	—	—		—	—		—		564			—			—			564
Other comprehensive income	—	—		—	—		—		—			6			—			6
Purchases of treasury stock	—	—		—	—		—		—			—			(520		)	(520		)
Common stock issued under employee benefit plans	—	—		20	—		1		—			—			—			1
Common stock issued and stock-based compensation expense	—	—		968	1		16		—			—			—			17
Dividends — common stock	—	—		—	—		—		(117		)	—			—			(117		)
Dividends — preferred stock	—	—		—	—		—		(9		)	—			—			(9		)
Balance at March 31, 2017	575	$	560	563,402	$	6	$	3,979	$	15,568		$	(155	)	$	(8,693	)	$	11,265
Balance at December 31, 2017	6	$	563	563,498	$	6	$	4,042	$	16,687		$	(152	)	$	(10,254	)	$	10,892
Net income	—	—		—	—		—		666			—			—			666
Other comprehensive income	—	—		—	—		—		—			13			—			13
Purchases of treasury stock	—	—		—	—		—		—			—			(584		)	(584		)
Common stock issued under employee benefit plans	—	—		23	—		2		—			—			—			2
Common stock issued and stock-based compensation expense	—	—		989	—		24		—			—			—			24
Dividends — common stock	—	—		—	—		—		(126		)	—			—			(126		)
Dividends — preferred stock	—	—		—	—		—		(16		)	—			—			(16		)
Balance at March 31, 2018	6	$	563	564,510	$	6	$	4,068	$	17,211		$	(139	)	$	(10,838	)	$	10,871

See Notes to the Condensed Consolidated Financial Statements.

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DISCOVER FINANCIAL SERVICES

Condensed Consolidated Statements of Cash Flows

	For the Three Months Ended March 31,
	2018			2017
	(unaudited) (dollars in millions)
Cash flows from operating activities
Net income	$	666		$	564
Adjustments to reconcile net income to net cash provided by (used for) operating activities:
Provision for loan losses	751			586
Depreciation and amortization	107			93
Amortization of deferred revenues and accretion of accretable yield on acquired loans	(101		)	(98		)
Net loss on investments and other assets	11			14
Other, net	(96		)	11
Changes in assets and liabilities:
Decrease in other assets	251			181
Decrease in accrued expenses and other liabilities	(351		)	(338		)
Net cash provided by operating activities	1,238			1,013
Cash flows from investing activities
Maturities of available-for-sale investment securities	44			52
Maturities of held-to-maturity investment securities	4			4
Purchases of held-to-maturity investment securities	(33		)	(17		)
Net principal disbursed on loans originated for investment	959			1,010
Purchases of other investments	—			(14		)
Purchases of premises and equipment	(58		)	(47		)
Net cash used for investing activities	916			988
Cash flows from financing activities
Proceeds from issuance of securitized debt	1,666			1,290
Maturities and repayment of securitized debt	(1,794		)	(925		)
Proceeds from issuance of other long-term borrowings	822			1,005
Maturities and repayment of other long-term borrowings	(751		)	—
Proceeds from issuance of common stock	2			1
Purchases of treasury stock	(584		)	(520		)
Net increase in deposits	2,338			1,529
Dividends paid on common and preferred stock	(142		)	(127		)
Net cash provided by financing activities	1,557			2,253
Net increase in cash, cash equivalents and restricted cash	3,711			4,254
Cash, cash equivalents and restricted cash, at beginning of period	13,387			12,009
Cash, cash equivalents and restricted cash, at end of period	$	17,098		$	16,263
Reconciliation of cash, cash equivalents and restricted cash:
Cash and cash equivalents	$	17,011		$	15,163
Restricted cash	87			1,100
Cash, cash equivalents and restricted cash, at end of period	$	17,098		$	16,263

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”). The Company provides direct banking products and services and payment services through its subsidiaries. The Company offers its customers credit card loans, private student loans, personal loans, home equity loans and deposit products. The Company also operates the Discover Network, the PULSE network (“PULSE”) and Diners Club International (“Diners Club”). The Discover Network processes transactions for Discover-branded credit and debit cards and provides payment transaction processing and settlement services. 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 charge cards and/or provide card acceptance services.

The Company’s business activities are managed in two segments, Direct Banking and Payment Services, based on the products and services provided. For a detailed description of the operations of each segment, as well as the allocation conventions used in business segment reporting, see Note 15: Segment Disclosures.

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 interim period. 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 2017 audited consolidated financial statements filed with the Company’s annual report on Form 10-K for the year ended December 31, 2017.

Recently Issued Accounting Pronouncements

In February 2018, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2018-02, Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income. The ASU permits, but does not require, issuers to reclassify into retained earnings any tax effects that are stranded in accumulated other comprehensive income (“AOCI”) as a result of the change in the statutory federal tax rate enacted by the Tax Cuts and Jobs Act of 2017 (“TCJA”). Tax effects that are stranded in AOCI for other reasons, such as prior changes in tax law or changes in a valuation allowance, may not be reclassified directly through retained earnings. The guidance is effective for fiscal years beginning after December 15, 2018. The Company is permitted to early adopt the guidance in any interim or annual period and apply it either (1) in the period of adoption, or (2) retrospectively to each period in which the effect of the change in the federal corporate income tax rate is recognized. The Company has not elected to early adopt the ASU as of March 31, 2018. The reclassification of stranded tax effects from AOCI to retained earnings will not be material to the Company’s consolidated statements of financial condition and will have no impact on the Company’s cash flows or consolidated statements of income.

In August 2017, the FASB issued ASU No. 2017-12, Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for Hedging Activities. The amendments of ASU 2017-12 are intended to improve the financial reporting of hedging relationships to better reflect the economic results of an entity’s risk management activities through changes to both the designation and measurement guidance for qualifying hedges and improvements to the presentation of hedge results. The amendments expand an entity’s ability to apply hedge accounting for both financial and non-financial risk components and

6

allow for a simplified approach for fair value hedging of interest rate risk. ASU 2017-12 eliminates the requirement to separately measure and report hedge ineffectiveness and generally requires the entire change in fair value of a hedging instrument to be presented in the same income statement line as the hedged item. Additionally, the standard simplifies the hedge documentation and effectiveness assessment requirements under the previous guidance and amends the disclosures about hedging activities.

The Company early adopted ASU 2017-12 effective January 1, 2018. Accordingly, the Company is no longer required to separately measure and immediately recognize ineffectiveness related to cash flow hedges. The Company has also elected to measure changes in the fair value of hedged items designated under certain existing fair value hedges transitioned at adoption using the benchmark rate component of the contractual rate cash flows. As a result, the Company recorded separate cumulative-effect adjustments to (a) AOCI with respect to cash flow hedges and (b) the basis adjustment for certain hedged items with respect to fair value hedges. This resulted in an immaterial adjustment to the opening balance of retained earnings as of January 1, 2018, and thus did not have a material impact to the Company’s financial statements.

In January 2017, the FASB issued ASU No. 2017-04, Intangibles—Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment. The purpose of this ASU is to simplify the test for goodwill impairment by eliminating Step 2 of the current impairment test. Under the current rules, if the reporting unit’s carrying value exceeds its fair value (Step 1), goodwill impairment is measured as the difference between the carrying value of goodwill and its implied fair value. To compute the implied fair value of goodwill under Step 2, an entity has to perform procedures to determine the fair value at the impairment testing date of its assets and liabilities (including unrecognized assets and liabilities) following the procedure that would be required in determining the fair value of assets acquired and liabilities assumed in a business combination. Under the new standard, the Company will perform its annual goodwill impairment test by comparing the fair value of a reporting unit with its carrying amount. The Company should recognize an impairment charge for the amount by which the carrying amount exceeds the reporting unit’s fair value; however, the loss recognized should not exceed the total amount of goodwill allocated to that reporting unit. The amendments in this ASU apply to the Company’s annual or any interim goodwill impairment tests in fiscal years beginning after December 15, 2019. Early adoption is permitted for interim or annual goodwill impairment tests performed on testing dates after January 1, 2017. The amendments in this ASU apply on a prospective basis. All of the Company’s recorded goodwill is associated with its PULSE debit business. This ASU has no impact on cash flows, and its adoption is not expected to have any impact on the Company’s condensed consolidated financial condition or results of operations because the estimated fair value of the PULSE reporting unit is well in excess of its carrying value. The Company did not early adopt this standard, but is still evaluating whether it will prior to the 2020 effective date.

In November 2016, the FASB issued ASU No. 2016-18, Statement of Cash Flows (Topic 230): Restricted Cash. Whereas restricted cash balances have traditionally been excluded from the statement of cash flows, this ASU requires restricted cash and restricted cash equivalents to be included within the beginning and ending totals of cash, cash equivalents and restricted cash presented on the statement of cash flows for all periods presented. Restricted cash and restricted cash equivalent inflows and outflows with external parties are required to be classified within the operating, investing, and/or financing activity sections of the statement of cash flows whereas transfers between cash and cash equivalents and restricted cash and restricted cash equivalents should no longer be presented on the statement of cash flows. ASU 2016-18 also requires the nature of the restrictions to be disclosed to help provide information about the sources and uses of these balances during a reporting period and a reconciliation of the cash, cash equivalents and restricted cash totals on the statement of cash flows to the related balance sheet line items when cash, cash equivalents, and restricted cash are presented in more than one line item on the balance sheet. The reconciliation can be presented either on the face of the statement of cash flows or in the notes to the financial statements and must be provided for each period that a balance sheet is presented. The ASU became effective for the Company on January 1, 2018 and did not have a material impact to the Company’s statement of cash flows.

In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments. This ASU replaces the incurred loss model with the current expected credit loss ("CECL") approach. For loans carried at amortized cost, the allowance for loan losses will be based on management’s current estimate of all expected credit losses over the remaining contractual term of the loans. Upon the origination of a loan, the Company will have to record its estimate of all expected credit losses on that loan through an immediate charge to earnings. Updates to that estimate each period will be recorded through provision expense. The CECL estimate is to be based on historical experience, current conditions and reasonable and supportable forecasts. No specific method for estimating credit loss is mandated, permitting companies to use judgment in selecting the approach that is most appropriate in their circumstances.

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The CECL approach is expected to affect the Company’s allowance for loan losses as a result of: (1) encompassing expected losses, not simply those deemed to be already incurred, (2) extending the loss estimate period over the entire life of the loan, and (3) reclassification of the credit loss component of the purchased credit-impaired ("PCI") loan portfolio out of loan carrying value and into the allowance for loan losses. All loans carried at amortized cost, including PCI loans and loans modified in a troubled debt restructuring ("TDR") will be measured under the CECL approach. Existing specialized measurement guidance for PCI loans, which the ASU refers to as purchased credit-deteriorated ("PCD"), and TDRs will be eliminated, although certain separate disclosure guidance will be retained. Measurement of credit impairment of available-for-sale debt securities will generally remain unchanged under the new rules, but any such impairment will be recorded through an allowance, rather than a direct write-down of the security.

The ASU is effective beginning January 1, 2020, with early adoption permitted no sooner than January 1, 2019. Management is not considering early adoption at this time. On the date of adoption, the allowance for loan losses will be adjusted to the CECL estimate for loans held at that date with an offsetting adjustment to retained earnings. Additionally, the carrying value of PCD loans will be increased through an offsetting addition to the allowance for loan losses for the CECL estimate on those loans. The CECL allowance will be re-evaluated in subsequent periods and adjusted through provision expense as needed. The Company is actively engaged in cross-functional implementation efforts and planning for loss modeling requirements consistent with lifetime expected loss estimates. The Company has also been involved in efforts to identify and resolve various implementation issues specific to the application of the standard to credit card receivables. Adoption of the standard has the potential to materially impact stockholders' equity and regulatory capital as well as the Company's financial condition and results of operations. The extent of the impact upon adoption will likely depend on the characteristics of the Company's loan portfolio and economic conditions at that date, as well as forecasted conditions thereafter.

In March 2016, the FASB issued ASU No. 2016-08, Principal versus Agent Considerations (Reporting Revenue Gross versus Net). This guidance became effective for the Company on January 1, 2018, along with ASU 2014-09, Revenue from Contracts with Customers (Topic 606), discussed below. This ASU did not result in a change to the accounting or reporting of the Company's revenue arrangements that involve a principal-agent relationship. Therefore, its adoption has had no impact on the Company's condensed consolidated financial condition, results of operations or cash flows. The guidance in this ASU provides clarification on the principal versus agent concept in relation to revenue recognition guidance issued as part of ASU 2014-09. Topic 606 requires a company to determine whether it is a principal or an agent in a transaction in which another party is involved in providing goods or services to a customer by evaluating the nature of its promise to the customer. ASU 2016-08 provides clarification for identifying the good, service or right being transferred in a revenue transaction and identifies the principal as the party that controls the good, service or right prior to its transfer to the customer. The ASU provides further clarity on how to evaluate control in this context.

In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842). The guidance will require lessees to capitalize most leases on their balance sheet whereas under current GAAP only capital leases are recognized on the lessee’s balance sheet. Leases which today are identified as capital leases will generally be identified as financing leases under the new guidance but otherwise their accounting treatment will remain relatively unchanged. Leases identified today as operating leases will generally remain in that category under the new standard, but both a right-of-use asset and a liability for remaining lease payments will now be required to be recognized on the balance sheet for this type of lease. The manner in which expenses associated with all leases are reported on the income statement will remain mostly unchanged. Lessor accounting also remains substantially unchanged by the new standard. The new guidance will become effective for the Company on January 1, 2019, and management does not expect it to have a material impact on the condensed consolidated financial statements.

In January 2016, the FASB issued ASU No. 2016-01, Financial Instruments—Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities. This ASU became effective for the Company on January 1, 2018 and has not had a material impact to the financial statements. The ASU has had limited impact on the Company since it does not change the guidance for classifying and measuring investments in debt securities or loans. The standard requires entities to measure certain cost-method equity investments at fair value with changes in value recognized in net income. Equity investments that do not have readily determinable fair values are carried at cost, less any impairment, plus or minus changes resulting from any observable price changes in orderly transactions for an identical or similar investment of the same issuer. This ASU requires public entities to use the exit price notion when measuring the fair value of financial instruments for disclosure purposes and requires separate presentation of financial assets and financial liabilities by measurement category and form of financial asset (i.e., securities or loans) on the balance sheet or the accompanying notes to the financial statements.

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In May 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers (Topic 606). The guidance in this ASU supersedes existing revenue recognition requirements in Topic 605, Revenue Recognition, including an assortment of transaction-specific and industry-specific rules. The new revenue recognition model became effective for the Company on January 1, 2018. The model generally results in the same revenue recognition patterns as have historically been applied to the Company’s revenues that are subject to this guidance. The timing and measurement of fee revenues associated with the Company’s credit card arrangements and costs associated with the Company’s credit card reward programs have not been affected as a result of the adoption of Accounting Standards Codification ("ASC") 606. Accounting and reporting for the Company’s transaction processing services, including discount and interchange revenue and other transaction processing fees, remains substantially unchanged from treatments under GAAP in effect prior to 2018. As permitted by the ASU, management has elected to adopt this standard using a modified retrospective approach, which means that the cumulative effect of initially applying the standard is recognized at the date of initial application through an adjustment to beginning retained earnings, but no restatement of prior periods is made. Based on its evaluations, management has concluded that no adjustment to beginning retained earnings is required as of January 1, 2018, the date of adoption. See Note 16: Revenue from Contracts with Customers for additional information resulting from this standard.

2. Investments

The Company’s investment securities consist of the following (dollars in millions):
	March 31, 2018		December 31, 2017
U.S. Treasury securities(1)	$	672	$	672
States and political subdivisions of states	—		1
Residential mortgage-backed securities - Agency(2)	871		895
Total investment securities	$	1,543	$	1,568

(1) Includes $38 million and $48 million of U.S. Treasury securities pledged as swap collateral as of March 31, 2018 and December 31, 2017, respectively.

(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 millions):
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
At March 31, 2018
Available-for-Sale Investment Securities(1)
U.S. Treasury securities	$	675	$	—	$	(3	)	$	672
Residential mortgage-backed securities - Agency	683		—		(15		)	668
Total available-for-sale investment securities	$	1,358	$	—	$	(18	)	$	1,340
Held-to-Maturity Investment Securities(2)
Residential mortgage-backed securities - Agency(3)	$	203	$	1	$	(4	)	$	200
Total held-to-maturity investment securities	$	203	$	1	$	(4	)	$	200
At December 31, 2017
Available-for-Sale Investment Securities(1)
U.S. Treasury securities	$	675	$	—	$	(3	)	$	672
Residential mortgage-backed securities - Agency	728		1		(6		)	723
Total available-for-sale investment securities	$	1,403	$	1	$	(9	)	$	1,395
Held-to-Maturity Investment Securities(2)
States and political subdivisions of states	$	1	$	—	$	—		$	1
Residential mortgage-backed securities - Agency(3)	172		1		(1		)	172
Total held-to-maturity investment securities	$	173	$	1	$	(1	)	$	173

(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.

9

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 (dollars in millions):
	Number of Securities in a Loss Position	Less than 12 months					More than 12 months
		Fair Value		Unrealized Losses			Fair Value		Unrealized Losses
At March 31, 2018
Available-for-Sale Investment Securities
U.S. Treasury securities	1	$	—	$	—		$	672	$	(3	)
Residential mortgage-backed securities - Agency	31	$	546	$	(10	)	$	122	$	(5	)
Held-to-Maturity Investment Securities
Residential mortgage-backed securities - Agency	80	$	125	$	(2	)	$	40	$	(2	)
At December 31, 2017
Available-for-Sale Investment Securities
U.S. Treasury securities	1	$	—	$	—		$	672	$	(3	)
Residential mortgage-backed securities - Agency	27	$	457	$	(3	)	$	132	$	(3	)
Held-to-Maturity Investment Securities
Residential mortgage-backed securities - Agency	45	$	56	$	—		$	38	$	(1	)

There were no losses related to other-than-temporary impairments and no proceeds from sales or recognized gains and losses on available-for-sale securities during the three months ended March 31, 2018 and 2017. See Note 7: Accumulated Other Comprehensive Income for unrealized gains and losses on available-for-sale securities during the three months ended March 31, 2018 and 2017.

Maturities of available-for-sale debt securities and held-to-maturity debt securities are provided in the table below (dollars in millions):
	One Year or Less		After One Year Through Five Years		After Five Years Through Ten Years		After Ten Years		Total
At March 31, 2018
Available-for-Sale Investment Securities—Amortized Cost
U.S. Treasury securities	$	675	$	—	$	—	$	—	$	675
Residential mortgage-backed securities - Agency(1)	—		78		506		99		683
Total available-for-sale investment securities	$	675	$	78	$	506	$	99	$	1,358
Held-to-Maturity Investment Securities—Amortized Cost
Residential mortgage-backed securities - Agency(1)	$	—	$	—	$	—	$	203	$	203
Total held-to-maturity investment securities	$	—	$	—	$	—	$	203	$	203
Available-for-Sale Investment Securities—Fair Values
U.S. Treasury securities	$	672	$	—	$	—	$	—	$	672
Residential mortgage-backed securities - Agency(1)	—		77		493		98		668
Total available-for-sale investment securities	$	672	$	77	$	493	$	98	$	1,340
Held-to-Maturity Investment Securities—Fair Values
Residential mortgage-backed securities - Agency(1)	$	—	$	—	$	—	$	200	$	200
Total held-to-maturity investment securities	$	—	$	—	$	—	$	200	$	200

(1) Maturities of residential mortgage-backed securities are reflective of the contractual maturities of the investment.

10

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. The related commitment for future investments is recorded in accrued expenses and other liabilities within the condensed consolidated statements of financial condition. The portion of each investment's operating results allocable to the Company is recorded in other expense within the condensed consolidated statements of income. The Company reduces the carrying value of the investments by recognizing any amounts that are in excess of future net tax benefits in other expense. 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 March 31, 2018 and December 31, 2017, the Company had outstanding investments in these entities of $286 million and $297 million, respectively, and related contingent liabilities of $66 million. Of the above outstanding equity investments, the Company had $279 million and $288 million of investments related to affordable housing projects as of March 31, 2018 and December 31, 2017, respectively, which had $66 million related contingent liabilities.

3. Loan Receivables

The Company has three loan portfolio segments: credit card loans, other loans and PCI loans.

The Company's classes of receivables within the three portfolio segments are depicted in the table below (dollars in millions):
	March 31, 2018			December 31, 2017
Loan receivables
Credit card loans(1)	$	65,577		$	67,291
Other loans
Personal loans	7,307			7,374
Private student loans	7,416			7,076
Other	488			423
Total other loans	15,211			14,873
PCI loans(2)	1,956			2,084
Total loan receivables	82,744			84,248
Allowance for loan losses	(2,736		)	(2,621		)
Net loan receivables	$	80,008		$	81,627

(1) Amounts include $21.1 billion and $21.2 billion underlying investors’ interest in trust debt at March 31, 2018 and December 31, 2017, respectively, and $8.1 billion and $9.9 billion in seller's interest at March 31, 2018 and December 31, 2017, respectively. See Note 4: Credit Card and Student Loan Securitization Activities for additional information.

(2) Amounts include $712 million and $762 million of loans pledged as collateral against the notes issued from the Student Loan Corporation ("SLC") securitization trusts at March 31, 2018 and December 31, 2017, respectively. See Note 4: Credit Card and Student Loan Securitization Activities for additional information.

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Credit Quality Indicators

The Company regularly reviews its collection experience (including delinquencies and net charge-offs) in determining its allowance for loan losses.

Information related to the delinquent and non-accruing loans in the Company’s loan portfolio 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 millions):
	30-89 Days Delinquent		90 or More Days Delinquent		Total Past Due		90 or More Days Delinquent and Accruing		Total Non-accruing(1)
At March 31, 2018
Credit card loans(2)	$	752	$	777	$	1,529	$	719	$	209
Other loans
Personal loans(3)	73		28		101		26		11
Private student loans (excluding PCI)(4)	118		49		167		48		10
Other	2		1		3		—		19
Total other loans (excluding PCI)	193		78		271		74		40
Total loan receivables (excluding PCI)	$	945	$	855	$	1,800	$	793	$	249
At December 31, 2017
Credit card loans(2)	$	781	$	751	$	1,532	$	693	$	203
Other loans
Personal loans(3)	73		30		103		28		10
Private student loans (excluding PCI)(4)	134		33		167		33		2
Other	3		1		4		—		18
Total other loans (excluding PCI)	210		64		274		61		30
Total loan receivables (excluding PCI)	$	991	$	815	$	1,806	$	754	$	233

(1) The Company estimates that the gross interest income that would have been recorded in accordance with the original terms of non-accruing credit card loans was $9 million and $8 million for the three months ended March 31, 2018 and 2017, 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. This amount was estimated based on customers' current balances and most recent interest rates.

(2) Credit card loans that are 90 or more days delinquent and accruing interest include $83 million and $72 million of loans accounted for as TDRs at March 31, 2018 and December 31, 2017, respectively.

(3) Personal loans that are 90 or more days delinquent and accruing interest include $4 million and $5 million of loans accounted for as TDRs at March 31, 2018 and December 31, 2017, respectively.

(4) Private student loans that are 90 or more days delinquent and accruing interest include $7 million and $5 million of loans accounted for as TDRs at March 31, 2018 and December 31, 2017, respectively.

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Information related to the net charge-offs in the Company's loan portfolio 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 millions):
	For the Three Months Ended March 31,
	2018				2017
	Net Charge-offs		Net  Charge-off Rate(1)		Net Charge-offs		Net  Charge-off Rate(1)
Credit card loans	$	540	3.32	%	$	422	2.84	%
Other loans
Personal loans	73		4.03	%	51		3.16	%
Private student loans (excluding PCI)	22		1.17	%	14		0.83	%
Other	—		—	%	2		3.45	%
Total other loans	95		2.52	%	67		2.02	%
Net charge-offs (excluding PCI)	$	635	3.17	%	$	489	2.69	%
Net charge-offs (including PCI)	$	635	3.09	%	$	489	2.60	%

(1) Net charge-off rate represents net charge-off dollars (annualized) divided by average loans for the reporting period.

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 FICO or other credit scores, relating to the customer’s broader credit performance. FICO 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 portion of delinquent accounts have FICO scores below 660.

The following table provides the most recent FICO scores available for the Company’s customers as a percentage of each class of loan receivables:
	Credit Risk Profile by FICO Score
	660 and  Above		Less than 660 or No Score
At March 31, 2018
Credit card loans	81	%	19	%
Personal loans	95	%	5	%
Private student loans (excluding PCI)(1)	95	%	5	%
At December 31, 2017
Credit card loans	82	%	18	%
Personal loans	95	%	5	%
Private student loans (excluding PCI)(1)	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 March 31, 2018 and December 31, 2017, there were $40 million and $29 million, respectively, of private student loans, including PCI, in forbearance, representing 0.7% and 0.5%, respectively, of total student loans in repayment and forbearance.

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Allowance for Loan Losses

The following tables provide changes in the Company’s allowance for loan losses (dollars in millions):
	For the Three Months Ended March 31, 2018
	Credit Card			Personal Loans			Student Loans(1)			Other			Total
Balance at beginning of period	$	2,147		$	301		$	162		$	11		$	2,621
Additions
Provision for loan losses	645			73			31			2			751
Deductions
Charge-offs	(663		)	(81		)	(25		)	—			(769		)
Recoveries	123			8			3			—			134
Net charge-offs	(540		)	(73		)	(22		)	—			(635		)
Other(2)	—			—			(1		)	—			(1		)
Balance at end of period	$	2,252		$	301		$	170		$	13		$	2,736
	For the Three Months Ended March 31, 2017
	Credit Card			Personal Loans			Student Loans(1)			Other			Total
Balance at beginning of period	$	1,790		$	200		$	158		$	19		$	2,167
Additions
Provision for loan losses	524			58			12			(8		)	586
Deductions
Charge-offs	(535		)	(57		)	(17		)	(2		)	(611		)
Recoveries	113			6			3			—			122
Net charge-offs	(422		)	(51		)	(14		)	(2		)	(489		)
Balance at end of period	$	1,892		$	207		$	156		$	9		$	2,264

(1) Includes both PCI and non-PCI private student loans.

(2) Net change in reserves on PCI pools having no remaining non-accretable difference.

Net charge-offs of principal are recorded against the allowance for loan losses, as shown in the preceding table. Information regarding net charge-offs of interest and fee revenues on credit card and other loans is as follows (dollars in millions):
	For the Three Months Ended March 31,
	2018		2017
Interest and fees accrued subsequently charged off, net of recoveries (recorded as a reduction of interest income)	$	109	$	84
Fees accrued subsequently charged off, net of recoveries (recorded as a reduction to other income)	$	27	$	22

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The following tables provide additional detail of the Company’s allowance for loan losses and recorded investment in its loan portfolio by impairment methodology (dollars in millions):
	Credit Card		Personal Loans		Student Loans(1)		Other Loans		Total
At March 31, 2018
Allowance for loans evaluated for impairment as
Collectively evaluated for impairment in accordance with ASC 450-20	$	2,007	$	266	$	122	$	5	$	2,400
Evaluated for impairment in accordance with ASC 310-10-35(2)(3)	245		35		21		8		309
Acquired with deteriorated credit quality, evaluated in accordance with ASC 310-30	—		—		27		—		27
Total allowance for loan losses	$	2,252	$	301	$	170	$	13	$	2,736
Recorded investment in loans evaluated for impairment as
Collectively evaluated for impairment in accordance with ASC 450-20	$	64,054	$	7,186	$	7,271	$	435	$	78,946
Evaluated for impairment in accordance with ASC 310-10-35(2)(3)	1,523		121		145		53		1,842
Acquired with deteriorated credit quality, evaluated in accordance with ASC 310-30	—		—		1,956		—		1,956
Total recorded investment	$	65,577	$	7,307	$	9,372	$	488	$	82,744
At December 31, 2017
Allowance for loans evaluated for impairment as
Collectively evaluated for impairment in accordance with ASC 450-20	$	1,921	$	269	$	112	$	4	$	2,306
Evaluated for impairment in accordance with ASC 310-10-35(2)(3)	226		32		21		7		286
Acquired with deteriorated credit quality, evaluated in accordance with ASC 310-30	—		—		29		—		29
Total allowance for loan losses	$	2,147	$	301	$	162	$	11	$	2,621
Recorded investment in loans evaluated for impairment as
Collectively evaluated for impairment in accordance with ASC 450-20	$	65,975	$	7,263	$	6,939	$	370	$	80,547
Evaluated for impairment in accordance with ASC 310-10-35(2)(3)	1,316		111		137		53		1,617
Acquired with deteriorated credit quality, evaluated in accordance with ASC 310-30	—		—		2,084		—		2,084
Total recorded investment	$	67,291	$	7,374	$	9,160	$	423	$	84,248

(1) Includes both PCI and non-PCI private student loans.

(2) Loan receivables evaluated for impairment in accordance with ASC 310-10-35 include credit card loans, personal loans and student loans collectively evaluated for impairment in accordance with ASC Subtopic 310-40, Receivables, which consists of modified loans accounted for as TDRs. Other loans are individually evaluated for impairment and generally do not represent TDRs.

(3) The unpaid principal balance of credit card loans was $1.3 billion and $1.1 billion at March 31, 2018 and December 31, 2017, respectively. The unpaid principal balance of personal loans was $121 million and $109 million at March 31, 2018 and December 31, 2017, respectively. The unpaid principal balance of student loans was $145 million and $135 million at March 31, 2018 and December 31, 2017, respectively. All loans accounted for as TDRs have a related allowance for loan losses.

Troubled Debt Restructurings

The Company has internal loan modification programs that provide relief to credit card, personal loan and student loan borrowers who may be experiencing financial hardship. The Company continually evaluates new programs to determine which of them meet the definition of a TDR. The internal loan modification programs include both temporary and permanent programs which vary by product. External loan modification programs are also available for credit card and personal loans. Temporary and permanent modifications on credit card and personal loans, as well as temporary modifications on student loans and certain grants of student loan forbearance, result in the loans being considered individually impaired. In addition, loans that defaulted or graduated from modification programs or forbearance are considered to be individually impaired.

For credit card customers, the Company offers temporary hardship programs consisting of an interest rate reduction and in some cases a reduced minimum payment, 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 modification program does not normally provide for the forgiveness of

15

unpaid principal, but may allow for the reversal of certain unpaid interest or fee assessments. The Company also makes permanent loan modifications for customers who request financial assistance through external sources, such as a consumer credit counseling agency program. 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. Modified credit card loans that are deemed to meet the definition of TDRs includes loans in both temporary and permanent programs.

For personal loan customers, in certain situations the Company offers 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 12 months with the option of a final balloon payment required at the end of the loan term or an extension of the maturity date with the total term not exceeding nine years. Further, in certain circumstances the interest rate on the loan is reduced. The permanent program involves changing the terms of the loan in order to pay off the outstanding balance over a longer term and also in certain circumstances reducing the interest rate on the loan. Similar to the temporary programs, the total term may not exceed nine years. The Company also allows permanent loan modifications for customers who request financial assistance through external sources, similar to the 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 TDRs.

To assist student loan borrowers who are experiencing temporary financial difficulties but are willing to resume making payments, the Company may offer hardship forbearance or programs that include payment deferral, temporary payment reduction, temporary interest rate reduction or extended terms. A modified loan typically meets the definition of a TDR based on the cumulative length of the concession period and an evaluation of the credit quality of the borrower, based on FICO scores.

The Company monitors borrower performance after using payment programs or forbearance and the Company believes the programs help to prevent defaults and are useful in assisting customers experiencing financial difficulties. The Company plans to continue to use payment programs and forbearance and, as a result, expects to have additional loans classified as TDRs in the future.

Additional information about modified loans classified as TDRs is shown below (dollars in millions):
	Average recorded investment in loans		Interest income recognized during period loans were impaired(1)		Gross interest income that would have been recorded with original terms(2)
For the Three Months Ended March 31, 2018
Credit card loans(3)	$	1,413	$	34	$	26
Personal loans	$	117	$	3	$	1
Private student loans	$	142	$	3	$	—
For the Three Months Ended March 31, 2017
Credit card loans(3)	$	1,108	$	25	$	20
Personal loans	$	84	$	2	$	1
Private student loans	$	94	$	2	$	—

(1) The Company does not separately track interest income on loans in 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 additional 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 loans and the average interest rate earned on loans in the modification programs to the average loans in the modification programs.

(3) Includes credit card loans that were modified in TDRs, but are no longer enrolled in a TDR program due to noncompliance with the terms of the modification or due to successful completion of a program after which charging privileges may be reinstated based on customer-level evaluation. The average balance of credit card loans that were no longer enrolled in a TDR program was $399 million and $311 million, respectively, for the three months ended March 31, 2018 and 2017.

16

In order to evaluate the primary financial effects that resulted from credit card loans entering into a loan modification program during the three months ended March 31, 2018 and 2017, the Company quantified the amount by which interest and fees were reduced during the periods. During the three months ended March 31, 2018 and 2017, the Company forgave approximately $12 million and $11 million, respectively, of interest and fees as a result of accounts entering into a credit card loan modification program.

The following table provides information on loans that entered a loan modification program during the period (dollars in millions):
	For the Three Months Ended March 31,
	2018			2017
	Number of Accounts	Balances		Number of Accounts	Balances
Accounts that entered a loan modification program during the period
Credit card loans	60,055	$	380	30,893	$	181
Personal loans	2,128	$	29	1,563	$	18
Private student loans	906	$	16	1,017	$	17

The following table presents the carrying value of loans that experienced a payment default during the period that had been modified in a TDR during the 15 months preceding the end of each period (dollars in millions):
	For the Three Months Ended March 31,
	2018			2017
	Number of Accounts	Aggregated Outstanding Balances Upon Default		Number of Accounts	Aggregated Outstanding Balances Upon Default
TDRs that subsequently defaulted
Credit card loans(1)(2)	8,814	$	47	8,166	$	44
Personal loans(2)	575	$	8	307	$	4
Private student loans(3)	271	$	5	185	$	3

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

(2) For credit card loans and personal loans, a customer defaults from a modification program after two consecutive missed payments. The outstanding balance upon default is generally the loan balance at the end of the month prior to default.

(3) For student loans, defaults have been defined as loans that are 60 or more days delinquent. The outstanding balance upon default is generally the loan balance at the end of the month prior to default.

Of the account balances that defaulted as shown above for the three months ended March 31, 2018 and 2017, approximately 37% and 38%, respectively, of the total balances were charged off at the end of the month in which they defaulted. For accounts that have defaulted from a loan modification program and have not been subsequently charged off, the balances are included in the allowance for loan loss analysis discussed above under "— 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 acquired private student loan portfolio comprise the Company’s only PCI loans at March 31, 2018 and December 31, 2017. Total PCI student loans had an outstanding balance of $2.0 billion and $2.2 billion, including accrued interest, and a related carrying amount of $2.0 billion and $2.1 billion as of March 31, 2018 and December 31, 2017, respectively.

17

The following table provides changes in accretable yield for the acquired loans during each period (dollars in millions):
	For the Three Months Ended March 31,
	2018			2017
Balance at beginning of period	$	669		$	796
Accretion into interest income	(36		)	(41		)
Balance at end of period	$	633		$	755

Periodically, the Company updates the estimate of cash flows expected to be collected based on management's latest expectations of future credit losses, borrower prepayments and certain other assumptions that affect cash flows. No provision expense was recorded during the three months ended March 31, 2018 and 2017. The allowance for PCI loan losses at March 31, 2018 and December 31, 2017 was $27 million and $29 million, respectively. For the three months ended March 31, 2018 and 2017, there were no changes in cash flow assumptions. Changes to accretable yield are recognized prospectively as an adjustment to yield over the remaining life of the pools.

At March 31, 2018, the 30 or more days delinquency and 90 or more days delinquency rates on PCI student loans (which include loans not yet in repayment) were 2.92% and 0.83%, respectively. At December 31, 2017, the 30 or more days delinquency and 90 or more days delinquency rates on PCI student loans (which include loans not yet in repayment) were 3.24% and 0.93%, 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 was 0.99% and 0.53% for the three months ended March 31, 2018 and 2017, respectively.

4. Credit Card and Student Loan Securitization Activities

The Company’s securitizations are accounted for as secured borrowings and the related trusts are treated as consolidated subsidiaries of the Company. For a description of the Company’s principles of consolidation with respect to VIEs, see Note 1: Background and Basis of Presentation of the Company’s annual report on Form 10-K for the year ended December 31, 2017.

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”). Credit card loan receivables are transferred into DCMT and beneficial interests in DCMT are transferred into DCENT. DCENT issues debt securities to investors that are reported in long-term borrowings.

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 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 subordinated classes are held by wholly-owned subsidiaries of Discover Bank. The Company is exposed to credit-related risk of loss associated with trust assets as of the balance sheet date through the retention of these subordinated interests. The estimated probable incurred loss is included in the allowance for loan losses estimate.

The Company’s retained interests in the assets of the trusts, consisting of investments in DCENT notes held by subsidiaries of Discover Bank, constitute intercompany positions which are eliminated in the preparation of the Company’s condensed consolidated statements 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. Further, the transferred credit card loan receivables are owned by the trust and are not available to third-party creditors of the Company. The trusts have ownership of cash balances, the amounts of which are reported in restricted cash. 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. 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.

18

The carrying values of these restricted assets, which are presented on the Company’s condensed consolidated statements of financial condition as relating to securitization activities, are shown in the table below (dollars in millions):
	March 31, 2018			December 31, 2017
Restricted cash	$	29		$	26
Investors’ interests held by third-party investors	15,950			16,025
Investors’ interests held by wholly-owned subsidiaries of Discover Bank	5,126			5,133
Seller’s interest	8,106			9,861
Loan receivables(1)	29,182			31,019
Allowance for loan losses allocated to securitized loan receivables(1)	(1,006		)	(998		)
Net loan receivables	28,176			30,021
Other	6			5
Carrying value of assets of consolidated variable interest entities	$	28,211		$	30,052

(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 trusts are subject to credit, payment and interest rate risks on the transferred credit card loan receivables. To protect investors in the securities, there are certain features or triggering events that could cause an early amortization of the debt securities, including triggers related to the impact of the performance of the trust receivables on the availability and adequacy of cash flows to meet contractual requirements. As of March 31, 2018, no economic or other early amortization events have occurred.

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

Student loan trust receivables underlying third-party investors’ interests are recorded in PCI loans and the related debt issued by the trusts is reported in long-term borrowings. The assets of the trusts 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 trusts. With the exception of the trusts’ restricted assets, the trusts and investors have no recourse to the Company’s other assets or the Company's general credit for a shortage in cash flows.

Currently there are two 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. 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 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.

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.

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The carrying values of these restricted assets, which are presented on the Company’s condensed consolidated statements of financial condition as relating to securitization activities, are shown in the table below (dollars in millions):
	March 31, 2018		December 31, 2017
Restricted cash	$	58	$	55
Student loan receivables	712		762
Carrying value of assets of consolidated variable interest entities	$	770	$	817

5. Deposits

The Company offers its deposit products 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”). Direct-to-consumer deposits include certificates of deposit, money market accounts, online savings and checking accounts and IRA certificates of deposit, while brokered deposits include certificates of deposit and sweep accounts.

The following table provides a summary of interest-bearing deposit accounts (dollars in millions):
	March 31, 2018		December 31, 2017
Certificates of deposit in amounts less than $100,000	$	24,063	$	23,768
Certificates of deposit in amounts $100,000 or greater(1)	6,035		5,984
Savings deposits, including money market deposit accounts	30,432		28,413
Total interest-bearing deposits	$	60,530	$	58,165

(1) Includes $1.4 billion in certificates of deposit greater than $250,000, the Federal Deposit Insurance Corporation ("FDIC") insurance limit, as of March 31, 2018 and December 31, 2017.

The following table summarizes certificates of deposit in amounts of $100,000 or greater by contractual maturity (dollars in millions):
Maturity Period	March 31, 2018
Three months or less	$	778
Over three months through six months	830
Over six months through twelve months	1,739
Over twelve months	2,688
Total	$	6,035

The following table summarizes certificates of deposit maturing over the remainder of this year, over each of the next four years, and thereafter (dollars in millions):
Year	March 31, 2018
2018	$	10,263
2019	7,408
2020	4,370
2021	2,912
2022	2,094
Thereafter	3,051
Total	$	30,098

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6. Long-Term Borrowings

Long-term borrowings consist of borrowings 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 outstanding balances (dollars in millions):
	March 31, 2018					December 31, 2017
	Maturity	Interest Rate	Weighted-Average Interest Rate	Outstanding Amount		Outstanding Amount
Securitized Debt
Fixed-rate asset-backed securities(1)	2018-2024	1.39%-3.03%	1.92%	$	9,478	$	8,888
Floating-rate asset-backed securities(2)(3)	2018-2024	2.01%-2.59%	2.25%	6,337		7,038
Total Discover Card Master Trust I and Discover Card Execution Note Trust				15,815		15,926
Floating-rate asset-backed securities(4)(5)(6)	2031-2036	1.89%-5.50%	3.45%	570		610
Total SLC Private Student Loan Trusts				570		610
Total long-term borrowings - owed to securitization investors				16,385		16,536
Discover Financial Services (Parent Company)
Fixed-rate senior notes	2019-2027	3.75%-10.25%	4.25%	2,718		2,710
Fixed-rate retail notes	2018-2031	2.85%-4.40%	3.71%	328		302
Discover Bank
Fixed-rate senior bank notes(1)	2018-2026	2.60%-4.25%	3.37%	6,115		6,080
Fixed-rate subordinated bank notes	2019-2020	7.00%-8.70%	7.49%	698		698
Total long-term borrowings				$	26,244	$	26,326

(1) The Company uses interest rate swaps to hedge portions of these long-term borrowings against changes in fair value attributable to changes in London Interbank Offered Rate ("LIBOR"). Use of these interest rate swaps impacts carrying value of the debt. See Note 14: Derivatives and Hedging Activities.

(2) Discover Card Execution Note Trust floating-rate asset-backed securities include issuances with the following interest rate terms: 1-month LIBOR + 23 to 60 basis points and Commercial paper rate + 55 basis points as of March 31, 2018.

(3) The Company uses interest rate swaps to manage its exposure to changes in interest rates related to future cash flows resulting from interest payments on a portion of these long-term borrowings. There is no impact on debt carrying value from use of these interest rate swaps. See Note 14: Derivatives and Hedging Activities.

(4) SLC Private Student Loan Trusts floating-rate asset-backed securities include issuances with the following interest rate terms: 3-month LIBOR + 17 to 45 basis points and Prime rate + 100 basis points as of March 31, 2018.

(5) 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.

(6) Includes $226 million of senior notes maturing in 2031 and $344 million of senior and subordinated notes maturing in 2036 as of March 31, 2018.

The following table summarizes long-term borrowings maturing over the remainder of this year, over each of the next four years, and thereafter (dollars in millions):
Year	March 31, 2018
2018	$	3,270
2019	5,988
2020	4,694
2021	1,036
2022	2,776
Thereafter	8,480
Total	$	26,244

The Company has access to committed borrowing capacity through private securitizations to support the funding of its credit card loan receivables. As of March 31, 2018, the total commitment of secured credit facilities through private providers was $6.0 billion, $500 million of which was drawn as of March 31, 2018. Access to the unused portions of the secured credit facilities is subject to the terms of the agreements with each of the providers which have various expirations in calendar years

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2019 through 2020. 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.

7. Accumulated Other Comprehensive Income

Changes in each component of AOCI were as follows (dollars in millions):
	Unrealized Loss on Available-for-Sale Investment Securities, Net of Tax			Gain (Loss) on Cash Flow Hedges, Net of Tax			Loss on Pension Plan, Net of Tax			AOCI
For the Three Months Ended March 31, 2018
Balance at December 31, 2017	$	(5	)	$	10		$	(157	)	$	(152	)
Net change	(7		)	19			1			13
Balance at March 31, 2018	$	(12	)	$	29		$	(156	)	$	(139	)
For the Three Months Ended March 31, 2017
Balance at December 31, 2016	$	(3	)	$	(13	)	$	(145	)	$	(161	)
Net change	1			5			—			6
Balance at March 31, 2017	$	(2	)	$	(8	)	$	(145	)	$	(155	)

The table below presents each component of other comprehensive income (loss) ("OCI") before reclassifications and amounts reclassified from AOCI for each component of OCI before- and after-tax (dollars in millions):
	Before Tax			Tax Benefit (Expense)			Net of Tax
For the Three Months Ended March 31, 2018
Available-for-Sale Investment Securities
Net unrealized holding loss arising during the period	$	(9	)	$	2		$	(7	)
Net change	$	(9	)	$	2		$	(7	)
Cash Flow Hedges
Net unrealized gain arising during the period	$	24		$	(6	)	$	18
Amounts reclassified from AOCI	1			—			1
Net change	$	25		$	(6	)	$	19
Pension Plan
Unrealized gain arising during the period	$	1		$	—		$	1
Net change	$	1		$	—		$	1
For the Three Months Ended March 31, 2017
Available-for-Sale Investment Securities
Net unrealized holding gain arising during the period	$	2		$	(1	)	$	1
Net change	$	2		$	(1	)	$	1
Cash Flow Hedges
Net unrealized gain arising during the period	$	6		$	(3	)	$	3
Amounts reclassified from AOCI	5			(3		)	2
Net change	$	11		$	(6	)	$	5

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8. Income Taxes

The following table presents the calculation of the Company's effective income tax rate (dollars in millions, except effective income tax rate):
	For the Three Months Ended March 31,
	2018			2017
Income before income tax expense	$	856		$	868
Income tax expense	$	190		$	304
Effective income tax rate	22.2		%	35.0		%

Income tax expense and the effective tax rate decreased$114 million and 12.8%, respectively, for the three months ended March 31, 2018, as compared to the same period in 2017as a result of a reduction in the U.S. federal statutory income tax rate from 35% to 21% offset by other provisions of the TCJA. For the three months ended March 31, 2018, the effective tax rate was also favorably impacted by the resolution of certain tax matters.

The Company is subject to examination by the Internal Revenue Service ("IRS") and tax authorities in various state, local and foreign tax jurisdictions. 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 IRS is currently examining the years 2011-2015. At this time, the potential change in unrecognized tax benefits is not expected to be significant over the next 12 months. The Company believes that its reserves are sufficient to cover any tax, penalties and interest that would result from such examinations.

9. Earnings Per Share

The following table presents the calculation of basic and diluted earnings per share ("EPS") (in millions, except per share amounts):
	For the Three Months Ended March 31,
	2018			2017
Numerator
Net income	$	666		$	564
Preferred stock dividends	(16		)	(9		)
Net income available to common stockholders	650			555
Income allocated to participating securities	(4		)	(4		)
Net income allocated to common stockholders	$	646		$	551
Denominator
Weighted-average shares of common stock outstanding	355			386
Weighted-average shares of common stock outstanding and common stock equivalents	355			386
Basic earnings per common share	$	1.82		$	1.43
Diluted earnings per common share	$	1.82		$	1.43

There were no anti-dilutive securities on the computation of diluted EPS for the three months ended March 31, 2018 and 2017.

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10. Capital Adequacy

The Company is subject to the capital adequacy guidelines of the Federal Reserve, and Discover Bank, the Company’s main banking subsidiary, is subject to various regulatory capital requirements as administered by 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 Discover Bank. Under capital adequacy guidelines and the regulatory framework for prompt corrective action, the Company and Discover Bank must meet specific capital guidelines that involve quantitative measures of assets, liabilities and certain off-balance sheet items, as calculated under regulatory guidelines. Capital amounts and classification are also subject to qualitative judgments by the regulators about components, risk weightings and other factors.

In 2013, the Federal Reserve, the Office of the Comptroller of the Currency, and the FDIC issued final capital rules under the Basel Committee’s December 2010 framework (referred to as “Basel III”) establishing a new comprehensive capital framework for U.S. banking organizations. The final capital rules ("Basel III rules") substantially revise Basel I rules regarding the risk-based capital requirements applicable to bank holding companies and depository institutions, including the Company. The Basel III rules became effective for the Company on January 1, 2015. This timing is based on the Company being classified as a "Standardized Approach" entity.

Among other things, the Basel III rules (i) introduced a new capital measure called Common Equity Tier 1 (“CET1”), (ii) specify that Tier 1 capital consists of CET1 and additional Tier 1 capital instruments meeting specified requirements, (iii) apply most deductions/adjustments to regulatory capital measures to CET1 and not to the other components of capital, thus potentially requiring higher levels of CET1 in order to meet minimum ratios and (iv) expand the scope of the deductions/adjustments from capital as compared to existing regulations.

The Basel III minimum capital ratios are as follows:

• 8.0% Total capital (i.e., Tier 1 plus Tier 2) to risk-weighted assets;

• 6.0% Tier 1 capital (i.e., CET1 plus Additional Tier 1) to risk-weighted assets;

• 4.0% Tier 1 capital to average consolidated assets as reported on consolidated financial statements (known as the “leverage ratio”); and

• 4.5% CET1 to risk-weighted assets.

As of March 31, 2018, the Company and Discover Bank met all Basel III minimum capital ratio requirements to which they were subject. The Company and Discover Bank also met the requirements to be considered "well-capitalized" under Regulation Y and prompt corrective action regulations, respectively, and there have been no conditions or events that management believes have changed the Company's or Discover Bank's category. To be categorized as “well-capitalized,” the Company and Discover Bank must maintain minimum capital ratios as set forth in the table below.

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The following table shows the actual capital amounts and ratios of the Company and Discover Bank and comparisons of each to the regulatory minimum and “well-capitalized” requirements (dollars in millions):
	Actual				Minimum Capital Requirements			Capital Requirements To Be Classified as Well-Capitalized
	Amount		Ratio(1)		Amount		Ratio	Amount(2)		Ratio(2)
March 31, 2018
Total capital (to risk-weighted assets)
Discover Financial Services	$	11,901	14.0	%	$	6,792	≥8.0%	$	8,490	≥10.0%
Discover Bank	$	12,372	14.7	%	$	6,716	≥8.0%	$	8,395	≥10.0%
Tier 1 capital (to risk-weighted assets)
Discover Financial Services	$	10,644	12.5	%	$	5,094	≥6.0%	$	5,094	≥6.0%
Discover Bank	$	10,563	12.6	%	$	5,037	≥6.0%	$	6,716	≥8.0%
Tier 1 capital (to average assets)
Discover Financial Services	$	10,644	10.6	%	$	4,016	≥4.0%	N/A		N/A
Discover Bank	$	10,563	10.6	%	$	3,973	≥4.0%	$	4,967	≥5.0%
CET1 capital (to risk-weighted assets)
Discover Financial Services	$	10,081	11.9	%	$	3,820	≥4.5%	N/A		N/A
Discover Bank	$	10,563	12.6	%	$	3,778	≥4.5%	$	5,457	≥6.5%
December 31, 2017
Total capital (to risk-weighted assets)
Discover Financial Services	$	11,952	13.8	%	$	6,946	≥8.0%	$	8,683	≥10.0%
Discover Bank	$	12,364	14.4	%	$	6,872	≥8.0%	$	8,589	≥10.0%
Tier 1 capital (to risk-weighted assets)
Discover Financial Services	$	10,677	12.3	%	$	5,210	≥6.0%	$	5,210	≥6.0%
Discover Bank	$	10,533	12.3	%	$	5,154	≥6.0%	$	6,872	≥8.0%
Tier 1 capital (to average assets)
Discover Financial Services	$	10,677	10.8	%	$	3,949	≥4.0%	N/A		N/A
Discover Bank	$	10,533	10.8	%	$	3,912	≥4.0%	$	4,890	≥5.0%
CET1 capital (to risk-weighted assets)
Discover Financial Services	$	10,114	11.6	%	$	3,907	≥4.5%	N/A		N/A
Discover Bank	$	10,533	12.3	%	$	3,865	≥4.5%	$	5,583	≥6.5%

(1) Capital ratios are calculated based on the Basel III Standardized Approach rules, subject to applicable transition provisions.

(2) The Basel III rules do not establish well-capitalized thresholds for these measures for bank holding companies. Existing well-capitalized thresholds established in the Federal Reserve's Regulation Y have been included where available.

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11. Commitments, Contingencies and Guarantees

In the normal course of business, the Company enters into a number of off-balance sheet commitments, transactions and obligations under guarantee arrangements that expose the Company to varying degrees of risk. The Company's commitments, contingencies and guarantee relationships are described below.

Commitments

Lease Commitments

The Company leases various office space and equipment under capital and non-cancelable operating leases, which expire at various dates through 2029. Future minimum payments on capital leases were not material at March 31, 2018. The following table shows future minimum payments on non-cancelable operating leases with original terms in excess of one year (dollars in millions):
	March 31, 2018
2018	$	10
2019	12
2020	11
2021	10
2022	7
Thereafter	41
Total minimum lease payments	$	91

Unused Credit Arrangements

At March 31, 2018, the Company had unused credit arrangements for loans of approximately $190.7 billion. Such arrangements arise primarily from agreements with customers for unused lines of credit on certain credit cards and certain other loan products, provided there is no violation of conditions in the related agreements. These arrangements, 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.

Contingencies

See Note 12: Litigation and Regulatory Matters for a description of potential liability arising from pending litigation or regulatory proceedings involving the Company.

Guarantees

The Company has obligations under certain guarantee arrangements, including contracts, indemnification agreements, and representations and warranties, 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.

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.

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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, and the principal amount of any student loan secured borrowings, plus any unpaid interest for the corresponding secured borrowings. The Company has recorded substantially all of the maximum potential amount of future payments in long-term borrowings on the Company’s condensed consolidated statements 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 sold loans it originated 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 was required by these investors to make certain representations and warranties relating to credit information, loan documentation and collateral. These representations and warranties may extend through the contractual life of the mortgage loan, even though the Company closed the mortgage origination business. Subsequent to the sale, if underwriting deficiencies, borrower fraud or documentation defects are discovered in individual mortgage loans, the Company may be obligated 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 March 31, 2018, this amount was not material and was included in accrued expenses and other liabilities on the condensed consolidated statements of financial condition.

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.

• Network Alliance Guarantee. Discover Network, Diners Club and PULSE have entered into contractual relationships with certain international payment networks in which DFS Services LLC retains the counterparty exposure if a network 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 potential counterparty defaults on its settlement and the time at which the Company disables the settlement of any further transactions for the defaulting party. 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, would be $164 million for merchant guarantees as of March 31, 2018. The maximum potential counterparty exposures to these settlement guarantees for ATM guarantees would be immaterial as of March 31, 2018. The maximum potential counterparty exposures for network alliance guarantees would be $33 million as of March 31, 2018.

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 March 31, 2018, the Company had not recorded any contingent liability in the consolidated financial statements for these counterparty exposures, and management believes that the probability of any payments under these arrangements is low.

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Discover Network Merchant Chargeback Guarantees

The Company operates the Discover Network, issues payment cards and permits third parties to issue payment cards. 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. Losses related to merchant chargebacks were not material for the three months ended March 31, 2018 and 2017.

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 (in millions):
	For the Three Months Ended March 31,
	2018		2017
Aggregate sales transaction volume(1)	$	36,017	$	32,654

(1) 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 did not record any contingent liability in the condensed consolidated financial statements for merchant chargeback guarantees as of March 31, 2018 or December 31, 2017. 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. As of March 31, 2018 and December 31, 2017, the Company had escrow deposits and settlement withholdings of $9 million and $10 million, respectively, which are recorded in interest-bearing deposit accounts and accrued expenses and other liabilities on the Company's condensed consolidated statements of financial condition.

12. 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 litigation process is not predictable and can lead to unexpected results. The Company contests liability and/or the amount of damages as appropriate in each pending matter.

The Company has historically offered its customers an arbitration clause in its customer agreements. The arbitration clause allows the Company and its customers to quickly and economically resolve disputes. Additionally, the arbitration clause has in some instances limited the costs of, and the Company’s exposure to, litigation. Future legal and regulatory challenges and prohibitions may cause the Company to discontinue its offering and use of such clauses. From time to time, the Company is involved in legal actions challenging its arbitration clause. Bills may be periodically introduced in Congress to directly or indirectly prohibit the use of pre-dispute arbitration clauses. On July 10, 2017, the Consumer Financial

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Protection Bureau (the "CFPB") issued a final arbitration rule (the "Arbitration Rule") that would have effectively banned consumer financial companies from including class action waivers in arbitration clauses. On November 1, 2017, a resolution of disapproval of the Arbitration Rule was signed into law and the Arbitration Rule was blocked from taking effect and cannot be reissued in substantially the same form, nor can a new rule that is substantially similar be issued unless specifically authorized by a law enacted after the date of the resolution of disapproval.

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, consumer regulatory, accounting, tax and other operational matters, some of which may result in significant adverse judgments, settlements, fines, penalties, injunctions, decreases in regulatory ratings, customer restitution or other relief, which could materially impact the Company's condensed consolidated financial statements, increase its cost of operations, or limit its ability to execute its business strategies and engage in certain business activities. For example, the Company is currently the subject of an action by the Federal Reserve with respect to anti-money laundering and related compliance programs as referred to below. This agreement followed the consent order that Discover Bank entered into with the FDIC on June 13, 2014 related to Discover Bank's anti-money laundering and related compliance programs. This consent order was terminated in August 2017. In addition, certain subsidiaries of the Company are subject to a consent order with the CFPB regarding certain student loan servicing practices, as described below. Pursuant to powers granted under federal banking laws, regulatory agencies have broad and sweeping discretion, and may assess civil money penalties, require changes to certain business practices or require customer restitution at any time. The existing supervisory action related to anti-money laundering and related laws and regulations will limit for a period of time the Company's ability to enter into certain types of acquisitions and make certain types of investments.

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 and regulatory settlement related expense was not material for the three months ended March 31, 2018 and 2017.

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 $140 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 condensed 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 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 May 26, 2015, the Company entered into a written agreement with the Federal Reserve Bank of Chicago where the Company agreed to enhance the Company’s enterprise-wide anti-money laundering and related compliance programs. The agreement does not include civil money penalties.

On July 22, 2015, the Company announced that its subsidiaries, Discover Bank, SLC and Discover Products Inc. (the “Discover Subsidiaries”), agreed to a consent order with the CFPB resolving the agency’s investigation with respect to

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certain student loan servicing practices. The CFPB’s investigation into these practices has been previously disclosed by the Company, initially in February 2014. The order required the Discover Subsidiaries to provide redress of approximately $16 million to consumers who may have been affected by the activities described in the order related to certain collection calls, overstatements of minimum payment due amounts in billing statements, and provision of interest paid information to consumers, and provide regulatory disclosures with respect to loans acquired in default. In addition, the Discover Subsidiaries were required to pay a $2.5 million civil money penalty to the CFPB. As required by the consent order, on October 19, 2015, the Discover Subsidiaries submitted to the CFPB a redress plan and a compliance plan designed to ensure that the Discover Subsidiaries provide redress and otherwise comply with the terms of the order.

On September 4, 2015, the District Attorney of Trinity County, California filed a protection products lawsuit against the Company in California state court (The People of the State of California Ex Rel, Eric L. Heryford, District Attorney, Trinity County v. Discover Financial Services, et al.). The District Attorney subsequently dismissed this lawsuit on February 19, 2016 and filed a new complaint in federal court in the Eastern District of California on March 4, 2016 alleging the same cause of action. An amended complaint was filed on March 25, 2016. The lawsuit asserts various claims under California's Unfair Competition Law with respect to the Company's marketing and administration of various protection products. Plaintiff seeks declaratory relief, statutory civil penalties, and attorneys’ fees. The Company filed a motion to dismiss the first amended complaint on April 26, 2016. The Company is not in a position at this time to assess the likely outcome or its exposure, if any, with respect to this matter, but will seek to vigorously defend against all claims asserted by the plaintiff.

On March 8, 2016, a class action lawsuit was filed against the Company, other credit card networks, other issuing banks, and EMVCo in the U.S. District Court for the Northern District of California (B&R Supermarket, Inc., d/b/a Milam’s Market, et al. v. Visa, Inc. et al.) alleging violations of the Sherman Antitrust Act, California's Cartwright Act, and unjust enrichment. Plaintiffs allege a conspiracy by defendants to shift fraud liability to merchants with the migration to the EMV security standard and chip technology. Plaintiffs assert joint and several liability among the defendants and seek unspecified damages, including treble damages, attorneys' fees, costs and injunctive relief. On July 15, 2016, plaintiffs filed an amended complaint that includes additional named plaintiffs, reasserts the original claims, and includes additional state law causes of action. The defendants filed motions to dismiss on August 5, 2016. On September 30, 2016, the court granted the motions to dismiss for certain issuing banks and EMVCo but denied the motions to dismiss filed by the networks, including the Company. In May 2017, while discovery was proceeding and after class certification was fully briefed but not yet ruled upon, the Court entered an order transferring the entire action to a federal court in New York that is presiding over certain related claims that are pending in the actions consolidated as MDL 1720. In June 2017, the federal court in New York declined to consolidate the B&R case with MDL 1720, but ordered the parties to coordinate discovery across the actions to the extent they involved related issues. On July 6, 2017, the Company requested permission to file a motion to dismiss the claims against it in the federal court in New York. On August 24, 2017, the Court held a status conference at which it set a briefing schedule on Discover’s motion to dismiss. In September 2017, Discover filed its motion to dismiss. On November 29, 2017, the Court heard argument on class certification and took the motion under advisement. On January 23, 2018, the Court heard argument on Discover's motion to dismiss. On March 11, 2018, the Court entered an order denying the plaintiffs' motion of class certification without prejudice to filing a renewed motion with additional detail on the proposed class period and alleged antitrust injuries. Plaintiffs have requested permission to file such a motion on July 16, 2018. Discovery is ongoing, and for most fact issues and defenses is scheduled to conclude on April 30, 2018, subject to a proposed extension through June 14, 2018 for certain discovery related to questions in the Court’s March 11, 2018 class certification order. The Company is not in a position at this time to assess the likely outcome or its exposure, if any, with respect to this matter, but will seek to vigorously defend against all claims asserted by the plaintiffs.

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13. Fair Value Measurements

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 Topic 820, Fair Value Measurement, provides a three-level hierarchy for classifying financial instruments, 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. It also 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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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 millions):
	Quoted Price in Active Markets for Identical Assets  (Level 1)		Significant Other Observable Inputs  (Level 2)		Significant Unobservable Inputs  (Level 3)		Total
Balance at March 31, 2018
Assets
Fair value - OCI
U.S. Treasury securities	$	672	$	—	$	—	$	672
Residential mortgage-backed securities - Agency	—		668		—		668
Available-for-sale investment securities	$	672	$	668	$	—	$	1,340
Derivative financial instruments - cash flow hedges(1)	$	—	$	7	$	—	$	7
Fair value - Net income
Derivative financial instruments - fair value hedges(1)	$	—	$	3	$	—	$	3
Liabilities
Fair value - OCI
Derivative financial instruments - cash flow hedges(1)	$	—	$	1	$	—	$	1
Balance at December 31, 2017
Assets
Fair value - OCI
U.S. Treasury securities	$	672	$	—	$	—	$	672
Residential mortgage-backed securities - Agency	—		723		—		723
Available-for-sale investment securities	$	672	$	723	$	—	$	1,395
Derivative financial instruments - cash flow hedges(1)	$	—	$	2	$	—	$	2
Fair value - Net income
Derivative financial instruments - fair value hedges(1)	$	—	$	4	$	—	$	4
Liabilities
Fair value - OCI
Derivative financial instruments - cash flow hedges(1)	$	—	$	3	$	—	$	3

(1) Derivative instrument carrying values in an asset or liability position are presented as part of Other assets or Accrued expenses and other liabilities, respectively, in the Company's condensed consolidated statements of financial condition.

Fair value hedge derivative financial instruments in a liability position were immaterial at March 31, 2018 and December 31, 2017. There were no transfers between Levels 1 and 2 within the fair value hierarchy for the three months ended March 31, 2018 and 2017.

Available-for-Sale Investment Securities

Investment securities classified as available-for-sale consist of U.S. Treasury securities and residential mortgage-backed securities. The fair value estimates of investment securities classified as Level 1, consisting of U.S. Treasury securities, are determined based on quoted market prices for the same securities. The Company classifies residential mortgage-backed securities as Level 2, the fair value estimates of which 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

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as benchmark yields, issuer spreads, prepayment speeds, credit ratings and losses, the priority of which may vary based on availability of information.

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 March 31, 2018, amounts reported in residential mortgage-backed securities reflect government-rated obligations issued by Fannie Mae, Freddie Mac and Ginnie Mae with a par value of $668 million, a weighted-average coupon of 2.81% and a weighted-average remaining maturity of three years.

Derivative Financial Instruments

The Company's derivative financial instruments consist of interest rate swaps and foreign exchange forward contracts. These instruments are classified as Level 2 as their fair values are estimated using proprietary pricing models, containing certain assumptions based on readily observable market-based inputs, including interest rate curves, option volatility and foreign currency forward and spot rates. 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 the 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 the observable market interest rate curves. The Company considers collateral and master netting agreements that mitigate credit exposure to counterparties in determining the counterparty credit risk valuation adjustment. The fair values of the currency instruments are valued comparing the contracted forward exchange rate pertaining to the specific contract maturities to the current market exchange rate.

The Company validates the fair value estimates of interest rate swaps primarily through comparison to the fair value estimates computed by the counterparties to each of 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 exchange forward contracts through independent calculation of the fair value estimates.

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 the initial recognition of the assets is applicable if one or more of the assets is determined to be impaired. During the three months ended March 31, 2018 and 2017, the Company had no material impairments related to these assets.

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Financial Instruments Measured at Other Than Fair Value

In accordance with ASU 2016-01, Financial Instruments—Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities, the Company uses the exit price notion when measuring the fair value of financial instruments. See Note 1: Background and Basis of Presentation for additional information.

The following tables disclose the estimated fair value of the Company's financial assets and financial liabilities that are not required to be carried at fair value (dollars in millions):
	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 March 31, 2018
Assets
Amortized cost
States and political subdivisions of states	$	—	$	—	$	—	$	—	$	—
Residential mortgage-backed securities - Agency	—		200		—		200		203
Held-to-maturity investment securities	$	—	$	200	$	—	$	200	$	203
Net loan receivables	$	—	$	—	$	83,634	$	83,634	$	80,008
Carrying value approximates fair value(1)
Cash and cash equivalents	$	17,011	$	—	$	—	$	17,011	$	17,011
Restricted cash	$	87	$	—	$	—	$	87	$	87
Accrued interest receivables(2)	$	—	$	830	$	—	$	830	$	830
Liabilities
Amortized cost
Time deposits(3)	$	—	$	30,005	$	—	$	30,005	$	30,098
Long-term borrowings - owed to securitization investors	$	—	$	15,848	$	596	$	16,444	$	16,385
Other long-term borrowings	—		10,148		—		10,148		9,859
Long-term borrowings	$	—	$	25,996	$	596	$	26,592	$	26,244
Carrying value approximates fair value(1)
Accrued interest payables(2)	$	—	$	210	$	—	$	210	$	210
(1) The carrying values of these assets and liabilities approximate fair value due to the nature of their liquidity (i.e., due or payable in less than one year).
(2) Accrued interest receivable and payable carrying values are presented as part of Other assets or Accrued expenses and other liabilities, respectively, in the Company's
condensed consolidated statements of financial condition.
(3) Excludes deposits without contractually defined maturities for all periods presented.

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The following tables disclose the estimated fair value of the Company's financial assets and financial liabilities that are not required to be carried at fair value (dollars in millions):
	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 December 31, 2017
Assets
Amortized cost
States and political subdivisions of states	$	—	$	1	$	—	$	1	$	1
Residential mortgage-backed securities - Agency	—		172		—		172		172
Held-to-maturity investment securities	$	—	$	173	$	—	$	173	$	173
Net loan receivables	$	—	$	—	$	85,108	$	85,108	$	81,627
Carrying value approximates fair value(1)
Cash and cash equivalents	$	13,306	$	—	$	—	$	13,306	$	13,306
Restricted cash	$	81	$	—	$	—	$	81	$	81
Accrued interest receivables(2)	$	—	$	818	$	—	$	818	$	818
Liabilities
Amortized cost
Time deposits(3)	$	—	$	29,848	$	—	$	29,848	$	29,752
Long-term borrowings - owed to securitization investors	$	—	$	15,851	$	640	$	16,491	$	16,536
Other long-term borrowings	—		10,293		—		10,293		9,790
Long-term borrowings	$	—	$	26,144	$	640	$	26,784	$	26,326
Carrying value approximates fair value(1)
Accrued interest payables(2)	$	—	$	214	$	—	$	214	$	214

(1) The carrying values of these assets and liabilities approximate fair value due to the nature of their liquidity (i.e., due or payable in less than one year).

(2) Accrued interest receivable and payable carrying values are presented as part of Other assets or Accrued expenses and other liabilities, respectively, in the Company's condensed consolidated statements of financial condition.

(3) Excludes deposits without contractually defined maturities for all periods presented.

14. 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 foreign currency are not designated as hedges and do not qualify for hedge accounting.

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 related counterparties.

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. See Note 13: Fair Value Measurements for a description of the valuation methodologies of derivatives. Cash collateral posted and held balances are recorded in other assets and deposits, respectively, in the condensed consolidated statements of financial condition. Collateral amounts recorded in the condensed consolidated statements of financial condition are based on the net collateral posted or held position for each applicable legal entity's

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master netting arrangement with each counterparty. Certain cash collateral amounts associated with derivative positions that are cleared through an exchange are legally characterized as settlement of the derivative positions. Such collateral amounts are reflected as offsets to the associated derivatives balances recorded in other assets or in accrued expenses and other liabilities, instead of as collateral in other assets or deposits.

Derivatives Designated as Hedges

Derivatives designated and qualifying as a hedge of the exposure to variability in expected future cash flows arising from changes in interest rates, 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 interest payments on credit card securitized debt and deposits. The Company's outstanding cash flow hedges are for an initial maximum period of seven years for securitized debt and deposits. The derivatives are designated as hedges of the risk of changes in cash flows on the Company's LIBOR or Federal Funds rate-based interest payments, and qualify for hedge accounting in accordance with ASC Topic 815, Derivatives and Hedging (“ASC 815”).

Prior to adopting ASU 2017-12, the ineffective portion of the change in the fair value of derivatives designated as cash flow hedges, if any, was required to be separately measured and recognized directly in earnings. As a result of adopting ASU 2017-12, the entire change in the fair value of derivatives designated as cash flow hedges is recorded in OCI and is subsequently reclassified into earnings in the period that the hedged forecasted cash flows affect earnings. Amounts reported in AOCI related to derivatives at March 31, 2018 will be reclassified to interest expense as interest payments are accrued on certain of the Company's floating-rate securitized debt and deposits. During the next 12 months, the Company estimates it will reclassify $7 million of pretax benefit to interest expense 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. The Company uses interest rate swaps to manage its exposure to changes in fair value of certain fixed-rate long-term borrowings, including securitized debt and bank or other senior notes, and deposits attributable to changes in LIBOR, a benchmark interest rate as defined by ASC 815. 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 long-term borrowings and deposits relating to the risk being hedged are recorded in interest expense. The changes generally provide substantial offset to one another, with any difference in interest expense.

Derivatives Not Designated as Hedges

Foreign Exchange Forward Contracts

The Company has foreign exchange forward contracts that are economic hedges and are not designated as accounting hedges. The Company enters into foreign exchange forward contracts to manage foreign currency risk. Changes in the fair value of these contracts are recorded in other income.

Derivatives Cleared Through an Exchange

The legal characterization of cash variation margin payments on derivatives cleared through an exchange are legally considered settlement payments and are accounted for with corresponding derivative positions as one unit of account and not separately as collateral. With settlement payments on derivative positions cleared through this exchange reflected as offsets to the associated derivative asset and liability balances, the fair values of derivative instruments and collateral balances shown are generally reduced.

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Derivatives Activity

The following table summarizes the fair value (including accrued interest) and outstanding notional amounts of derivative instruments and related collateral balances (dollars in millions):
	March 31, 2018									December 31, 2017
	Notional Amount		Number of Outstanding Derivative Contracts	Derivative Assets			Derivative Liabilities			Notional Amount		Derivative Assets			Derivative Liabilities
Derivatives designated as hedges
Interest rate swaps—cash flow hedge	$	3,000	6	$	7		$	1		$	3,800	$	2		$	3
Interest rate swaps—fair value hedge	$	7,230	9	3			—			$	7,333	4			—
Derivatives not designated as hedges
Foreign exchange forward contracts(1)	$	23	7	—			—			$	23	—			—
Total gross derivative assets/liabilities(2)				10			1					6			3
Less: Collateral held/posted(3)				(8		)	(1		)			(1		)	(3		)
Total net derivative assets/liabilities				$	2		$	—				$	5		$	—

(1) The foreign exchange forward contracts have notional amounts of EUR 6 million, GBP 5 million, SGD 1 million and INR 464 million as of March 31, 2018 and notional amounts of EUR 7 million, GBP 5 million, SGD 1 million and INR 464 million as of December 31, 2017.

(2) In addition to the derivatives disclosed in the table, the Company enters into forward contracts to purchase when-issued mortgage-backed securities as part of its community reinvestment initiatives. At March 31, 2018, the Company had one outstanding contract with a notional amount of $47 million and immaterial fair value. At December 31, 2017, the Company had one outstanding contract with a notional amount of $54 million and immaterial fair value.

(3) Collateral amounts, which consist of both cash and investment securities, are limited to the related derivative asset/liability balance and do not include excess collateral received/pledged.

The following amounts were recorded on the statements of financial condition related to cumulative basis adjustment for fair value hedges (dollars in millions):
	March 31, 2018
	Carrying Amount of the Hedged Assets (Liabilities)		Cumulative Amount of Fair Value Hedging Adjustment Included in the Carrying Amount of the Hedged Assets (Liabilities)
Long-term borrowings	$	7,027	$	157

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The following table summarizes the impact of the derivative instruments on income and indicates where within the condensed consolidated financial statements such impact is reported (dollars in millions):
	Location and Amount of (Loss) Gain Recognized in Income
	Interest (Expense)
	Deposits			Long-Term Borrowings			Other Income
For the Three Months Ended March 31, 2018
Total amounts of income and expense line items presented in the statements of income in which the effects of fair value or cash flow hedges are recorded	$	(262	)	$	(207	)	$	29
The effects of cash flow and fair value hedging:
Loss on cash flow hedging relationship
Amounts reclassified from OCI into earnings	$	(1	)	$	—		$	—
Gain (loss) on fair value hedging relationship
Gain on hedged items	$	—		$	48		$	—
Loss on interest rate swaps	—			(52		)	—
Total loss on fair value hedges	$	—		$	(4	)	$	—
The effects of derivatives not designated in hedging relationships:
Loss on derivatives not designated as hedges	$	—		$	—		$	(1	)
For the Three Months Ended March 31, 2017
Total amounts of income and expense line items presented in the statements of income in which the effects of fair value or cash flow hedges are recorded	$	(191	)	$	(195	)	$	28
The effects of cash flow and fair value hedging:
Loss on cash flow hedging relationship
Amounts reclassified from OCI into earnings	$	(2	)	$	(3	)	$	—
Gain (loss) on fair value hedging relationship
Gain on hedged items	$	1		$	15		$	—
Loss on interest rate swaps	(1		)	(9		)	—
Total gain on fair value hedges	$	—		$	6		$	—

For the three months ended March 31, 2017, the loss on derivatives not designated as hedges was immaterial. For the impact of the derivative instruments on OCI, see Note 7: Accumulated Other Comprehensive Income.

Collateral Requirements and Credit-Risk Related Contingency Features

The Company has master netting arrangements and minimum collateral posting thresholds with its counterparties for its fair value and cash flow hedge interest rate swaps and foreign exchange forward contracts. The Company has not sought a legal opinion in relation to the enforceability of its master netting arrangements and, as such, does not report any of these positions on a net basis.Collateral is required by either the Company or its subsidiaries or the counterparty depending on the net fair value position of these derivatives held with that counterparty. The Company may also be required to post collateral with a counterparty for its fair value and cash flow hedge interest rate swaps depending on the credit rating it or Discover Bank receives from specified major credit rating agencies. Collateral receivable or payable amounts are generally not offset against the fair value of these derivatives, but are recorded separately in other assets or deposits. However, certain cash collateral amounts related to positions cleared through an exchange are reflected as offsets to the associated derivatives balances recorded in other assets and accrued expenses and other liabilities.

At March 31, 2018, Discover Bank’s credit rating met specified thresholds set by its counterparties. However, if its credit rating is reduced below investment grade, Discover Bank would be required to post additional collateral. The amount

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of additional collateral as of March 31, 2018 would have been $20 million. DFS (Parent Company) had no outstanding derivatives as of March 31, 2018, and therefore, no collateral was required.

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.

15. 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-branded credit cards issued to individuals on the Discover Network and other consumer products and services, including private student loans, personal loans, home equity loans, and other consumer lending and deposit products. The majority of Direct Banking revenues relate to interest income earned on the segment's loan products. Additionally, the Company’s credit card products generate substantially all revenues related to discount and interchange, protection 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 Network Partners business, which provides payment transaction processing and settlement services on the Discover Network. The majority of Payment Services revenues relate to transaction processing revenue from PULSE and royalty and licensee revenue 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:

• The Company aggregates operating segments when determining reportable segments.

• 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, with the exception of an allocation of direct and incremental costs driven by the Company's Payment Services segment.

• 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 between 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 (dollars in millions):
	Direct Banking		Payment Services			Total
For the Three Months Ended March 31, 2018
Interest income
Credit card loans	$	2,090	$	—		$	2,090
Private student loans	147		—			147
PCI student loans	37		—			37
Personal loans	226		—			226
Other	69		—			69
Total interest income	2,569		—			2,569
Interest expense	469		—			469
Net interest income	2,100		—			2,100
Provision for loan losses	751		—			751
Other income	394		81			475
Other expense	932		36			968
Income before income tax expense	$	811	$	45		$	856
For the Three Months Ended March 31, 2017
Interest income
Credit card loans	$	1,876	$	—		$	1,876
Private student loans	124		—			124
PCI student loans	41		—			41
Personal loans	198		—			198
Other	39		—			39
Total interest income	2,278		—			2,278
Interest expense	386		—			386
Net interest income	1,892		—			1,892
Provision for loan losses	594		(8		)	586
Other income	375		72			447
Other expense	849		36			885
Income before income tax expense	$	824	$	44		$	868

16. Revenue from Contracts with Customers

FASB ASC Topic 606, Revenue from Contracts with Customers, generally applies to the sales of any good or service for which no other specific accounting guidance is provided. ASC 606 defines a principles-based model under which revenue from a contract is allocated to the distinct performance obligations within the contract and recognized in income as each performance obligation is satisfied. The Company’s revenue that is subject to this model includes discount and interchange, protection products fees, transaction processing revenue, and amounts classified as other income.

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The following table presents revenue from contracts with customers disaggregated by business segment and reconciles revenue from contracts with customers to total other income (dollars in millions):
	Direct Banking		Payment Services		Total
For the Three Months Ended March 31, 2018
Other income subject to ASC 606
Discount and interchange revenue, net(1)	$	242	$	12	$	254
Protection products	53		—		53
Transaction processing revenue	—		43		43
Other income	3		26		29
Total other income subject to ASC 606(2)	298		81		379
Other income not subject to ASC 606
Loan Fee Income	96		—		96
Total other income not subject to ASC 606	96		—		96
Total other income by operating segment	$	394	$	81	$	475
For the Three Months Ended March 31, 2017
Other income subject to ASC 606
Discount and interchange revenue, net(1)	$	223	$	10	$	233
Protection products	58		—		58
Transaction processing revenue	—		39		39
Other income	5		23		28
Total other income subject to ASC 606(2)	286		72		358
Other income not subject to ASC 606
Loan Fee Income	89		—		89
Total other income not subject to ASC 606	89		—		89
Total other income by operating segment	$	375	$	72	$	447

(1) Net of rewards, including Cashback Bonus rewards, of $392 million and $363 million for the three months ended March 31, 2018 and 2017, respectively.

(2) Excludes $1 million of deposit product fees that are reported within net interest income for the three months ended March 31, 2018. Deposit product fees were immaterial for the three months ended March 31, 2017.

Discount and Interchange Revenue

The Company earns discount revenue from fees charged to merchants with whom it has entered into card acceptance agreements for processing credit card purchase transactions. The Company earns acquirer interchange revenue primarily from merchant acquirers on all Discover Network card transactions and certain Diners Club transactions made by credit card customers at merchants with whom merchant acquirers have entered into card acceptance agreements for processing credit card purchase transactions. These card acceptance arrangements generally renew automatically and do not have fixed durations. Under these agreements, the Company stands ready to process payment transactions as and when each is presented to it. The Company earns discount, interchange and similar fees only if and when transactions are processed. Contractually defined per-transaction fee amounts typically apply to each type of transaction processed and are recognized as revenue at the time each transaction is captured for settlement. These fees are typically collected by the Company as part of the process of settling transactions daily with merchants and acquirers and are fully earned at the time settlement is made.

The Company pays issuer interchange to card-issuing entities that have entered into contractual arrangements to issue cards on the Discover Network and on certain transactions on the Diners Club network. This cost is contractually established and is based on the card-issuing organization’s transaction volume. The Company classifies this cost as a reduction of discount and interchange revenue. Costs of cardholder reward arrangements, including the Cashback Bonus reward program, are classified as reductions of discount and interchange revenue pursuant to guidance under ASC 606 governing consideration payable to a customer. For both issuer interchange and cardholder rewards, the Company accrues the cost at the time each underlying card transaction is captured for settlement.

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Protection Products

The Company earns revenue related to fees received for marketing ancillary products and services, including payment protection and identity theft protection services, to its credit card customers. A portion of this revenue comprises amounts earned for arranging for the delivery of products offered by third-party service providers. The amount of revenue recorded is generally based on either a percentage of a customer’s outstanding balance or a flat fee, in either case assessed monthly, and is recognized as earned. These contracts are month-to-month arrangements that are cancellable at any time. The Company recognizes each monthly fee in the period to which the service or coverage relates.

Transaction Processing Revenue

Transaction processing revenue represents switch fees charged to financial institutions and merchants under network participation agreements for processing ATM, debit and POS transactions over the PULSE network, as well as various participation and membership fees. Network participation agreements generally renew automatically and do not have fixed durations, although the Company does enter into fixed-term pricing or incentive arrangements with certain network participants. The impact of such incentives is not material to the Company’s consolidated statements of income. Similar to discount and interchange fees, switch fees are contractually defined per-transaction fee amounts and are assessed and recognized as revenue at the time each transaction is captured for settlement. These fees are typically collected by the Company as part of the process of settling transactions daily with network participants. Membership and other participation fees are recognized over the periods to which each fee relates.

Other Income

Other income includes sales-based royalty revenues earned by Diners Club, merchant fees, certain payments from merchants related to reward programs, revenues from network partners and other miscellaneous revenue items. Sales-based royalty revenues are recognized as the related sales are reported by Diners franchisees. All remaining items of other income are recognized as the related performance obligations are satisfied.

Future Revenue Associated with Customer Contracts

For contracts under which the Company processes payment card transactions, the Company has the right to assess fees for services performed and to collect those fees through the settlement process. The Company generates essentially all of its discount and interchange revenue and transaction processing revenue, as well as some revenue reported as other income, through such contracts. There is no specified quantity of service promised in these contracts as the number of payment transactions is dependent upon cardholder behavior which is outside the control of the Company and its network customers (i.e., merchants, acquirers, issuers, and other network participants). As noted above, these contracts are typically without fixed durations and renew automatically. For these reasons, the Company does not make or disclose an estimate of revenue associated with performance obligations attributable to the remaining terms of these contracts. Future revenue associated with the Company’s sales-based royalty revenues earned from Diners Club licensees is similarly variable and open ended, and therefore the Company does not make or disclose an estimate of royalties associated with performance obligations attributable to the remaining terms of the licensing and royalty arrangements. Because of the nature of the services and the manner of collection associated with the majority of the Company's revenue from contracts with customers, material receivables or deferred revenues are not generated.

17. Subsequent Events

The Company has evaluated events and transactions that have occurred subsequent to March 31, 2018 and determined that there were no subsequent events that would require recognition or disclosure in the condensed consolidated financial statements.

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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, 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, but not limited to, those related to financial regulatory reform, consumer financial services practices, anti-corruption 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, personal loan and home equity loan products; losses as a result of mortgage loan repurchase and indemnification obligations to secondary market purchasers; difficulty obtaining regulatory approval for, financing, transitioning, integrating or managing the expenses of acquisitions of or investments in new businesses, products or technologies; 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; limits on our ability to receive payments from our subsidiaries; fraudulent activities or material security breaches of key systems; our ability to remain organizationally effective; our ability to increase or sustain Discover card usage or attract new customers; our ability to maintain relationships with 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; 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 in this quarterly report 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 December 31, 2017, which is filed with the SEC and available at the SEC’s internet site (http://www.sec.gov).

Introduction and Overview

Discover Financial Services ("DFS") is a direct banking and payment services company. We provide direct banking products and services and payment services through our subsidiaries. We offer our customers credit card loans, private student loans, personal loans, home equity loans and deposit products. We also operate the Discover Network, the PULSE network (“PULSE”) and Diners Club International (“Diners Club”). The Discover Network processes transactions for Discover-branded credit and debit cards and provides payment transaction processing and settlement services. 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 charge cards and/or provide card acceptance services.

Our primary revenues consist of interest income earned on loan receivables and fees earned from customers, financial institutions, merchants and issuers. The primary expenses required to operate our business include funding costs (interest

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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 three months ended March 31, 2018 was $666 million compared to $564 million for the same period in 2017.

• Total loans grew$6.9 billion, or 9%, from March 31, 2017 to $82.7 billion.

• Credit card loans grew$5.8 billion, or 10%, to $65.6 billion, and Discover card sales volume increased6% from March 31, 2017.

• Net charge-off rate excluding PCI loans increased48 basis points from the prior year to 3.17% and the credit card delinquency rate for loans over 30 days past due increased27 basis points from the prior year to 2.33%.

• Direct-to-consumer deposits grew$4.2 billion, or 11%, from the prior year to $41.3 billion.

• Payment Services transaction dollar volume for the segment was $56.1 billion, up19% from the prior year.

Outlook

We continue to focus on deploying capital through disciplined and profitable organic loan growth as well as through our quarterly dividends and share repurchase program as permitted by bank holding company regulation. We expect the reduction in income tax expense resulting from the Tax Cuts and Job Act ("TCJA") to continue to benefit us and allow for additional investments in business growth, technology, analytical capabilities, our employees and our community. New card accounts and wallet share gains with existing customers remain priorities as we invest in marketing and rewards to achieve continued loan growth. We expect our rewards rate to rise slightly as we leverage enhanced rewards programs to support growth.

The total charge-off rate is expected to increase in comparison to the prior year and we expect to add to the loan loss reserve to provide for the seasoning of recent loan growth and supply-driven credit normalization. We expect net interest margin to increase slightly during the year, driven by the impact of recent and anticipated prime rate increases on our asset sensitive balance sheet. These increases may be partially offset by higher deposit rates, promotional card balances and interest charge-offs.

In our payments segment, we will continue to pursue new ways to drive volume growth in 2018. We continue to leverage our network to support our card-issuing business and we expect the payments industry to remain competitive.

Regulatory Environment and Developments

Over the past several years, regulators have proposed and implemented new regulations and supervisory guidance, including under the Dodd-Frank Wall Street Reform and Consumer Protection Act (the "Dodd-Frank Act"), and increased their examination and enforcement activities. In February 2017, an executive order was signed identifying principles by which the administration would regulate the U.S financial system, including making regulation appropriately tailored and efficient. The executive order also directed the Treasury Secretary to identify laws, regulations, guidance and other government policies, among other things, that are inconsistent with those principles. In June, October and November 2017 as well as February 2018, the Treasury Department issued reports that recommended significant changes to many of the rules and regulations implemented in response to the financial crisis of 2007.

In addition, Congress has addressed regulation of the financial services sector in several ways. For example, it exercised its authority to reject recently promulgated regulations, rarely used in the past under the Congressional Review Act, to overturn a regulation adopted by the Consumer Financial Protection Bureau (the "CFPB") that limited pre-dispute arbitration agreements. The joint resolution repealing the arbitration rule was signed by the President in November 2017. Additionally, the House and Senate have approved different versions of regulatory relief legislation that modifies provisions of the Dodd-Frank Act. Included in both are amendments to Dodd-Frank provisions that currently impose enhanced supervisory and capital requirements automatically on banks with more than $50 billion in assets. This and other changes would provide relief to mid-sized banks like Discover. The House bill makes significant changes to the structure and funding of the CFPB. While prospects for the enactment of financial regulatory reform legislation in 2018 are favorable, the breadth and form of the final law are uncertain at this time.

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Despite a growing focus on regulatory reform, banking regulators and policymakers at the federal and state levels are increasingly focused on measures to enhance data security and incident response capabilities as a result of growing cybersecurity threats and the number of incidents involving unauthorized access to consumer information, including the September 2017 disclosure of a large data breach at a national credit reporting agency. Regulations at various levels of government have been proposed to address security breach notification and data security standards. For example, several states have recently issued regulations for certain firms operating within their jurisdiction. While it is too early to know their impact, these developments could ultimately result in the imposition of requirements on Discover and other card issuers or networks that could increase costs or adversely affect the competitiveness of our credit card or debit card products. In addition, the size and scope of the 2017 national credit reporting agency breach may result in the financial services industry shifting to new means of identifying and authenticating consumers.

The impact of the evolving regulatory environment on our business and operations depends upon a number of factors, including supervisory priorities and actions, our actions, actions of our competitors and other marketplace participants, and the behavior of consumers. For more information on how the regulatory environment, enforcement actions, findings and ratings could also have an impact on our strategies, the value of our assets, or otherwise adversely affect our business see “Risk Factors — Economic and Regulatory Environment” of our annual report on Form 10-K for the year ended December 31, 2017. For more information on recent matters affecting us, see Note 12: Litigation and Regulatory Matters to our condensed consolidated financial statements.

Consumer Financial Services

The CFPB regulates consumer financial products and services, as well as certain financial services providers, including Discover. The CFPB has rulemaking and interpretive authority under the Dodd-Frank Act and other federal consumer financial services laws, as well as broad supervisory, examination and enforcement authority over designated financial services providers, including Discover. The CFPB’s regulatory authority includes the exercise of rulemaking, supervision and enforcement powers with respect to “unfair, deceptive or abusive acts or practices” and consumer access to fair, transparent and competitive financial products and services. Historically, the CFPB's policy priorities focused on several financial products of the type we offer (e.g. credit cards and student loans).

Under its interim director, the CFPB has recently issued a 5-year strategic plan that focuses on ensuring that all consumers have access to markets for consumer financial products and services, implementing and enforcing the law consistently to ensure that markets for consumer financial products and services are fair, transparent and competitive, and fostering operational excellence through efficient and effective process governance and security of resources and information. In furtherance of each of these areas, the CFPB has recently issued formal requests for information on various topics. It is unclear when a new director will be nominated and confirmed and whether the new director will continue the interim director's priorities or goals. Notwithstanding any changes in the CFPB's leadership, the CFPB is required by statute to undertake certain actions. For example, pursuant to the Credit Card Accountability Responsibility and Disclosure Act of 2009, the CFPB recently completed its bi-annual review of the consumer credit card market. The review may result in additional guidance for credit card issuers, regulatory changes or legislative recommendations to Congress.

Notwithstanding the leadership changes at the CFPB and other federal regulators, there continues to be legislative and regulatory focus on the private student loan market, including by some state legislatures and state attorneys general. Recent areas of regulatory attention include servicing, payments and collection practices, and other matters. This regulatory focus has resulted in an increase in supervisory examinations of Discover related to private student loans. At the legislative level, the focus on student loans has resulted in the enactment of student loan servicing laws in several states, and similar legislation is being considered in other states that could impose new licensing, servicing, reporting and regulatory oversight requirements on student loan servicers. The enactment of new legislation or the adoption of new regulations or guidance may increase the complexity and expense of servicing student loans and impact the entire student loan market, which could cause us to change our private student loan products or servicing practices in ways that we may not currently anticipate.

Payment Networks

The Dodd-Frank Act contains several provisions impacting the debit card market, including network participation requirements and interchange fee limitations. The changing debit card environment, including competitor actions related to merchant and acquirer pricing and transaction routing strategies, has adversely affected, and is expected to continue to adversely affect, our PULSE network's business practices, network transaction volume, revenue and prospects for future growth. We continue to closely monitor competitor pricing and technology development strategies in order to assess their impact on our business and on competition in the marketplace. The U.S. Department of Justice is examining some of these

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competitor pricing strategies. In addition, PULSE filed a lawsuit against Visa in late 2014 with respect to these competitive concerns, which may impact expenses for the payment services segment. In addition, the Dodd-Frank Act's network participation requirements impact PULSE's ability to enter into exclusivity arrangements, which affects PULSE's current business practices and may materially adversely affect its network transaction volume and revenue.

There are initiatives in Europe that may have an impact on our business, including revisions to the Payment Services Directive ("PSD2") and the new General Data Protection Regulation ("GDPR"). The PSD2 was published in the Official Journal of the EU in December 2015 and may impact our Diners Club business. Each European Union member state was required to transpose the PSD2 into its national law by January 13, 2018. Among other terms, the PSD2 includes provisions that once transposed into local law will regulate surcharging and network access requirements, which may result in differential surcharging of Diners Club cards and may impact Diners Club licensing arrangements in Europe. The final draft of the GDPR was published in the Official Journal of the European Union in May 2016 and comes into force on May 25, 2018. The GDPR includes, among other things, a requirement for prompt notice of data breaches and requires companies processing personal data of individuals residing in the EU, regardless of the location of the company, to comply with EU privacy and data protection rules. We expect the GDPR to have an impact on how we process the personal data of EU individuals and we have a program underway to address GDPR requirements.

Banking

Capital

Discover is subject to the Federal Reserve’s Comprehensive Capital Analysis and Review (“CCAR”) program which requires a company to submit its capital plan to the Federal Reserve for approval each year, including planned dividends and share repurchases. In February 2018, the Federal Reserve published the supervisory scenarios and instructions for the 2018 CCAR submission. The severely adverse scenario simulates an economic recession with a sudden increase in unemployment not seen since the 1930's. In March 2018, the Federal Reserve announced that it had made enhancements to its internal models used for supervisory stress tests, including a change to its domestic credit card model that the Federal Reserve anticipates will result in "materially higher" projected losses for firms with large bank card exposures. These changes will be phased-in over two years. Our 2018 CCAR submission will include the impact of the TCJA. The TCJA has the effect of lowering the corporate tax rate; however, there are numerous other changes in the law that may impact our business, operations and financial results. For example, the TCJA has the effect of increasing the negative financial impact in capital stress testing scenarios due to larger disallowed deferred tax assets as net operating losses can now only be carried forward. These changes could reduce the amount of capital available to return to shareholders in such scenarios. For additional information, see "Business — Supervision and Regulation — Capital, Dividends and Share Repurchases" of our annual report on Form 10-K for the year ended December 31, 2017.

Discover Financial Services and Discover Bank are subject to regulatory capital requirements that became effective January 1, 2015 under final rules issued by the Federal Reserve and the Federal Deposit Insurance Corporation ("FDIC") to implement the provisions under the Basel Committee’s December 2010 framework (referred to as “Basel III”). The final capital rules ("Basel III rules") require minimum risk-based capital and leverage ratios and define what constitutes capital for purposes of calculating those ratios. In addition, the Basel III rules establish a capital conservation buffer ("CCB") above the regulatory minimum capital requirements, which must consist entirely of Common Equity Tier 1 ("CET1") capital and result in higher required minimum ratios by at least 2.5%. The new CCB requirement became effective January 2016; however, the buffer threshold amounts are subject to a gradual phase-in period. In 2017, the highest CCB threshold was 1.25%, which has risen to 1.875% for the 2018 calendar year. The full 2.5% buffer requirement will not be fully phased-in until January 2019. A banking organization is subject to limitations on paying dividends, engaging in share repurchases and paying discretionary bonuses if its capital level falls below any of the minimum capital requirements, taking into account the applicable CCB thresholds. Based on our current capital composition and levels and business plans, we are and expect to continue to be in compliance with the requirements for the foreseeable future. For additional information, see "— Liquidity and Capital Resources — Capital."

Federal banking regulators jointly issued a proposed rule in September 2017 that would simplify the treatment of certain assets and deductions for institutions that are not subject to the advanced approaches capital rule. Among other things, the proposed rule would increase or adjust the deduction thresholds for certain mortgage servicing assets, deferred tax assets, investments in the capital of unconsolidated financial institutions, and minority interests. As proposed, the new rules would apply to Discover Financial Services and its subsidiary banks. While the banking agencies consider comments on the proposed rule, the agencies adopted a rule in November 2017, that provides interim relief to non-advanced approaches

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banking organizations, such as Discover, by extending the regulatory capital transition periods effective in 2017 for certain items, including regulatory capital deductions, risk weights, and certain minority interest limitations.

In December 2017, the Basel Committee adopted various standards meant to finalize remaining elements of the Basel III reforms first introduced in 2010. Among the new standards are revisions to the standardized approach for credit risk, which establishes standardized risk weightings used to measure credit risk for purposes of calculating regulatory capital requirements. The new revisions include a provision that would, for the first time, require banking organizations to include a percentage of “unconditionally cancellable commitments” in risk-weighted asset calculations. If this change were to be adopted in the United States by the domestic federal banking agencies and made applicable to all "Standardized Approach" banking organizations such as Discover, it could require credit card issuers to substantially increase the amount of capital they hold against unused credit card lines. The federal banking agencies have publicly indicated support for the new Basel standards but stated that the standards were “designed for internationally active banks” and that any changes to the regulatory capital rules in the United States “will be made through the standard notice-and-comment rulemaking process.”

On April 10, 2018, the Federal Reserve issued a notice of proposed rulemaking that would significantly revise the regulatory capital and stress testing frameworks for mid-sized bank holding companies such as Discover Financial Services. The proposal is intended to make regulatory capital requirements more forward-looking, risk-sensitive, and firm-specific by linking them to the annual CCAR stress testing and capital plan review process. The timing and substance of any final rulemaking is uncertain at this time, however the notice indicates the Federal Reserve intends to adopt a final rule that would be effective on December 31, 2018.

On April 17, 2018, federal banking agencies issued a joint proposal that would, among other things, give bank holding companies and banks, including Discover and its bank subsidiaries, the option to phase in the regulatory capital impacts of implementing the current expected credit loss ("CECL") approach over a three-year transition period. Recognition would be on a straight-line basis (i.e., 25% in year one, 50% in year two, 75% in year three and 100% thereafter). The timing and substance of any final rulemaking is uncertain at this time. For more information on CECL and how it may affect Discover, see Note 1: Background and Basis of Presentation to our condensed consolidated financial statements.

Liquidity

We are subject to the U.S. liquidity coverage ratio rule issued by federal banking regulators. This quantitative requirement is designed to promote the short-term resilience of the liquidity risk profile of large and internationally active banking organizations in the United States. The rule requires covered banks to maintain an amount of high-quality liquid assets sufficient to cover projected net cash outflows during a prospective 30-day calendar period under an acute, hypothetical liquidity stress scenario. Given our current asset size, we are subject to a modified liquidity coverage ratio requirement which requires a lower level of high-quality liquid assets to meet the minimum ratio requirement due to adjustments to the net cash outflow amount. As of March 31, 2018, our liquidity coverage ratio was in excess of the applicable regulatory requirement. Pursuant to the final rule issued by the Federal Reserve, we will be required to publish quarterly public disclosures regarding our liquidity risk profile and components of our liquidity coverage ratio beginning the fourth quarter of 2018.

Funding

On April 3, 2018, the Federal Reserve Bank of New York began publication of three new reference rates based on overnight repurchase agreement transactions secured by Treasury securities. These new reference rates may be used in future transactions as a replacement for London Interbank Offered Rate ("LIBOR"), which will no longer be maintained after 2021, in certain contracts.

Segments

We manage our business activities in two segments, Direct Banking and Payment Services, based on the products and services provided. For a detailed description of the operations of each segment, as well as the allocation conventions used in our business segment reporting, see Note 15: Segment Disclosures to our condensed consolidated financial statements.

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The following table presents segment data (dollars in millions):
	For the Three Months Ended March 31,
	2018		2017
Direct Banking
Interest income
Credit card	$	2,090	$	1,876
Private student loans	147		124
PCI student loans	37		41
Personal loans	226		198
Other	69		39
Total interest income	2,569		2,278
Interest expense	469		386
Net interest income	2,100		1,892
Provision for loan losses	751		594
Other income	394		375
Other expense	932		849
Income before income tax expense	811		824
Payment Services
Provision for loan losses	—		(8		)
Other income	81		72
Other expense	36		36
Income before income tax expense	45		44
Total income before income tax expense	$	856	$	868

The following table presents information on transaction volume (in millions):
	For the Three Months Ended March 31,
	2018		2017
Network Transaction Volume
PULSE Network	$	43,158	$	36,066
Network Partners	4,553		3,661
Diners Club(1)	8,390		7,382
Total Payment Services	56,101		47,109
Discover Network—Proprietary(2)	32,382		29,859
Total Volume	$	88,483	$	76,968
Transactions Processed on Networks
Discover Network	550		503
PULSE Network	989		870
Total	1,539		1,373
Credit Card Volume
Discover Card Volume(3)	$	34,327	$	32,406
Discover Card Sales Volume(4)	$	30,850	$	29,134

(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 $811 millionfor the three months ended March 31, 2018 as compared to pretax income of $824 millionfor the three months ended March 31, 2017.

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Net interest margin increased for the three months ended March 31, 2018 as compared to the same period in 2017 primarily driven by higher yields on credit card loans, partially offset by higher funding costs, both of which were the result of higher market rates. Interest income increased during the three months ended March 31, 2018 as compared to the same period in 2017 primarily due to loan growth and yield expansion from prime rate increases. Interest expense increased during the three months ended March 31, 2018 as compared to the same period in 2017 primarily due to higher market rates and a larger funding base.

For the three months ended March 31, 2018, the provision for loan losses increased as compared to the same period in 2017primarily due to higher levels of net charge-offs as well as a larger build of the allowance for loan losses as compared to the same period in 2017. For a detailed discussion on provision for loan losses, see "— Loan Quality — Provision and Allowance for Loan Losses."

Total other income increased in the three months ended March 31, 2018 as compared to the same period in 2017. The increase was primarily due to higher discount and interchange revenue, partially offset by higher standard rewards, both of which were the result of higher sales volume.

Total other expense increased in the three months ended March 31, 2018 as compared to the same period in 2017. The increase was primarily driven by higher employee compensation and benefits, marketing and business development and other expense. The increase in employee compensation and benefits was driven by additional headcount for business growth and regulatory and compliance needs, as well as higher average salaries. The increase in marketing and business development was primarily the result of higher brand advertising and acquisition costs that contributed to loan growth and deposit growth. The increase in other expense was primarily driven by incremental investments in philanthropic initiatives.

Discover card sales volume was $30.9 billion for the three months ended March 31, 2018, which was an increase of 5.9% as compared to the same period in 2017. This volume growth was primarily driven by an increase in active cardmembers.

Payment Services

Our Payment Services segment reported pretax income of $45 million for the three months ended March 31, 2018 which was relatively flat as compared to pretax income of $44 millionfor the same period in 2017 with higher volume driven revenue offset by a reserve release in 2017.

Downturns in the global economy or negative impacts in foreign currency may adversely affect our financial condition or results of operations in our Payment Services segment. We continue to work with our Diners Club licensees with regard to their ability to maintain financing sufficient to support business operations. We may continue to provide additional support in the future, including loans, facilitating transfer of ownership, or acquiring assets or licensees, which may cause us to incur losses. The licensees that we currently consider to be of concern accounted for approximately 4%of Diners Club revenues during the three months ended March 31, 2018.

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 condensed 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, the evaluation of goodwill and other non-amortizable intangible assets for potential impairment and the 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 December 31, 2017. That discussion can be found within “Management’s Discussion and Analysis of Financial Condition and Results of Operations” under the heading “— Critical Accounting Estimates.” There have not been any material changes in the methods used to formulate these critical accounting estimates from those discussed in our annual report on Form 10-K for the year ended December 31, 2017.

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Earnings Summary

The following table outlines changes in our condensed consolidated statements of income (dollars in millions):
	For the Three Months Ended March 31,				2018 vs. 2017 Increase (Decrease)
	2018		2017		$			%
Interest income	$	2,569	$	2,278	$	291		13	%
Interest expense	469		386		83			22	%
Net interest income	2,100		1,892		208			11	%
Provision for loan losses	751		586		165			28	%
Net interest income after provision for loan losses	1,349		1,306		43			3	%
Other income	475		447		28			6	%
Other expense	968		885		83			9	%
Income before income tax expense	856		868		(12		)	(1	)%
Income tax expense	190		304		(114		)	(38	)%
Net income	$	666	$	564	$	102		18	%

Net Interest Income

The table that follows this section has been provided to supplement the discussion below and provide further analysis of net interest income and net interest margin. 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-earning 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) cash and cash equivalents primarily related to amounts on deposit with the Federal Reserve Bank of Philadelphia, (ii) restricted cash, (iii) other short-term investments, (iv) investment securities and (v) loan receivables. 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-earning assets, including our liquidity portfolio and interest-bearing liabilities;

• 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 increased for the three months ended March 31, 2018 as compared to the same period in 2017 primarily driven by higher yields on credit card loans, partially offset by higher funding costs, both of which were the result of higher market rates. Interest income increased during the three months ended March 31, 2018 as compared to the same period in 2017 primarily due to loan growth and yield expansion from prime rate increases. Interest expense increased during the three months ended March 31, 2018 as compared to the same period in 2017 primarily due to higher market rates and a larger funding base.

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Average Balance Sheet Analysis (dollars in millions)
	For the Three Months Ended March 31,
	2018							2017
	Average Balance			Rate		Interest		Average Balance			Rate		Interest
Assets
Interest-earning assets
Cash and cash equivalents	$	13,509		1.55	%	$	52	$	13,693		0.81	%	$	27
Restricted cash	821			1.68	%	3		819			0.70	%	1
Investment securities	1,549			1.76	%	7		1,731			1.61	%	7
Loan receivables(1)
Credit card(2)	65,983			12.85	%	2,090		60,122			12.65	%	1,876
Personal loans	7,387			12.43	%	226		6,582			12.18	%	198
Private student loans	7,413			8.03	%	147		6,678			7.52	%	124
PCI student loans	2,019			7.38	%	37		2,519			6.67	%	41
Other	452			5.98	%	7		284			5.39	%	4
Total loan receivables	83,254			12.21	%	2,507		76,185			11.94	%	2,243
Total interest-earning assets	99,133			10.51	%	2,569		92,428			9.99	%	2,278
Allowance for loan losses	(2,615		)					(2,166		)
Other assets	4,221							4,166
Total assets	$	100,739						$	94,428
Liabilities and Stockholders’ Equity
Interest-bearing liabilities
Interest-bearing deposits
Time deposits(3)	$	30,221		2.03	%	151		$	26,619		1.86	%	122
Money market deposits(4)	6,772			1.59	%	27		6,911			1.16	%	20
Other interest-bearing savings deposits	22,470			1.52	%	84		19,028			1.05	%	49
Total interest-bearing deposits(5)	59,463			1.79	%	262		52,558			1.48	%	191
Borrowings
Short-term borrowings	1			1.75	%	—		1			0.67	%	—
Securitized borrowings(3)(4)	16,180			2.43	%	97		16,960			2.17	%	91
Other long-term borrowings(3)	9,945			4.49	%	110		9,600			4.38	%	104
Total borrowings	26,126			3.21	%	207		26,561			2.97	%	195
Total interest-bearing liabilities	85,589			2.22	%	469		79,119			1.98	%	386
Other liabilities and stockholders’ equity	15,150							15,309
Total liabilities and stockholders’ equity	$	100,739						$	94,428
Net interest income						$	2,100						$	1,892
Net interest margin(6)				10.23	%						10.07	%
Net yield on interest-earning assets(7)				8.59	%						8.30	%
Interest rate spread(8)				8.29	%						8.01	%

(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 above.

(2) Interest income on credit card loans includes $59 million and $51 million of amortization of balance transfer fees for the three months ended March 31, 2018 and 2017, respectively.

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

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

(5) Includes the impact of FDIC insurance premiums and Large Institution Surcharge.

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

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

(8) 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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Loan Quality

Loan receivables consist of the following (dollars in millions):
	March 31, 2018			December 31, 2017
Loan receivables
Credit card loans	$	65,577		$	67,291
Other loans
Personal loans	7,307			7,374
Private student loans	7,416			7,076
Other	488			423
Total other loans	15,211			14,873
PCI loans(1)	1,956			2,084
Total loan receivables	82,744			84,248
Allowance for loan losses	(2,736		)	(2,621		)
Net loan receivables	$	80,008		$	81,627

(1) Represents PCI private student loans. See Note 3: Loan Receivables to our condensed consolidated financial statements for more information regarding PCI loans.

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. While establishing the estimate for probable losses requires significant management judgment, the factors that influence the provision for loan losses include:

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

• Changes in consumer spending, payment and credit utilization behaviors;

• Changes in our loan portfolio, including the overall mix of accounts, products and loan balances within the portfolio and maturation of the loan 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 determining the allowance for loan losses, we estimate probable losses separately for segments of the loan portfolio that have similar risk characteristics. 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 to the identification of loss emergence. We use these analyses together as a basis for determining our allowance for loan losses.

The provision for loan losses 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 losses at the balance sheet date. For the three months ended March 31, 2018, the provision for loan losses increased by $165 million, or 28%, as compared to the same period in 2017 primarily due to higher levels of net charge-offs as well as a larger build of the allowance for loan losses as compared to the same period in 2017.

The allowance for loan losses was $2.7 billion at March 31, 2018, which reflects a $115 million reserve build over the amount of the allowance for loan losses at December 31, 2017. The reserve build, which related primarily to credit card loans, was due to higher losses driven by seasoning of continued loan growth and supply driven credit normalization.

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The following tables provide changes in our allowance for loan losses (dollars in millions):
	For the Three Months Ended March 31, 2018
	Credit Card			Personal Loans			Student Loans(1)			Other			Total
Balance at beginning of period	$	2,147		$	301		$	162		$	11		$	2,621
Additions
Provision for loan losses	645			73			31			2			751
Deductions
Charge-offs	(663		)	(81		)	(25		)	—			(769		)
Recoveries	123			8			3			—			134
Net charge-offs	(540		)	(73		)	(22		)	—			(635		)
Other(2)	—			—			(1		)	—			(1		)
Balance at end of period	$	2,252		$	301		$	170		$	13		$	2,736
	For the Three Months Ended March 31, 2017
	Credit Card			Personal Loans			Student Loans(1)			Other			Total
Balance at beginning of period	$	1,790		$	200		$	158		$	19		$	2,167
Additions
Provision for loan losses	524			58			12			(8		)	586
Deductions
Charge-offs	(535		)	(57		)	(17		)	(2		)	(611		)
Recoveries	113			6			3			—			122
Net charge-offs	(422		)	(51		)	(14		)	(2		)	(489		)
Balance at end of period	$	1,892		$	207		$	156		$	9		$	2,264

(1) Includes both PCI and non-PCI private student loans.

(2) Net change in reserves on PCI pools having no remaining non-accretable difference.

Net Charge-offs

Our net charge-offs include the principal amount of losses charged off less principal recoveries and exclude charged-off and recovered interest and fees and fraud losses. Charged-off and recovered interest and fees are recorded in interest income and loan fee income, respectively, which is effectively a reclassification of the provision for loan losses, 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. Personal loans and private student loans, which are 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 products (dollars in millions):
	For the Three Months Ended March 31,
	2018				2017
	$		%		$		%
Credit card loans	$	540	3.32	%	$	422	2.84	%
Personal loans	$	73	4.03	%	$	51	3.16	%
Private student loans (excluding PCI(1))	$	22	1.17	%	$	14	0.83	%

(1) Charge-offs for PCI loans did not result in a charge to earnings during any of the periods presented and are therefore excluded from the calculation. See Note 3: Loan Receivables to our condensed consolidated financial statements for more information regarding the accounting for charge-offs on PCI loans.

The net charge-off rates on our credit card loans, personal loans and private student loans excluding PCI increased by 48, 87, and 34 basis points for the three months ended March 31, 2018, respectively, when compared to the same period in 2017. The increase for all three portfolios was driven by seasoning of continued loan growth and supply driven credit normalization.

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Delinquencies

Delinquencies are an indicator of credit quality at a point in time. A loan balance is considered delinquent when contractual payments on the loan become 30 days past due.

The following table presents the amounts and delinquency rates of key loan products that are 30 and 90 days or more delinquent, loan receivables that are not accruing interest, regardless of delinquency and restructured loans (dollars in millions):
	March 31, 2018				December 31, 2017
	$		%		$		%
Loans 30 or more days delinquent
Credit card loans	$	1,529	2.33	%	$	1,532	2.28	%
Personal loans	$	101	1.37	%	$	103	1.40	%
Private student loans (excluding PCI loans(1))	$	167	2.25	%	$	167	2.35	%
Loans 90 or more days delinquent
Credit card loans	$	777	1.18	%	$	751	1.12	%
Personal loans	$	28	0.38	%	$	30	0.41	%
Private student loans (excluding PCI loans(1))	$	49	0.66	%	$	33	0.47	%
Loans not accruing interest	$	249	0.31	%	$	233	0.28	%
Restructured loans
Credit card loans(2)	$	1,523	2.32	%	$	1,316	1.96	%
Personal loans(3)	$	121	1.66	%	$	111	1.51	%
Private student loans (excluding PCI loans(1))(4)	$	145	1.96	%	$	137	1.94	%

(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 credit card loans include $86 million and $74 million at March 31, 2018 and December 31, 2017, respectively, that are also included in loans over 90 days delinquent or more.

(3) Restructured personal loans include $4 million and $5 million at March 31, 2018 and December 31, 2017, respectively, that are also included in loans over 90 days delinquent or more.

(4) Restructured private student loans include $7 million and $5 million at March 31, 2018 and December 31, 2017, respectively, that are also included in loans over 90 days delinquent or more.

The 30-day and 90-day delinquency rates for credit card and personal loans at March 31, 2018 were relatively flat as compared to December 31, 2017. The 30-day delinquency rate for private student loans at March 31, 2018decreased as compared to December 31, 2017 primarily due to seasonality of the loan portfolio. The 90-day delinquency rate for private student loans at March 31, 2018increased as compared to December 31, 2017 as a result of seasoning of recent loan growth as more loans have entered into repayment.

The restructured loan balances at March 31, 2018increased as compared to December 31, 2017 due to seasoning of continued loan growth and greater utilization of programs available.

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. We offer temporary hardship programs consisting of an interest rate reduction and in some cases a reduced minimum payment, both lasting for a period no longer than 12 months. The permanent modification 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 modification program does 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 permanent 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. Modified credit card loans that are deemed to meet the definition of troubled debt restructurings ("TDRs") in both temporary and permanent programs.

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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 12 months with the option of a final balloon payment required at the end of the loan term or an extension of the maturity date with the total term not exceeding nine years. Further, in certain circumstances, the interest rate on the loan is reduced. The permanent programs involve changing the terms of the loan in order to pay off the outstanding balance over a longer term and also in certain circumstances reducing the interest rate on the loan. Similar to the temporary programs, the total term may not exceed nine years. We also allow permanent 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 TDRs.

At March 31, 2018, there was $5.6 billion of private student loans in repayment, which includes both PCI and non-PCI loans to students who are not in deferment. To assist student loan borrowers who are experiencing temporary financial difficulties but are willing to resume making payments, we may offer hardship forbearance or programs that include payment deferral, temporary payment reduction, temporary interest rate reduction or extended terms. A non-PCI modified loan typically meets the definition of a TDR based on the cumulative length of the concession period and an evaluation of the credit quality of the borrower based on FICO scores.

Borrower performance after using payment programs or forbearance is monitored and we believe the programs help to prevent defaults and are useful in assisting customers experiencing financial difficulties. We plan to continue to use payment programs and forbearance and, as a result, we expect to have additional loans classified as TDRs in the future.

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 3: Loan Receivables to our condensed consolidated financial statements.

Other Income

The following table presents the components of other income (dollars in millions):
	For the Three Months Ended March 31,				2018 vs. 2017 Increase (Decrease)
	2018		2017		$			%
Discount and interchange revenue, net(1)	$	254	$	233	$	21		9	%
Protection products revenue	53		58		(5		)	(9	)%
Loan fee income	96		89		7			8	%
Transaction processing revenue	43		39		4			10	%
Other income	29		28		1			4	%
Total other income	$	475	$	447	$	28		6	%

(1) Net of rewards, including Cashback Bonus rewards, of $392 million and $363 million for the three months ended March 31, 2018 and 2017, respectively.

Total other income increased in the three months ended March 31, 2018 as compared to the same period in 2017. The increase was primarily due to higher discount and interchange revenue, partially offset by higher standard rewards, both of which were the result of higher sales volume.

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Other Expense

The following table represents the components of other expense (dollars in millions):
	For the Three Months Ended March 31,				2018 vs. 2017 Increase
	2018		2017		$		%
Employee compensation and benefits	$	405	$	363	$	42	12	%
Marketing and business development	185		168		17		10	%
Information processing and communications	82		80		2		3	%
Professional fees	155		147		8		5	%
Premises and equipment	26		25		1		4	%
Other expense	115		102		13		13	%
Total other expense	$	968	$	885	$	83	9	%

Total other expense increased in the three months ended March 31, 2018 by $83 million as compared to the same period in 2017. The increase was primarily driven by higher employee compensation and benefits, marketing and business development and other expense. The increase in employee compensation and benefits was driven by additional headcount for business growth and regulatory and compliance needs, as well as higher average salaries. The increase in marketing and business development was primarily the result of higher brand advertising and acquisition costs that contributed to loan growth and deposit growth. The increase in other expense was primarily driven by incremental investments in philanthropic initiatives.

Income Tax Expense

The following table presents the calculation of the effective income tax rate (dollars in millions, except effective income tax rate):
	For the Three Months Ended March 31,
	2018			2017
Income before income tax expense	$	856		$	868
Income tax expense	$	190		$	304
Effective income tax rate	22.2		%	35.0		%

Income tax expense and the effective tax rate decreased$114 million and 12.8% respectively for the three months ended March 31, 2018 as compared to the same period in 2017as a result of a reduction in the U.S. federal statutory income tax rate from 35% to 21% offset by other provisions of the TCJA. For the three months ended March 31, 2018, the effective tax rate was also favorably impacted by the resolution of certain tax matters.

Liquidity and Capital Resources

Funding and Liquidity

We seek to maintain stable, diversified and cost-effective funding sources and a strong liquidity profile in order to fund our business and repay or refinance our maturing obligations under both normal operating conditions and periods of economic or financial stress. In managing our liquidity risk, we seek to maintain a prudent liability maturity profile and ready access to an ample store of primary and contingent liquidity sources. Our primary funding sources include direct-to-consumer and brokered deposits, public term asset-backed securitizations and other short-term and long-term borrowings. Our primary liquidity sources include a liquidity portfolio comprised of highly liquid, unencumbered assets, including cash and cash equivalents and investment securities, and borrowing capacity through private term asset-backed securitizations. In addition, we have unused borrowing capacity with the Federal Reserve discount window which provides another source of contingent liquidity.

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Funding Sources

Deposits

We offer deposit products 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”). Direct-to-consumer deposits include certificates of deposit, money market accounts, online savings and checking accounts, and IRA certificates of deposit, while brokered deposits include certificates of deposit and sweep accounts. At March 31, 2018, we had $41.3 billion of direct-to-consumer deposits and $19.8 billion of brokered and other deposits.

Credit Card Securitization Financing

We use the securitization of credit card receivables as a 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 DCENT DiscoverSeries notes in both public and private transactions. From time to time, we may add credit card receivables to these trusts to create sufficient funding capacity for future securitizations while managing seller’s interest. We retain significant exposure to the performance of trust assets through holdings of the seller's interest and subordinated security classes of 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. 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 impair our liquidity, and may 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 March 31, 2018, the DiscoverSeries three-month rolling average excess spread was 12.81%.

We may elect to add receivables to the restricted pool of receivables subject to certain requirements. Through our wholly-owned indirect subsidiary, Discover Funding LLC, we are 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. 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 interests held by us). If the level of receivables in the trust were to fall below the required minimum, we 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. Seller's interest is impacted by seasonality as higher balance repayments tend to occur in the first calendar year quarter. If we could not add enough receivables to satisfy the minimum seller's interest requirement, an early amortization (or repayment) of investors’ interests would be triggered. No accounts were added to those restricted for securitization investors for the three months ended March 31, 2018.

At March 31, 2018, we had $16.0 billion of outstanding public asset-backed securities and $5.1 billion of outstanding subordinated 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 (dollars in millions):
At March 31, 2018	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	$	15,815	$	4,613	$	6,321	$	3,561	$	1,320

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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. Although the implementation of the Financial Accounting Standards Board Accounting Standards Codification Topic 860, Transfers and Servicing, no longer qualified certain transfers of assets for sale accounting treatment, the FDIC approved a final rule that preserved 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 may, however, impact our ability and/or desire to issue asset-backed securities in the future.

Other Long-Term Borrowings—Student Loans

At March 31, 2018, we had $577 million of remaining principal balance outstanding on securitized debt assumed as part of the acquisition of The Student Loan Corporation. Principal and interest payments on the underlying student loans will reduce the balance of these secured borrowings over time.

Other Long-Term Borrowings - Corporate and Bank Debt

The following table provides a summary of Discover Financial Services (Parent Company) and Discover Bank outstanding fixed-rate debt (dollars in millions):
At March 31, 2018	Principal Amount Outstanding
Discover Financial Services (Parent Company) fixed-rate senior notes, maturing 2019-2027	$	2,900
Discover Financial Services (Parent Company) fixed-rate retail notes, maturing 2018-2031	$	333
Discover Bank fixed-rate senior bank notes, maturing 2018-2026	$	6,200
Discover Bank fixed-rate subordinated bank notes, maturing 2019-2020	$	700

Certain Discover Financial Services senior 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.

Short-Term Borrowings

As part of our regular funding strategy, we may from time to time borrow short-term funds in the federal funds market or the repurchase (“repo”) market through repurchase agreements. Federal funds are short-term, unsecured loans between banks or other financial entities with a Federal Reserve account. Funds borrowed in the repo market are short-term, collateralized loans usually secured with highly-rated investment securities such as U.S. Treasury bills or notes, or federal agency mortgage bonds or debentures. At March 31, 2018 and December 31, 2017, there were no outstanding balances in the federal funds market or repurchase agreements.

Additional Funding Sources

Private Asset-Backed Securitizations

We have access to committed borrowing capacity through privately placed asset-backed securitizations. At March 31, 2018, we had total committed capacity of $6.0 billion, $500 million of which was drawn. While we may utilize funding from these private securitizations from time to time for normal business operations, their committed nature also makes them a reliable contingency funding source. Therefore, we reserve some undrawn capacity, informed by our liquidity stress testing results, for potential contingency funding needs. We also seek to ensure the stability and reliability of these securitizations by staggering their maturity dates, renewing them approximately one year prior to their scheduled maturity dates and periodically drawing them for operational testing purposes.

Federal Reserve

Discover Bank has access to the Federal Reserve Bank of Philadelphia’s discount window. As of March 31, 2018, Discover Bank had $29.6 billion of available borrowing capacity through the discount window based on the amount and type

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of assets pledged, primarily consumer loans. We have no borrowings outstanding under the discount window and reserve this capacity as a source of contingent liquidity.

Funding Uses

Our primary uses of funds include the extensions of loans and credit, primarily through Discover Bank, the purchase of investment securities for our liquidity portfolio, working capital, and debt and capital service. We assess funding uses and liquidity needs under stressed and normal operating conditions, considering primary uses of funding, such as on-balance sheet loans, and contingent uses of funding, such as the need to post additional collateral for derivatives positions. In order to anticipate funding needs under stress, we conduct liquidity stress testing to assess the impact of idiosyncratic, systemic, and hybrid (idiosyncratic and systemic) scenarios with varying levels of liquidity risk reflecting a range of stress severity.

Credit Ratings

Our borrowing costs and capacity in certain funding markets, including those for securitizations and unsecured senior and subordinated debt, may be affected by the credit ratings of 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 higher collateral enhancement requirements for both our public and private asset securitizations. 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 maintain agreements with certain of our derivative counterparties that contain provisions that require DFS and Discover Bank to maintain an investment grade credit rating from specified major credit rating agencies. At March 31, 2018, Discover Bank's credit rating met specified thresholds set by its counterparties. However, if Discover Bank's credit ratings were reduced below investment grade, Discover Bank would be required to post additional collateral, which, as of March 31, 2018, would have been $20 million. DFS (Parent Company) had no outstanding derivatives as of March 31, 2018, and therefore, no collateral was required.

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. Our credit ratings are summarized in the following table:
	Moody’s Investors Service	Standard & Poor’s	Fitch Ratings
Discover Financial Services
Senior unsecured debt	Ba1	BBB-	BBB+
Outlook for Discover Financial Services senior unsecured debt	Positive	Stable	Stable
Discover Bank
Senior unsecured debt	Baa3	BBB	BBB+
Outlook for Discover Bank senior unsecured debt	Positive	Stable	Stable
Subordinated debt	Ba1	BBB-	BBB
Discover Card Execution Note Trust
Class A(1)	Aaa(sf)	AAA(sf)	AAA(sf)

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

Liquidity

We seek to ensure that we have adequate liquidity to sustain business operations, fund asset growth and satisfy debt obligations under stressed and normal operating conditions. In addition to the funding sources discussed in the previous section, we also maintain highly liquid, unencumbered assets in our liquidity portfolio that we expect to be able to convert to cash quickly and with little loss of value using either the repo market or outright sales.

We maintain a liquidity risk and funding management policy, which outlines the overall framework and general principles we follow in managing liquidity risk across our business. The policy is approved by the Board of Directors with implementation responsibilities delegated to the Asset and Liability Management Committee (the “ALCO”). Additionally, we maintain a liquidity management framework document, which outlines the general strategies, objectives and principles we utilize to manage our liquidity position and the various liquidity risks inherent in our business model. We seek to balance the trade-offs between maintaining too much liquidity, which may be costly, with having too little liquidity, which could cause

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financial distress. Liquidity risk is centrally managed by the ALCO, which is chaired by our Treasurer and has cross-functional membership. The ALCO monitors the liquidity risk profiles of DFS and Discover Bank and oversees any actions Corporate Treasury may take to ensure that we maintain ready access to our funding sources and sufficient liquidity to meet current and projected needs. In addition, the ALCO and our Board of Directors regularly review our compliance with our liquidity limits at DFS and Discover Bank, which are established in accordance with the liquidity risk appetite set by our Board of Directors.

We employ a variety of metrics to monitor and manage liquidity. We utilize early warning indicators (“EWIs”) to detect the initial phases of liquidity stress events and a reporting and escalation process that is designed to be consistent with regulatory guidance. The EWIs include both idiosyncratic and systemic measures, and are monitored on a daily basis and reported to the ALCO regularly. A warning from one or more of these indicators triggers prompt review and decision-making by our senior management team, and in certain instances may lead to the convening of a senior-level response team and activation of our contingency funding plan.

In addition, we conduct liquidity stress testing regularly and ensure contingency funding is in place to address potential liquidity shortfalls. We evaluate a range of stress scenarios that are designed in accordance with regulatory requirements, including idiosyncratic, systemic and a combination of such events that could impact funding sources and our ability to meet liquidity needs. These scenarios measure the projected liquidity position at DFS and Discover Bank across a range of time horizons by comparing estimated contingency funding needs to available contingent liquidity.

Our primary contingent liquidity sources include our liquidity portfolio and private securitizations with unused borrowing capacity. In addition, we have unused borrowing capacity with the Federal Reserve discount window, which provides an additional source of contingent liquidity. We seek to maintain sufficient liquidity to be able to satisfy all maturing obligations and fund business operations for at least 12 months in a severe stress environment. In such an environment, we may also take actions to curtail the size of our balance sheet, which would reduce the need for funding and liquidity.

At March 31, 2018, our liquidity portfolio is comprised of highly liquid, unencumbered assets, including cash and cash equivalents and 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 residential mortgage-backed securities issued by U.S. government housing agencies or Government Sponsored Enterprises. These investments are considered highly liquid, and we expect to have the ability to raise cash by selling them, utilizing repurchase agreements or pledging certain of these investments to access secured funding. The size and composition of our liquidity portfolio may fluctuate based upon the size of our balance sheet as well as operational requirements and market conditions.

At March 31, 2018, our liquidity portfolio and undrawn credit facilities were $52.6 billion, which was $3.9 billion higher than the balance at December 31, 2017. During the three months ended March 31, 2018, the average balance of our liquidity portfolio was $15.2 billion.

	March 31, 2018		December 31, 2017
	(dollars in millions)
Liquidity portfolio
Cash and cash equivalents(1)	$	16,248	$	12,213
Investment securities(2)	1,302		1,347
Total liquidity portfolio	17,550		13,560
Private asset-backed securitizations(3)	5,500		6,000
Primary liquidity sources	23,050		19,560
Federal Reserve discount window(3)	29,599		29,153
Total liquidity portfolio and undrawn credit facilities	$	52,649	$	48,713

(1) Cash in the process of settlement and restricted cash are excluded from cash and cash equivalents for liquidity purposes.

(2) Excludes $38 million and $48 million of U.S. Treasury securities that have been pledged as swap collateral in lieu of cash as of March 31, 2018 and December 31, 2017, respectively.

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

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Bank Holding Company Liquidity

The primary uses of funds at the unconsolidated DFS level include debt service obligations (interest payments and return of principal) and capital service and management activities, which include dividend payments on capital instruments and the periodic repurchase of shares of our common stock. Our primary sources of funds at the bank holding company level include the proceeds from the issuance of unsecured debt and capital securities, as well as dividends from our subsidiaries, particularly Discover Bank. Under periods of idiosyncratic or systemic stress, the bank holding company could lose or experience impaired access to the capital markets. In addition, our regulators have the discretion to restrict dividend payments from Discover Bank to the bank holding company.

We utilize a measure referred to as Number of Months of Pre-Funding to determine the length of time Discover Financial Services can meet upcoming funding obligations including common and preferred stock dividend payments and debt service obligations using existing cash resources. At March 31, 2018, Discover Financial Services had sufficient cash resources to fund the dividend and debt service payments for more than 18 months.

We structure our debt maturity schedule to minimize the amount of debt maturing at the bank holding company within a short period of time. See Note 6: Long-Term Borrowings to our condensed consolidated financial statements for further information regarding our debt. Our ALCO and Board of Directors regularly review our compliance with our liquidity limits as a bank holding company, which are established in accordance with the liquidity risk appetite articulated by our Board.

Capital

Our primary sources of capital are the earnings generated by our businesses and the proceeds from issuances of capital securities. We seek to manage capital to a level and composition sufficient to support the growth and risks of our businesses and to meet regulatory requirements, rating agency targets and debt investor expectations. 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 Federal Reserve and the FDIC, DFS, 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 requirements that involve quantitative measures of assets, liabilities and certain off-balance sheet items, as calculated under regulatory guidance and regulations. Current or future legislative or regulatory initiatives may require us to hold more capital in the future.

In 2013, the Federal Reserve, the Office of the Comptroller of the Currency, and the FDIC issued the Basel III rules applicable to DFS and Discover Bank. Under those rules, DFS and Discover Bank are classified as "Standardized Approach" entities, defined as U.S. banking organizations with consolidated total assets over $50 billion but not exceeding $250 billion and consolidated total on-balance sheet foreign exposures less than $10 billion. Additional phase-in requirements related to components of the final capital rules will become effective through 2019. The Basel III rules include new minimum and "well-capitalized" risk-based capital and leverage ratios, effective January 1, 2015, and refine the definition of what constitutes "capital" for purposes of calculating those ratios of which certain requirements are subject to phase-in periods through the end of 2018 (the "transition period"). During the transition period, the effects of the changes to capital (i.e., certain deductions and adjustments) are recognized in 20% increments from 2015 through 2018. For example, one of the deductions from CET1 capital, goodwill and intangibles, was subject to a 40% of total deduction in 2015 that increased to 60% in 2016 and so on, until reaching 100% deduction of total in 2018. For additional information regarding the risk-based capital and leverage ratios, see Note 10: Capital Adequacy to our condensed consolidated financial statements.

The Basel III rules also introduced a CCB on top of the minimum risk-weighted asset ratios. The buffer is designed to absorb losses during periods of economic stress. The calculation of the buffer started to phase in beginning on January 1, 2016 at the rate of 0.625% and increases by 0.625% on each subsequent January 1 until it reaches the maximum 2.5% on January 1, 2019. When the CCB is fully phased-in on January 1, 2019, this will effectively result in minimum ratios of (i) CET1 to risk-weighted assets of at least 7.0%, (ii) Tier 1 capital to risk-weighted assets of at least 8.5% and (iii) Total capital to risk-weighted assets of at least 10.5%. Banking institutions with a capital ratio below the required amount will face constraints on dividends, equity repurchases and compensation based on the amount of the shortfall.

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Another main component of the Basel III rules is a prescribed standardized approach for calculating risk-weighted assets that expands the risk-weight range from 0% to 100% (under Basel I) to 0% to 1,250% (under Basel III). The new range is intended to be more risk-sensitive and the risk weight assigned depends on the nature of the asset in question.

The Basel III rules provide for a number of the deductions from and adjustments to CET1, to the extent that any one such category exceeds 10% of CET1 or all such categories in the aggregate exceed 15%.

Basel III also requires disclosures relating to market discipline. This series of disclosures is commonly referred to as “Pillar 3.” The objective is to increase transparency of capital requirements for banking organizations. We are required to make prescribed regulatory disclosures on a quarterly basis regarding our capital structure, capital adequacy, risk exposures and risk-weighted assets. The Pillar 3 disclosures are made publicly available on our website in a report called "Basel III Regulatory Capital Disclosures."

At March 31, 2018, DFS and Discover Bank met the requirements for "well-capitalized" status under Regulation Y and the prompt corrective action rules, respectively, exceeding the regulatory minimums to which they were subject under the applicable rules.

As discussed in Note 10: Capital Adequacy to our condensed consolidated financial statements, we are subject to a CET1 capital ratio requirement under the Basel III rules. We believe that providing an estimate of our capital position based on the Basel III fully phased-in rules is important to complement the existing capital ratios and for comparability to other financial institutions. In addition, we disclose tangible common equity, which represents common equity less goodwill and intangibles. Management believes that common stockholders' equity excluding goodwill and intangibles is a more meaningful measure to investors of our true net asset value. As of March 31, 2018, the CET1 capital ratio calculated under Basel III fully phased-in rules and tangible common equity are not formally defined by U.S. GAAP or codified in the federal banking regulations and, as such, they are considered to be non-GAAP financial measures. Other financial services companies may also disclose this ratio and metric and definitions may vary, so we advise users of this information to exercise caution in comparing this ratio and metric for different companies.

The following table provides a reconciliation of total common stockholders’ equity (a U.S. GAAP financial measure) to tangible common equity (dollars in millions):
	March 31, 2018			December 31, 2017
Total common stockholders’ equity(1)	$	10,308		$	10,329
Less: Goodwill	(255		)	(255		)
Less: Intangible assets, net	(162		)	(163		)
Tangible common equity	$	9,891		$	9,911

(1) Total common stockholders’ equity is calculated as total stockholders’ equity less preferred stock.

The following table provides a reconciliation of CET1 capital calculated under Basel III transition rules (a U.S. GAAP financial measure) to CET1 capital and risk-weighted assets calculated under fully phased-in Basel III rules (dollars in millions):
	March 31, 2018
CET1 capital (Basel III transition)	$	10,081
Adjustments related to capital components during transition(1)	(27		)
CET1 capital (Basel III fully phased-in)	$	10,054
Risk-weighted assets (Basel III fully phased-in)(2)	$	84,862
CET1 capital ratio (Basel III fully phased-in)	11.8		%

(1) Adjustments related to capital components for fully phased-in Basel III include the phase-in of the intangible asset exclusion.

(2) Key differences under fully phased-in Basel III rules in the calculation of risk-weighted assets include higher risk weighting for past-due loans and unfunded commitments.

Additionally, we are required to submit an annual capital plan to the Federal Reserve that includes an assessment of our expected uses and sources of capital over a nine-quarter planning horizon. We submitted our annual capital plan to the Federal Reserve under its CCAR program and received notice in June 2017 that the Federal Reserve does not object to our

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proposed capital plan, including planned quarterly capital distributions through June 30, 2018. Our ability to make capital distributions, including our ability to pay dividends on or repurchase shares of our common stock, will continue to be subject to the Federal Reserve’s review and non-objection of the actions that we propose each year in our annual capital plan. On April 5, 2018, we submitted our 2018 CCAR plan and are awaiting a response from the Federal Reserve on our plan.

In June 2017, the Federal Reserve published the results of its annual supervisory stress tests for bank holding companies with $50 billion or more in total consolidated assets, including DFS. At that same time, we published company-run stress test results for DFS and Discover Bank. DFS is required to publish company-run stress tests results twice each year in accordance with Federal Reserve rules and Discover Bank is required to publish bank-run stress test results under FDIC rules.

We recently declared a quarterly cash dividend on our common stock of $0.35 per share, payable on June 7, 2018 to holders of record on May 24, 2018, which is consistent with last quarter. We also pay dividends on our preferred stock semi-annually.

On July 25, 2017, our Board of Directors approved a share repurchase program authorizing the repurchase of up to $2.8 billion of our outstanding shares of common stock. The program expires on October 31, 2018 and may be terminated at any time. This program replaced the prior $2.5 billion share repurchase program, which had $562 million of remaining authorization. During the three months ended March 31, 2018, we repurchased approximately 7 million shares, or 2%, of our outstanding common stock for $555 million. We expect to continue to repurchase shares under our program from time to time based on market conditions and other factors, subject to legal and regulatory requirements and restrictions, including non-objection from the Federal Reserve as described above. 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 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. The declaration and payment of future dividends, as well as the amount thereof, are subject to the discretion of our Board of Directors. Holders of our shares of common stock are subject to the prior dividend rights of holders of our preferred stock or the depositary shares representing such preferred stock outstanding, and if full dividends have not been declared and paid on all outstanding shares of preferred stock in any dividend period, no dividend may be declared or paid or set aside for payment on our common stock. In addition, as noted above, banking laws and regulations and our banking regulators may limit our ability to pay dividends and make share repurchases, including limitations on the extent to which our banking subsidiaries can provide funds to us through dividends, loans or otherwise. Further, 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.

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 11: 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 March 31, 2018, which include deposits, long-term borrowings, operating and capital lease obligations, interest payments on fixed-rate debt, purchase obligations and other liabilities were $91.2 billion. For a description of our contractual obligations, see our annual report on Form 10-K for the year ended December 31, 2017 under “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Contractual Obligations and Contingent Liabilities and Commitments.”

We extend credit for consumer loans, primarily arising from agreements with customers for unused lines of credit on certain credit cards and certain other loan products, provided there is no violation of conditions established in the related

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agreement. At March 31, 2018, our unused credit arrangements were approximately $190.7 billion. These arrangements, 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, customer creditworthiness and loan qualification. 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 reduced if the interest rate earned on assets increases at a slower pace than the interest rate on our borrowings. Changes in interest rates and our competitors' responses to those changes may influence customer payment rates, loan balances or deposit account activity. As a result, we may incur higher funding costs, 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 our mix of variable- and fixed-rate assets. To the extent that the repricing characteristics of the assets and liabilities in a particular portfolio are not sufficiently matched, 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 14: 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 change in interest rates relative to market consensus expectations as of the beginning of the period. The sensitivity is based upon the hypothetical assumption that all relevant types of interest rates would change instantaneously, simultaneously and to the same degree.

Our interest rate sensitive assets include our variable-rate loan receivables and the assets that make up our liquidity portfolio. We have limitations on our ability to mitigate interest rate risk by adjusting rates on existing balances and competitive actions may limit our ability to increase the rates that we charge to customers for new loans. At March 31, 2018, the majority of our credit card and student loans charge 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 revolving 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 increase in the underlying market-based indexed rate has been considered. For assets that have a fixed interest rate 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, which for purposes of this analysis are assumed to remain unchanged relative to our baseline expectations over the analysis horizon.

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 maturity date.

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Net interest income sensitivity requires assumptions to be made regarding market conditions, consumer behavior, and the overall growth and composition of the balance sheet. These assumptions are inherently uncertain and, as a result, actual earnings may differ from the simulated earnings presented above. Our actual earnings depend on multiple factors including, but not limited to, the direction and timing of changes in interest rates, the movement of short-term versus long-term rates, balance sheet composition, competitor actions affecting pricing decisions in our loans and deposits, and strategic actions undertaken by management.

The table below shows the impacts to net interest income over the following 12-month period that we estimate would result from an immediate and parallel change in interest rates affecting all interest rate sensitive assets and liabilities (dollars in millions).
	At March 31, 2018					At December 31, 2017
Basis point change	$			%		$			%
+100	$	204		2.26	%	$	179		2.03	%
-100	$	(211	)	(2.34	)%	$	(190	)	(2.15	)%

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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

There have been no 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 period covered by this report that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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Part II. OTHER INFORMATION

Item 1. Legal Proceedings

For a description of legal proceedings, see Note 12: 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 December 31, 2017.

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 most recent quarter.
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)
January 1 - 31, 2018
Repurchase program(1)	2,302,800	$	78.58	2,302,800	$	1,600,409,640
Employee transactions(2)	1,932	$	79.18	N/A	N/A
February 1 - 28, 2018
Repurchase program(1)	2,336,250	$	77.95	2,336,250	$	1,418,293,891
Employee transactions(2)	355,947	$	80.57	N/A	N/A
March 1 - 31, 2018
Repurchase program(1)	2,519,338	$	76.18	2,519,338	$	1,226,370,151
Employee transactions(2)	—	$	—	N/A	N/A
Total
Repurchase program(1)	7,158,388	$	77.53	7,158,388	$	1,226,370,151
Employee transactions(2)	357,879	$	80.57	N/A	N/A

(1) On July 25, 2017, our board of directors approved a share repurchase program authorizing the purchase of up to $2.8 billion of our outstanding shares of common stock. This share repurchase program expires on October 31, 2018 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.

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Exhibit Index

Exhibit Number	Description
10.1	Form 2018 Award Certificate for Restricted Stock Units under Discover Financial Services Directors' Compensation Plan.
10.2	Form 2018 Award Certificate for Restricted Stock Units under Discover Financial Services Amended and Restated Omnibus Incentive Plan.
10.3	Form 2018 Award Certificate for Performance Stock Units under Discover Financial Services Amended and Restated Omnibus Incentive Plan.
10.4	Amendment to 2017 Directors' Annual Equity Award Certificate for Restricted Stock Units of Discover Financial Services, effective February 22, 2018.
10.5	Amendment No. 6 to the Director's Compensation Plan of Discover Financial Services, effective as of February 22, 2018.
12.1	Statement regarding computation of ratio of earnings to fixed charges and computation of ratio of earnings to fixed charges and preferred stock 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.

68

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

Date: May 1, 2018

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EX-10.1

Exhibit 10.1

DISCOVER FINANCIAL SERVICES

DIRECTORS’ COMPENSATION PLAN

20XX Directors’ Annual Equity Award

AWARD CERTIFICATE FOR

RESTRICTED STOCK UNITS

TABLE OF CONTENTS FOR AWARD CERTIFICATE

1.Stock units generally.    2

2.Vesting schedule and conversion.    3

3.Dividend equivalent payments.    3

4.Death and Disability.    3

5.Change in Control.    4

6.Termination of Service and cancellation of awards.    4

7.Satisfaction of obligations.    4

8.Nontransferability.    5

9.Designation of a beneficiary.    5

10.Ownership and possession.    5

11.Securities law compliance matters.    6

12.Compliance with laws and regulations.    6

13.No entitlements.    6

14.Consents under local law.    6

15.Award modification.    6

16.Severability.    7

17.Governing law.    7

18.Defined terms.    7

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DISCOVER FINANCIAL SERVICES

DIRECTORS’ COMPENSATION PLAN

20XX DIRECTORS’ ANNUAL EQUITY AWARD

AWARD CERTIFICATE FOR RESTRICTED STOCK UNITS

Discover has awarded to you restricted stock units as an incentive for you to continue to provide services as a Director of the Company from the Date of the Award through the Scheduled Vesting Date, as provided in this Award Certificate. This Award Certificate sets forth the general terms and conditions of your 20XX Annual Equity Award restricted stock unit award.

The number of restricted stock units in your award has been communicated to you separately in writing.

Your restricted stock unit award is made pursuant to the Plan. References to “restricted stock units” in this Award Certificate mean only those restricted stock units included in your 20XX Annual Equity Award restricted stock unit award, and the terms and conditions herein apply only to such award. If you receive any other award under the Plan or another equity compensation plan, it will be governed by the terms and conditions of the applicable award documentation, which may be different from those herein.

The purpose of the restricted stock unit award is, among other things, to align your interests with the interests of Discover and its stockholders and to reward you for your continued service as a Director of Discover in the future. In view of these purposes, you will earn your 20XX Annual Equity Award restricted stock unit award only if you remain in continuous service as a Director of Discover through the applicable Scheduled Vesting Date.

Section 409A of the Internal Revenue Code imposes rules relating to the taxation of deferred compensation, including your 20XX Annual Equity Award restricted stock unit award. Discover reserves the right to modify the terms of your 20XX Annual Equity Award restricted stock unit award, including, without limitation, the payment provisions applicable to your restricted stock units, to the extent necessary or advisable to comply with Section 409A of the Internal Revenue Code.

Capitalized terms used in this Award Certificate that are not defined in the text have the meanings set forth in Section 18 below. Capitalized terms used in this Award Certificate that are not defined in the text or in Section 18 below have the meanings set forth in the Plan.

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1. Stock units generally.

Each of your restricted stock units corresponds to one share of Discover common stock. A restricted stock unit constitutes an unsecured promise by Discover to pay you one share of Discover common stock on the conversion date for the restricted stock unit. As the holder of restricted stock units, you have only the rights of a general unsecured creditor of Discover. You will not be a stockholder with respect to the shares of Discover common stock underlying your restricted stock units unless and until your restricted stock units convert to shares.

2. Vesting schedule and conversion.

(a)    Vesting schedule. Your restricted stock units will fully vest on the Scheduled Vesting Date. Except as otherwise provided in this Award Certificate, your restricted stock units will vest only if you continue to provide future services to Discover by remaining in continuous service as a Director of Discover through the applicable Scheduled Vesting Date. The special vesting terms set forth in Sections 4 and 5 of this Award Certificate apply (i) if your service as a Director of Discover terminates by reason of your death or Disability or (ii) upon a Change in Control.

(b)    Conversion. Except as otherwise provided in this Award Certificate, each of your vested restricted stock units will convert to one share of Discover common stock on the applicable Scheduled Vesting Date.

The shares received upon conversion of restricted stock units will be delivered as soon as administratively practicable thereafter or, if deferred by you, delivered pursuant to the terms of your Restricted Stock Unit Deferral Election Form, and will not be subject to any transfer restrictions, other than those that may arise under the securities laws or Discover’s policies.

3. Dividend equivalent payments.

Until your restricted stock units convert to shares, if Discover pays a regular or ordinary cash dividend on its common stock, you will be paid a dividend equivalent for your vested and unvested restricted stock units. No dividend equivalents will be paid to you with respect to any canceled restricted stock units.

Discover will decide on the form of payment and may pay dividend equivalents in shares of Discover common stock, in cash or in a combination thereof. Discover will pay the dividend equivalent as soon as administratively practicable after Discover pays the corresponding dividend on its common stock.

4. Death and Disability.

The following special vesting and payment terms apply to your restricted stock units:

(a)    Death. If your service as a Director of Discover terminates due to death, all of your unvested restricted stock units will vest on the date your service terminates. Your restricted stock units will convert to shares of Discover common stock and be delivered to the beneficiary you have designated pursuant to Section 9 or the legal representative of your estate, as applicable, as soon as administratively practicable after Discover receives appropriate notice of your death.

(b)    Disability. If your service as a Director of Discover terminates due to Disability, all your unvested restricted stock units will vest on the date your service terminates. On that date, your restricted stock units will convert to shares of Discover common stock and be delivered to you as soon as administratively practicable thereafter.

5. Change in Control.

If there is a Change in Control, all of your restricted stock units will immediately vest. On the date of a Change in Control, your restricted stock units will convert to shares of Discover common stock and be delivered as soon as administratively practicable thereafter.

6. Termination of Service and cancellation of awards.

Your unvested restricted stock units will be canceled if your service as a Director of Discover terminates for any reason other than under the circumstances set forth in this Award Certificate for death, Disability or Change in Control.

7. Satisfaction of obligations.

Notwithstanding any other provision of this Award Certificate, Discover may, in its sole discretion, take various actions affecting your restricted stock units in order to collect amounts sufficient to satisfy any obligation that you owe to Discover and any tax or other withholding obligations. These actions include the following:

(a) Upon conversion of restricted stock units, including any accelerated conversion pursuant to Sections 4, 5 or 6 above, or, if later, upon delivery of the shares of Discover common stock, Discover may withhold a number of shares sufficient to satisfy any obligation that you owe to the Company and any tax or other withholding obligations. Discover shall determine the number of shares to be withheld by dividing the dollar value of your obligation to Discover and any tax or other withholding obligations by the fair market value of Discover common stock on the date of conversion, or, if later, on the date the shares of Discover common stock are delivered.

(b) Discover may withhold the payment of dividend equivalents on your restricted stock units to ensure satisfaction of any obligation that you owe Discover or any tax or other withholding obligations.

Discover’s determination of the amount that you owe to it shall be conclusive. The fair market value of Discover common stock for purposes of the foregoing provisions shall be determined using a valuation methodology established by Discover.

8. Nontransferability.

You may not sell, pledge, hypothecate, assign or otherwise transfer your restricted stock units, other than as provided in Section 9 (which allows you to designate a beneficiary or beneficiaries in the event of your death) or by will or the laws of descent and distribution. This prohibition includes any assignment or other transfer that purports to occur by operation of law or otherwise. During your lifetime, payments relating to the restricted stock units will be made only to you.

Your personal representatives, heirs, legatees, beneficiaries, successors and assigns, and those of Discover, shall all be bound by, and shall benefit from, the terms and conditions of your award.

9. Designation of a beneficiary.

You may make a written designation of beneficiary or beneficiaries to receive all or part of the shares to be paid under this Award Certificate in the event of your death. To make a beneficiary designation, you must complete and file the form attached hereto as Appendix A with the Human Resources department.

Any shares that become payable upon your death, and as to which a designation of beneficiary is not in effect, will be distributed to your estate.

You may replace or revoke your beneficiary designation at any time. If there is any question as to the legal right of any beneficiary to receive shares under this award, Discover may determine in its sole discretion to deliver the shares in question to your estate. Discover’s determination shall be binding and conclusive on all persons and it will have no further liability to anyone with respect to such shares.

10. Ownership and possession.

(a)    Generally. Generally, you will not have any rights as a stockholder in the shares of Discover common stock corresponding to your restricted stock units prior to conversion of your restricted stock units.Prior to conversion of your restricted stock units, however, you will receive dividend equivalent payments, as set forth in Section 3 of this Award Certificate.

To the extent necessary or advisable to comply with Section 409A of the Internal Revenue Code, with respect to any provision of this Award Certificate that provides for vested restricted stock units to convert to shares of Discover common stock on or as soon as administratively practicable after a specified event or date, such conversion will be made by the later of the end of the calendar year in which the specified event or date occurs or the 15^th day of the third calendar month following the specified event or date.

(b)    Following conversion. Following conversion of your restricted stock units you will be the beneficial owner of the net shares issued to you, and you will be entitled to all rights of ownership, including voting rights and the right to receive cash or stock dividends or other distributions paid on the shares.

11. Securities law matters.

Shares of Discover common stock issued upon conversion of your restricted stock units may be subject to restrictions on transfer by virtue of the Securities Act of 1933, as amended.  Discover may advise the transfer agent to place a stop order against such shares if it determines that such an order is necessary or advisable.  Because Discover common stock will only be maintained in book-entry form, you will not receive a stock certificate representing your interest in such shares.

12. Compliance with laws and regulations.

Any sale, assignment, transfer, pledge, mortgage, encumbrance or other disposition of shares issued upon conversion of your restricted stock units (whether directly or indirectly, whether or not for value, and whether or not voluntary) must be made in compliance with any applicable constitution, rule, regulation, or policy of any of the exchanges or associations or other institutions with which Discover has membership or other privileges, and any applicable law, or applicable rule or regulation of any governmental agency, self-regulatory organization or state or federal regulatory body.

13. No entitlements.

(a)    No right to continued service. Nothing in this Award Certificate or the Plan shall confer the right to continue as a Director of Discover or any right to continue in the service of Discover during any period (including without limitation the period between the Date of the Award and the Scheduled Vesting Date or any portion of that period).

(b)    No right to future awards. This award does not confer on you any right or entitlement to receive another award of restricted stock units or any other equity-based award at any time in the future or in respect of any future period.

(c)    No effect on future compensation. This award does not confer on you any right or entitlement to receive compensation in any specific amount for any future fiscal year.

14. Consents under local law.

Your award is conditioned upon the making of all filings and the receipt of all consents or authorizations required to comply with, or required to be obtained under, applicable local law.

15. Award modification.

Discover reserves the right to modify or amend unilaterally the terms and conditions of your restricted stock units, without first asking your consent, or to waive any terms and conditions that operate in favor of Discover. These amendments may include (but are not limited to) changes that Discover considers necessary or advisable as a result of changes in any, or the adoption of any new, Legal Requirement. Discover may not modify your restricted stock units in a manner that would materially impair your rights in your restricted stock units without your consent; provided, however, that Discover may, without your consent, amend or modify your restricted stock units in any manner that Discover considers necessary or advisable to comply with any Legal Requirement or to ensure that your restricted stock units are not subject to United States federal, state or local income tax or any equivalent taxes in territories outside the United States prior to payment. Discover will notify you of any amendment of your restricted stock units that affects your rights. Any amendment or waiver of a provision of this Award Certificate (other than any amendment or waiver applicable to all recipients generally), which amendment or waiver operates in your favor or confers a benefit on you, must be in writing and signed by Discover’s Head of Human Resources (or if such positions no longer exist, by the holder of an equivalent position) to be effective.

16. Severability.

In the event Discover determines that any provision of this Award Certificate would cause you to be in constructive receipt for United States federal or state income tax purposes of any portion of your award, then such provision will be considered null and void and this Award Certificate will be construed and enforced as if the provision had not been included in this Award Certificate as of the date such provision was determined to cause you to be in constructive receipt of any portion of your award.

17. Governing law.

This Award Certificate and the related legal relations between you and Discover will be governed by and construed in accordance with the laws of the State of Delaware, without regard to any conflicts or choice of law, rule or principle that might otherwise refer the interpretation of the award to the substantive law of another jurisdiction.

18. Defined terms.

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For purposes of this Award Certificate, the following terms shall have the meanings set forth below:

(a)“Board”means the Board of Directors of Discover.

(b)A “Change in Control” means, except as provided otherwise below, any of the following events:

(1)any person (as defined in Section 3(a)(9) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), as such term is modified in Sections 13(d) and 14(d) of the Exchange Act), other than (i) any employee plan established by Discover or any of its subsidiaries, (ii) any group of employees holding shares subject to agreements relating to the voting of such shares, (iii) Discover or any of its affiliates (as defined in Rule 12b-2 promulgated under the Exchange Act), (iv) an underwriter temporarily holding securities pursuant to an offering of such securities, or (v) a corporation owned, directly or indirectly, by stockholders of Discover in substantially the same proportions as their ownership of Discover, is or becomes the beneficial owner, directly or indirectly, of securities of Discover (not including in the securities beneficially owned by such person any securities acquired directly from Discover or its affiliates other than in connection with the acquisition by Discover or its affiliates of a business) representing 30% or more of either the total fair market value or total voting power of the stock of Discover;

(2)a change in the composition of the Board such that individuals who, as of the Date of the Award, constitute the Board (the “Incumbent Board”) cease for any reason to constitute at least a majority of the Board; provided, however, thatany individual becoming a member of the Board subsequent to the Date of the Award whose election, or nomination for election by Discover’s stockholders, was approved by a vote of at least a majority of the directors then comprising the Incumbent Board shall be considered as though such individual were a member of the Incumbent Board, but excluding, for this purpose, any such individual whose initial assumption of office occurs as a result of an actual or threatened election contest with respect to the election or removal of directors or other actual or threatened solicitation of proxies or consents by or on behalf of a person other than the Board;

(3)the consummation of a merger or consolidation of Discover with any other corporation or other entity, or the issuance of voting securities in connection with a merger or consolidation of Discover (or any direct or indirect subsidiary of Discover) pursuant to applicable stock exchange requirements, other than (A) a merger or consolidation which results in the voting securities of Discover outstanding immediately prior thereto continuing to represent (either by remaining outstanding or by being converted into voting securities of the surviving entity or any parent thereof), in combination with the ownership of any trustee or other fiduciary holding securities under an employee

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benefit plan of Discover or any of its subsidiaries, at least 50% of the combined voting power of the voting securities of Discover or such surviving entity or any parent thereof outstanding immediately after such merger or consolidation, or (B) a merger or consolidation effected to implement a recapitalization of Discover (or similar transaction) in which no person (determined pursuant to clause 18(b)(1) above) is or becomes the beneficial owner, directly or indirectly, of securities of Discover (not including in the securities beneficially owned by such person any securities acquired directly from Discover or its affiliates other than in connection with the acquisition by Discover or its affiliates of a business) representing 30% or more of either the then outstanding shares of Discover’s common stock or the combined voting power of Discover’s then outstanding voting securities; or

(4)the stockholders of Discover approve a plan of complete liquidation of Discover or an agreement for the sale or disposition by Discover of all or substantially all of Discover’s assets, other than a sale or disposition by Discover of all or substantially all of Discover’s assets to an entity, at least 50% of the combined voting power of the voting securities of which are owned by persons in substantially the same proportions as their ownership of Discover immediately prior to such sale.

Notwithstanding the foregoing, no Change in Control shall be deemed to have occurred if there is consummated any transaction or series of integrated transactions immediately following which the beneficial holders of Discover’s common stock immediately prior to such transaction or series of transactions continue to have substantially the same proportionate ownership in an entity which owns substantially all of the assets of Discover immediately prior to such transaction or series of transactions.

(c)“Date of the Award” means [insert date of grant which is the date of the annual meeting of shareholders].

(d)“Disability” means a “permanent and total disability,” as defined in Section 22(e)(3) of the Internal Revenue Code.

(e) “Discover”means Discover Financial Services, a Delaware corporation.

(f)“Internal Revenue Code” means the United States Internal Revenue Code of 1986, as amended, and the rules, regulations and guidance thereunder.

(g)“Legal Requirement” means any law, regulation, ruling, judicial decision, accounting standard, regulatory guidance or other legal requirement.

(h)“Plan” means the Discover Financial Services Directors’ Compensation Plan, as in effect from time to time.

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(i)“Scheduled Vesting Date” means the earlier of [insert the date of the first anniversary of the Date of the Award], or immediately prior to [insert the date of the first annual meeting of shareholders following the Date of the Award].

IN WITNESS WHEREOF, Discover has duly executed and delivered this Award Certificate as of the Date of the Award.

DISCOVER FINANCIAL SERVICES

By: _____________________________

Doug Rose

Senior Vice President, Chief HR Officer

APPENDIX A

Designation of Beneficiary(ies) Under

Discover Equity Compensation Plans

This Designation of Beneficiary shall remain in effect with respect to all awards issued to me under any Discover equity compensation plan, including any awards that may be issued to me after the date hereof, unless and until I modify or revoke it by submitting a later dated beneficiary designation. This Designation of Beneficiary supersedes all my prior beneficiary designations with respect to all my equity awards.

If you have more than one primary beneficiary, benefits will be divided equally among the living beneficiaries unless you specify the percentage. The percentages for all of the primary beneficiaries must total 100%. Contingent beneficiary(ies) receive any survivor benefits with respect to your equity awards, ONLY if all primary beneficiaries predecease you. If you have more than one contingent beneficiary, benefits will be divided equally among the living beneficiaries unless you specify the percentage. The percentages for all of the contingent beneficiaries must total 100%.

I hereby designate the following beneficiary(ies) to receive any survivor benefits with respect to all my equity awards:

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Primary Beneficiary(ies)		Relationship	Percentage
(1	)
(2	)
(3	)
(4	)
Contingent Beneficiary(ies)		Relationship	Percentage
(1	)
(2	)
(3	)
(4	)

Address(es) of Primary Beneficiary(ies):

(1)

(2)

(3)

(4)

Address(es) of Contingent Beneficiary(ies):

(1)

(2)

(3)

(4)

Name: (please print)                Date

Signature

Please sign and email this form to ExecutiveCompensation@discover.com, or return via mail to:

Discover Financial Services

Attn: Executive Compensation

2500 Lake Cook Road

Riverwoods, IL 60015

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EX-10.2

Exhibit 10.2

DISCOVER FINANCIAL SERVICES

AMENDED AND RESTATED 2014 OMNIBUS INCENTIVE PLAN

2018 AWARD CERTIFICATE FOR

RESTRICTED STOCK UNITS

Vice President and Above

I

TABLE OF CONTENTS FOR AWARD CERTIFICATE

1.Restricted Stock Units Generally.    3

2.Vesting Schedule; Conversion; Retention Requirement.    3

3.Special Provisions for Certain “Specified Employees”.    4

4.Dividend Equivalent Payments.    4

5.Death; Disability; Retirement.    4

6.Reduction in Force.    5

7.Change in Control.    5

8.Termination of Employment.    5

9.Forfeiture/Cancellation/Clawback of RSU Awards Under Certain Circumstances.    6

10.Tax and Other Withholding Obligations.    8

11.Satisfaction of Obligations.    8

12.Nontransferability.    9

13.Designation of a Beneficiary.    9

14.Ownership and Possession.    9

15.Securities Law Matters.    10

16.Compliance with Laws and Regulations.    10

17.No Entitlements.    10

18.Consents.    11

19.Electronic Delivery and Consent to Electronic Participation.    12

20.Award Modification.    12

21.Severability.    12

22.Successors.    12

23.Governing Law.    13

24.Section 409A.    13

25.Defined Terms.    13

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DISCOVER FINANCIAL SERVICES

AMENDED AND RESTATED 2014 OMNIBUS INCENTIVE PLAN

2018 AWARD CERTIFICATE FOR RESTRICTED STOCK UNITS

Discover has awarded to you restricted stock units (“RSUs”) as part of your discretionary long-term incentive compensation for services provided to the Company, from the Date of the Award through the Scheduled Vesting Dates, as provided in this Award Certificate. This Award Certificate sets forth the general terms and conditions of your restricted stock unit award (your “RSU Award”). Capitalized terms used in this Award Certificate that are not defined in the text have the meanings set forth in Section 25 below. Capitalized terms used in this Award Certificate that are not defined in the text or in Section 25 below have the meanings set forth in the Plan.

The number of RSUs in your RSU Award has been communicated to you separately. If you are employed outside the United States, please reference the “International Supplement” included herein as Appendix C, which contains supplemental terms and conditions for your RSU Award. This Award Certificate should be read in conjunction with the International Supplement, if applicable, in order for you to understand the terms and conditions of your RSU Award.

Your RSU Award is made pursuant to the Plan. References to “restricted stock units” or “RSUs” in this Award Certificate mean only those RSUs included in your RSU Award, and the terms and conditions herein apply only to such RSU Award. If you receive any other award under the Plan or another equity compensation plan, it will be governed by the terms and conditions of the applicable award documentation, which may be different from those herein.

The purpose of the RSU Award is, among other things, to align your interests with the interests of Discover and its shareholders and to reward you for your continued Employment with the Company in the future and your compliance with the Company’s policies (including, without limitation, the Company’s risk policies and Code of Conduct), to protect the Company’s interests in non-public, confidential and/or proprietary information, products, trade secrets, customer relationships, and other legitimate business interests, and to ensure an orderly transition of responsibilities. In view of these purposes, you will earn RSUs included in your RSU Award only if you (1) remain in continuous Employment through the applicable Scheduled Vesting Dates (subject to limited exceptions set forth herein), (2) are not found to be subject to the forfeiture, cancellation, or clawback provisions set forth in Section 9 below, and (3) satisfy obligations you owe to the Company as set forth in Section 11 below. As the Company deems appropriate and in its sole discretion, the Company will require you to provide a written certification or other evidence, from time to time, to confirm that none of the circumstances described in Section 9 below exist or have occurred, including upon a termination of Employment and/or during a specified period of time prior to the applicable Scheduled Vesting Dates. If you fail to timely provide any required certification or other evidence, the Company will cancel your RSU Award. It is your responsibility to provide the Human Resources Department with your up-to-date contact information.

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1. Restricted Stock Units Generally.

Each of your RSUs corresponds to one share of Stock. A RSU constitutes an unsecured promise by Discover to pay you one share of Stock on the conversion date for the RSU. As the holder of RSUs, you have only the rights of a general unsecured creditor of the Company. You will not be a shareholder with respect to the Shares stock underlying your RSUs unless and until your RSUs convert to Shares.

2. Vesting Schedule; Conversion; Retention Requirement.

a)Vesting Schedule. Your RSUs will vest according to the Scheduled Vesting Dates set forth in Appendix A. Except as otherwise provided in this Award Certificate, each portion of your RSUs will vest only if you continue to provide future services to the Company by remaining in continuous Employment through the applicable Scheduled Vesting Date. The special vesting terms set forth in Sections 5, 6 and 7 of this Award Certificate apply (1) if your Employment terminates by reason of your death, Disability, or Retirement, (2) if the Company terminates your Employment in an involuntary termination under the circumstances described in Section 6, or (3) upon a Change in Control. Vested RSUs are subject to the tax withholding provisions set forth in Section 10 of this Award Certificate.

b)Conversion.

(A)Except as otherwise provided in this Award Certificate, each of your vested RSUs will convert to one share of Stock on the applicable Scheduled Vesting Date. The special conversion provisions set forth in Sections 5, 6 and 7 of this Award Certificate apply (i) if your Employment terminates by reason of your death, Disability, or Retirement, (ii) if the Company terminates your Employment in an involuntary termination under the circumstances described in Section 6, or (iii) upon a Change in Control.

(B)Shares to which you are entitled upon conversion of RSUs under any provision of this Award Certificate shall be delivered as soon as administratively practicable thereafter and shall not be subject to any transfer restrictions, other than those that may arise under the securities laws or the Company’s policies, including, without limitation, its stock ownership guidelines and/or Section 11 below, but will be subject to forfeiture, cancellation or clawback as set forth in Section 9 below.

c)Accelerated Conversion. The Committee, in its sole discretion, may determine that any RSUs may be converted to Shares prior to the Scheduled Vesting Date subject to compliance with all Legal Requirements. In such case, the Committee may determine in its sole discretion that the shares may not be transferable and may remain subject to applicable vesting, retention, forfeiture, cancellation, clawback and withholding provisions.

d)Rule of Construction for Timing of Conversion. Whenever this Award Certificate provides for your RSUs to convert to Shares on the Scheduled Vesting Date or upon a different specified event or date, such conversion will be considered to have been timely made, and neither you nor any of your beneficiaries or your estate shall have any claim against the Company

3

for damages based on a delay in conversion of your RSUs (or delivery of Shares following conversion), and the Company shall have no liability to you (or to any of your beneficiaries or your estate) in respect of any such delay, as long as conversion is made by December 31 of the year in which occurs the Scheduled Vesting Date or such other specified event or date or, if later, by the 15th day of the third calendar month following such specified event or date. Similarly, neither you nor any of your beneficiaries or your estate shall have any claim against the Company for damages, and the Company shall have no liability to you (or to any of your beneficiaries or your estate), based on any acceleration of the conversion of your RSUs pursuant to Section 2.c), as applicable.

e)Retention Requirement. Notwithstanding anything in the Plan or any other provisions of this Award Certificate to the contrary, following delivery thereof, you will be required to hold (and not transfer or otherwise dispose of) one-hundred percent (100%) of the Net Shares until one (1) year after the applicable Scheduled Vesting Date or such other specified event or date which accelerates the conversion of such Net Shares; provided, that this requirement shall lapse in the event of your death, Disability or a Change in Control.

3. Special Provisions for Certain “Specified Employees”.

Notwithstanding the other provisions of this Award Certificate, to the extent necessary to comply with Section 409A of the Internal Revenue Code, if Discover reasonably considers you to be one of its “specified employees” as defined in Section 409A of the Internal Revenue Code at the time of the termination of your Employment, any RSUs to which you are entitled under this Award Certificate that constitute a deferred compensation arrangement under Section 409A of the Internal Revenue Code and that are payable upon termination of your Employment will not convert to Stock until the date that is six months after the termination of your Employment (or the date of your death, if such event occurs earlier).

4. Dividend Equivalent Payments.

Until your RSUs convert to Shares, if Discover pays a regular or ordinary cash dividend on its common stock, you will be paid a dividend equivalent for your vested and unvested RSUs. The decision to pay a dividend and, if so, the amount of any such dividend, is determined by Discover in its sole discretion. No dividend equivalents will be paid to you on any canceled RSUs. Discover will decide on the form of payment and may pay dividend equivalents in Shares, in cash or in a combination thereof. Discover will pay the dividend equivalents as soon as administratively practicable after Discover pays the corresponding dividend on its common stock. Because dividend equivalent payments are considered part of your compensation for income tax purposes, they will be subject to applicable tax and other withholding obligations, as summarized in Section 10.

5. Death; Disability; Retirement.

The following special vesting and payment terms apply to your RSUs:

a)Death. If your Employment terminates due to your death, all RSUs subject to this Award Certificate will vest on the date your Employment terminates. On that date, your RSUs will convert to Shares and be delivered to the beneficiary you have designated pursuant to

4

Section 13 or the legal representative of your estate, as applicable, as soon as administratively practicable after the Company receives appropriate notice of your death. After your death, the cancellation provisions set forth in Section 9.a) will no longer apply.

b)Disability. If your Employment terminates due to Disability, all RSUs subject to this Award Certificate will vest on the date your Employment terminates. On that date, subject to Section 3 above, your RSUs will convert to Shares and be delivered to you.

c)Retirement. If your Employment terminates due to Retirement, the number of RSUs that will vest on the date your Employment terminates will be determined by multiplying the RSUs subject to this Award Certificate by the Pro Ration Fraction. On that date, subject to Section 3 above, your RSUs will convert to Shares and be delivered to you.

6. Reduction in Force.

If the Company terminates your Employment due to a reduction in force or an elimination of your position, each as determined by the Company in its sole discretion, the number of RSUs that will vest on the date your Employment terminates will be determined by multiplying the RSUs subject to this Award Certificate by the Pro Ration Fraction. These shares will convert to Shares and be delivered to you on the 60th day following your termination of Employment, subject to Section 3 above, provided that you sign (and do not revoke) an agreement and release of claims satisfactory to the Company.

7. Change in Control.

a)Termination in Connection with Change in Control. If the Company terminates your Employment other than for Cause, or if you terminate your Employment for Good Reason, within six months prior to or within 24 months after a Change in Control, all your RSUs will immediately vest and convert to Shares on the later of the date of a Change in Control and the date of your termination following a Change in Control, as applicable and be delivered as soon as administratively practicable thereafter.

b)Stock Consideration. In the event of a Change in Control which results from a transaction pursuant to which the shareholders of Discover receive shares of common stock of an acquiring entity that are registered under Section 12 of the Exchange Act (as defined in Section 25.c)(1)), unless otherwise determined by the Committee, in its sole discretion prior to such Change in Control, there shall be substituted for each Share subject to this certificate the number and class of shares of common stock of the acquiring entity into which each outstanding Share shall be converted pursuant to such Change in Control transactions, and this Award Certificate shall otherwise continue in effect.

c)Non-stock Consideration. In the event of a Change in Control which results from a transaction pursuant to which the shareholders of Discover receive consideration other than shares of common stock of the Acquirer that are registered under Section 12 of the Exchange Act, the value of the RSUs hereunder shall, unless otherwise determined by the Committee, in its sole discretion prior to such Change in Control, be converted into a right to receive the cash or other

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consideration received by the shareholders of Discover in such transaction, and this Award Certificate shall otherwise continue in effect.

8. Termination of Employment.

a)Cancellation of Unvested RSU Awards. Your unvested RSUs will be canceled if your Employment terminates for any reason other than under the circumstances set forth in this Award Certificate for death, Disability, and Retirement described in Section 5, for an involuntary termination by the Company described in Section 6, or in connection with a Change in Control as provided in Section 7.

b)General Treatment of Vested RSU Awards. Except as otherwise provided in this Award Certificate, your vested RSUs will convert to Shares on the applicable Scheduled Vesting Date. The tax and other withholding provisions as set forth in Section 10 of this Award Certificate will continue to apply until the date the Shares are delivered.

9. Forfeiture/Cancellation/Clawback of RSU Awards Under Certain Circumstances.

The forfeiture, cancellation and/or clawback circumstances and events set forth in this Section 9 are designed, among other things, to incentivize compliance with the Company’s policies (including, without limitation, the Company’s risk policies and Code of Conduct), to protect the Company’s interests in non-public, confidential and/or proprietary information, products, trade secrets, customer relationships, and other legitimate business interests, and to ensure an orderly transition of responsibilities. This Section 9 shall apply notwithstanding any other terms of this Award Certificate (except where sections in this Award Certificate specifically provide that the circumstances set forth in this Section 9 no longer apply).

a)Breach of Restrictive Covenants. Notwithstanding your satisfaction of the vesting conditions of this Award Certificate, RSUs are not earned until the applicable Scheduled Vesting Date and will be canceled prior to the applicable Scheduled Vesting Date in any of the circumstances set forth below. Although you will become the beneficial owner of Shares following conversion of your RSUs, the Company may, upon notice, issue a transfer restriction with respect to your Shares following conversion of your RSUs pending any investigation or other review that impacts the determination as to whether the RSUs are cancellable under the circumstances set forth below. The Shares underlying such RSUs shall be forfeited and recoverable in the event the Company determines that the RSUs were cancellable under the circumstances set forth below. Notwithstanding any provision of this Award Certificate to the contrary, in the event that at any time prior to one year after the termination of your Employment or service with the Company, you (i) engage, in Competitive Activity; (ii) engage in Wrongful Solicitation or (iii) breach your obligations to the Company under a confidentiality, intellectual property or other restrictive covenant, you shall be required to:

(A)pay to the Company an amount in cash equal to the value of the Shares that vested and converted on or after, or within two years prior to, your termination of Employment, which value shall be determined by the Company, in its sole discretion, and

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shall include an amount for tax adjustments appropriate to reflect your obligation to repay such amounts due to your breach of the restrictive covenants; or

(B)transfer to the Company the number of Shares that vested and converted on or after, or within two years prior to, your termination of Employment, plus an amount calculated by the Company, in its sole discretion, for tax adjustments appropriate to reflect your obligation to transfer such common stock due to your breach of the restrictive covenants.

b)Clawback.

(1) In the event and to the extent the Committee reasonably determines that the performance considered by the Committee, and on the basis of which the amount of RSUs were granted, was based on Discover’s material noncompliance with any financial reporting requirement under the securities laws which requires Discover to file a restatement of its financial statements within three years of the Date of the Award, you will be required to comply with paragraphs (1) and (2) (as applicable) below to repay to the Company an amount equal to the number of RSUs which were granted hereunder less the number of RSUs that would have been granted had your RSUs been granted based on compliance with any such financial reporting requirement under the securities laws (such number of RSUs, the “Clawback RSUs,” to be determined in each case by the Committee in its sole discretion:

(A)You shall forfeit a number of RSUs hereunder equal to the Clawback RSUs. In the event such forfeited RSUs are less than the Clawback RSUs, then you shall comply with the following paragraph (B).

(B)You shall be required:

(1) to pay to the Company an amount in cash equal to the value of Shares that vested and converted hereunder, which value shall be determined using a valuation method established by the Company, in its sole discretion, and shall include an amount for tax adjustments appropriate to reflect your obligation to repay such amounts due to the restatement of the Company’s financial statements; or

(2) to transfer to the Company the number of Shares that vested and converted, hereunder plus such amount calculated by the Company, in its sole discretion, for tax adjustments appropriate to reflect your obligation to repay such amounts due to the restatement of the Company’s financial statements.

c)Risk Review. No RSUs will convert to Shares until the Chief Human Resources Officer receives confirmation from the Chief Risk Officer that a review has been completed by the Chief Risk Officer to determine whether you engaged in any willful or reckless

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violation of the Company’s risk policies. If the Chief Risk Officer finds any such violation or breach, then the Company may determine that all or a portion of your RSUs will be forfeited. Additionally, if you are a Covered Employee, the Chief Risk Officer will conduct Company and/or Business Unit risk reviews as well as evaluate your individual risk goals. Based on this assessment, the Company may determine that all or a portion of your RSUs will be forfeited.

d)Authorization. You authorize the Company to deduct any amount or amounts owed by you pursuant to this Section 9 from any amounts payable by or on behalf of the Company to you, including, without limitation, any amount payable to you as salary, wages, paid time off, bonus, severance, change in control severance or the conversion of any equity-based award. This right of offset shall not be an exclusive remedy and the Company’s election not to exercise this right of offset with respect to any amount payable to you shall not constitute a waiver of this right of offset with respect to any other amount payable to you or any other remedy.

10. Tax and Other Withholding Obligations.

Subject to rules and procedures established by Discover, you may be eligible to elect to satisfy the tax or other withholding obligations arising upon conversion of your RSUs or upon any taxable event by having Discover withhold Shares or by tendering Shares, in each case in an amount sufficient to satisfy the tax or other withholding obligations. Shares withheld or tendered will be valued using the fair market value of Stock on the date the Shares are scheduled to convert, or otherwise become taxable, as applicable, using a valuation methodology established by Discover. In order to comply with applicable accounting standards or the Company’s policies in effect from time to time, Discover may limit the amount of Shares that you may have withheld or that you may tender.

11. Satisfaction of Obligations.

Notwithstanding any other provision of this Award Certificate, the Company may, in its sole discretion, take various actions affecting your RSUs in order to collect amounts sufficient to satisfy any obligation that you owe to the Company and any tax or other withholding obligations. The Company’s determination of the amount that you owe the Company shall be conclusive. The fair market value of Stock for purposes of the following provisions shall be determined using a valuation methodology established by the Company. The actions that may be taken by the Company pursuant to this Section 11 include, but are not limited to, the following:

a)Withholding of Shares. Upon conversion of RSUs, including any accelerated conversion pursuant to Sections 5, 6, or 7 above, or, if later, upon delivery of the Shares, the Company may withhold a number of Shares sufficient to satisfy any obligation that you owe to the Company and any tax or other withholding obligations whether national, federal, state or local tax withholding obligations including any social insurance contributions or employment tax obligation. The Company shall determine the number of Shares to be withheld by dividing the dollar value of your obligation to the Company and any tax or other withholding obligations by the fair market value of Stock on the date the Shares are scheduled to convert, or otherwise become taxable, as applicable. To the extent that the Company retains any Shares or reduces the number of RSUs to cover the withholding obligations, it will do so at the minimum statutory rate. Should the

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Company withhold in excess of the actual tax withholding obligation, the Company will refund the excess amount to you within a reasonable period and without any interest.

b)Netting of Accelerated RSUs. In order to satisfy any taxes due upon an event which is earlier than conversion, Discover may accelerate the vesting and conversion of a portion of your unvested RSUs. The Company shall determine the number of RSUs to be accelerated and converted by dividing the dollar value of your tax obligations upon such event by the fair market value of Stock on the date of accelerated conversion. Accelerated and converted RSUs shall not exceed the value of taxes due upon such event and the resulting Shares will be withheld by the Company.

c)Withholding of Other Compensation. The Company may withhold the payment of dividend equivalents on your RSUs or any other compensation or payments due from Discover to ensure satisfaction of any obligation that you owe the Company or any tax or other withholding obligations or Discover may permit you to satisfy such tax or other withholding obligation by paying such obligation in immediately available funds.

d)Mobile Employees. You are liable and responsible for all taxes and social insurance contributions owed in connection with the Award, regardless of any action the Company takes with respect to any tax withholding obligations that arise in connection with the Award. The Company does not make any representation or undertaking regarding the tax treatment or the treatment of any tax withholding in connection with the grant, vesting or payment of the Award. The Company does not commit and is under no obligation to structure the Award to reduce or eliminate your tax liability. Further, you may be subject to individual income taxation (and possibly social security or other applicable personal or payroll taxes) in each jurisdiction where you have performed services for the Company between the Award Date and the Vesting Date. Taxes for which you are liable, if applicable, may be withheld and deposited by the Company in each jurisdiction in which you have performed services regardless of your status as a resident or non-resident in one or more of the jurisdictions that have a right to impose taxation. You agree that you will comply with all United States and foreign individual income tax return filing obligations that may be imposed with respect to the Award.

12. Nontransferability.

You may not sell, pledge, hypothecate, assign or otherwise transfer your RSUs, other than as provided in Section 13 (which allows you to designate a beneficiary or beneficiaries in the event of your death) or by will or the laws of descent and distribution. This prohibition includes any assignment or other transfer that purports to occur by operation of law or otherwise. During your lifetime, payments relating to the RSUs will be made only to you.

13. Designation of a Beneficiary.

You may make a written designation of beneficiary or beneficiaries to receive all or part of the Shares to be paid under this Award Certificate in the event of your death. To make a beneficiary designation, you must complete and file the form attached hereto as Appendix B with the Human Resources Department. Any Shares that become payable upon your death, and as to which a

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designation of beneficiary is not in effect, will be distributed to your estate. If you previously filed a designation of beneficiary form for your equity awards with the Human Resources Department, such form will also apply to the RSUs granted pursuant to this RSU Award. You may replace or revoke your beneficiary designation at any time. If there is any question as to the legal right of any beneficiary to receive Shares under this RSU Award, Discover may determine in its sole discretion to deliver the shares in question to your estate. Discover’s determination shall be binding and conclusive on all persons and it will have no further liability to anyone with respect to such shares.

14. Ownership and Possession.

a)Generally. Generally, you will not have any rights as a shareholder in the Shares corresponding to your RSUs prior to conversion of your RSUs. Prior to conversion of your RSUs, however, you will receive dividend equivalent payments, as set forth in Section 4 of this Award Certificate. To the extent necessary or advisable to comply with Section 409A of the Internal Revenue Code, with respect to any provision of this Award Certificate that provides for vested RSUs to convert to Shares on or as soon as administratively practicable after a specified event or date, such conversion will be made by the later of the end of the calendar year in which the specified event or date occurs or the 15^th day of the third calendar month following the specified event or date.

b)Following Conversion. Subject to the terms and conditions of this Award Certificate, following conversion of your RSUs you will be the beneficial owner of the Shares issued to you, net of taxes, and you will be entitled to all rights of ownership, including voting rights and the right to receive cash or stock dividends or other distributions paid on such shares.

15. Securities Law Matters.

Shares issued upon conversion of your RSUs may be subject to restrictions on transfer by virtue of the Securities Act of 1933, as amended.  Discover may advise the transfer agent to place a stop order against such shares if it determines that such an order is necessary or advisable.  Because Stock will only be maintained in book-entry form, you will not receive a stock certificate representing your interest in such shares.

16. Compliance with Laws and Regulations.

Any sale, assignment, transfer, pledge, mortgage, encumbrance or other disposition of Shares issued upon conversion of your RSUs (whether directly or indirectly, whether or not for value, and whether or not voluntary) must be made in compliance with any applicable constitution, rule, regulation, or policy of any of the exchanges or associations or other institutions with which the Company or a Related Employer has membership or other privileges, and any applicable law, or applicable rule or regulation of any governmental agency, self-regulatory organization or state or federal regulatory body.

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17. No Entitlements.

a)No Right to Continued Employment. This RSU Award is not an employment agreement, and nothing in this Award Certificate, the International Supplement, if applicable, or the Plan shall alter your status as an “at-will” employee of the Company or your Employment status at a Related Employer. None of this Award Certificate, the International Supplement, if applicable, or the Plan shall be construed as guaranteeing your Employment by the Company or a Related Employer, or as giving you any right to continue in the employ of the Company or a Related Employer, during any period (including without limitation the period between the Date of the Award and any of the Scheduled Vesting Dates, or any portion of any of these periods), nor shall they be construed as giving you any right to be reemployed by the Company or a Related Employer following any termination of Employment.

b)No Right to Future Awards. This RSU Award, and all other awards of RSUs and other equity-based awards, are discretionary. This RSU Award does not confer on you any right or entitlement to receive another award of RSUs, any other equity-based award or any other award at any time in the future or in respect of any future period.

c)No Effect on Future Employment Compensation. Discover has made this RSU Award to you in its sole discretion. This RSU Award does not confer on you any right or entitlement to receive compensation in any specific amount for any future fiscal year, and does not diminish in any way the Company’s discretion to determine the amount, if any, of your compensation. In addition, this RSU Award is not part of your base salary or wages and will not be taken into account in determining any other Employment-related rights you may have, such as rights to pension or severance pay, end of service payments, bonuses, long-service awards or similar payments and in no event shall be considered as compensation for, or relating in any way to, past services for the Company.

d)Termination of Employment. In consideration of the grant of the Award, no claim or entitlement to compensation or damages shall arise from termination of the Award or diminution in value of the Award or Shares acquired through vesting of the Award resulting from termination of your employment by the Company (for any reason whatsoever and whether or not in breach of local labor laws) andyou irrevocably release the Company and the Employer from any such claim that may arise; if, notwithstanding the foregoing, any such claim is found by a court of competent jurisdiction to have arisen, then, by signing this Agreement, you will be deemed irrevocably to have waived your entitlement to pursue such claim; and in the event of termination of your employment (whether or not in breach of local labor laws), your right to receive the Award and vest in the Award under the Plan, if any, will terminate effective as of the date that you are no longer actively employed and will not be extended by any notice period mandated under local law (e.g., active employment would not include a period of “garden leave” or similar period pursuant to local law); Discover shall have the exclusive discretion to determine when you are no longer actively employed for purposes of your Award.

e)Language. If you have received this Agreement or any other document related to the Plan translated into a language other than English and if the translated version is different that the English version, the English version will control.

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f)Award Terms Control; Plan Terms Control. In the event of any conflict between any terms applicable to equity awards in any employment agreement, offer letter or other arrangement that you have entered into with the Company and the terms set forth in this Award Certificate, the latter shall control. In the event of any conflict between the terms set forth in this Award Certificate and the terms of the Plan, the latter shall control.

18. Consents.

Your RSU Award is conditioned upon the Company’s making of all filings and the receipt of all consents or authorizations required to comply with, or required to be obtained under, applicable local law.

In accepting this RSU Award, you consent to the collection, use and transfer, in electronic or other form, of your personal data by and among, as applicable, the Company and any other possible recipients for the purpose of implementing, administering and managing your participation in the Plan, as well as for the purpose of the Company’s compliance with applicable law, including, without limitation, Section 953(b) of the Dodd-Frank Wall Street Reform and Consumer Protection Act. You understand that the recipients of your personal data may be located in the U.S. or elsewhere, and the recipients’ country may have different data privacy laws and protections than your country. You understand that you may request a list with the names and addresses of any potential recipients of your personal data, view the personal data, request additional information about the storage of your personal data, require any necessary amendments to your personal data or refuse or withdraw your consent by contacting your local human resources representative, in any case without cost. You understand, however, that refusing or withdrawing your consent may affect your ability to participate in the Plan.

19. Electronic Delivery and Consent to Electronic Participation.

The Company may, in its sole discretion, decide to deliver any documents related to the RSU Award and participation in the Plan or future RSU Awards by electronic means. You hereby consent to receive such documents by electronic delivery and to participate in the Plan through an online or electronic system established and maintained by the Company or another third party designated by the Company, including the acceptance of RSU Awards and the execution of the RSU agreements through electronic signature.

20. Award Modification.

The Committee reserves the right to modify or amend unilaterally the terms and conditions of your RSUs, without first asking your consent, or to waive any terms and conditions that operate in favor of Discover. These amendments may include (but are not limited to) changes that the Committee considers necessary or advisable as a result of changes in any, or the adoption of any new, Legal Requirement. The Committee may not modify your RSUs in a manner that would materially impair your rights in your RSUs without your consent; provided, however, that the Committee may, without your consent, amend or modify your RSUs in any manner that the Committee considers necessary or advisable to comply with or reflect the application of any Legal Requirement or to ensure that your RSUs are not subject to United States federal, state or local

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income tax or any equivalent taxes in territories outside the United States prior to payment. Discover will notify you of any amendment of your RSUs that affects your rights. Any amendment or waiver of a provision of this Award Certificate (other than any amendment or waiver applicable to all recipients generally), which amendment or waiver operates in your favor or confers a benefit on you, must be in writing and signed by the Chief Human Resources Officer to be effective.

21. Severability.

In the event the Committee determines that any provision of this Award Certificate would cause you to be in constructive receipt for United States federal or state income tax purposes of any portion of your RSU Award, then such provision will be considered null and void and this Award Certificate will be construed and enforced as if the provision had not been included in this Award Certificate as of the date such provision was determined to cause you to be in constructive receipt of any portion of your RSU Award.

22. Successors.

This Award Certificate shall be binding upon and inure to the benefit of any successor or successors of Discover and any person or persons who shall, upon your death, acquire any rights hereunder in accordance with this Award Certificate or the Plan.

23. Governing Law.

This Award Certificate and the related legal relations between you and Discover will be governed by and construed in accordance with the laws of the State of Delaware, without regard to any conflicts or choice of law, rule or principle that might otherwise refer the interpretation of the RSU Award to the substantive law of another jurisdiction. The Company and you agree that the jurisdiction and venue for any disputes arising under, or any action brought to enforce (or otherwise relating to), the Plan or this Award Certificate shall be exclusively in the courts in the State of Illinois, Counties of Cook or Lake, including the federal courts located therein (should federal jurisdictions exist), and the Company and you hereby submit and consent to said jurisdiction and venue.

24. Section 409A.

This Award Certificate and your RSU Award (including all adjustments, substitutions, dividends, valuations and distributions, and deferrals hereunder) are intended to be exempt from or comply with Section 409A of the Internal Revenue Code pursuant to the guidance issued thereunder by the U.S. Internal Revenue Service in all respects and shall be administered in a manner consistent with such intent. If an unintentional operational failure occurs with respect to requirements under Section 409A of the Internal Revenue Code, you or your beneficiary shall fully cooperate with Discover to correct the failure, to the extent possible, in accordance with any correction procedure established by the U.S. Internal Revenue Service. Any reference herein to Section 409A of the Internal Revenue Code shall be interpreted to refer to any successor section of the Internal Revenue Code or other guidance issued by the U.S. Internal Revenue Service, or other agency with jurisdiction, as appropriate. To the extent that full or partial payment of your RSU Award that

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constitutes a deferral of compensation subject to Section 409A of the Internal Revenue Code is made upon a termination of Employment, a termination of Employment shall be deemed to occur only if it is a “separation from service” for purposes of Section 409Aof the Internal Revenue Code, and references in this Award Certificate to “termination,” “termination of Employment,” or like terms shall mean a “separation from service.”

25. Defined Terms.

For purposes of this Award Certificate, the following terms shall have the meanings set forth below:

a)“Board” means the Board of Directors of Discover .

b)“Cause” means:

(A)any act or omission which constitutes a material breach of your obligations to the Company or your failure or refusal to perform satisfactorily any duties reasonably required of you, which breach, failure or refusal (if susceptible to cure) is not corrected (other than failure to correct by reason of your incapacity due to Disability) within ten (10) business days after written notification thereof to you by the Company;

(B)any act or omission by you that constitutes (i) fraud or intentional misrepresentation, (ii) embezzlement, misappropriation or conversion of assets of, or business opportunities considered by, the Company or (iii) any other act which has caused or may reasonably be expected to cause material injury to the interest or business reputation of the Company; or

(C)your violation of any securities, commodities or banking laws, any rules or regulations issued pursuant to such laws, or rules or regulations of any securities or commodities exchange or association of which the Company is a member or of any policy of the Company relating to compliance with any of the foregoing.

c)“Change in Control” means, except as provided otherwise below, the first to occur of any of the following events:

(A)except as otherwise provided in clause (3) below, any person (as defined in Section 3(a)(9) of the Securities Exchange Act of 1934 (the “Exchange Act”), as such term is modified in Sections 13(d) and 14(d) of the Exchange Act), other than (i) any employee plan established by the Company or any of its Subsidiaries, (ii) any group of employees holding shares subject to agreements relating to the voting of such shares, (iii) the Company or any of its affiliates (as defined in Rule 12b-2 promulgated under the Exchange Act), (iv) an underwriter temporarily holding securities pursuant to an offering of such securities, or (v) a corporation owned, directly or indirectly, by shareholders of the Company in substantially the same proportions as their ownership of the Company, either (x) acquires ownership of stock of the Company that, together with stock held by such person (not including the stock owned by such person any stock acquired directly from the Company

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other than in connection with the acquisition by the Company of a business), constitutes more than fifty percent (50%) of the total fair market value of the stock of the Company (but only if such person did not own more than 50% of the total fair market value of the stock of the Company prior to the acquisition of additional stock), or (y) acquires (or has acquired during the twelve-month period ending on the date of the most recent acquisition by such person) ownership of the stock of the Company possessing thirty percent (30%) or more of the total voting power of the stock of the Company (but only if such person did not own 30% or more of the total voting power of the stock of the Company prior to the acquisition of additional stock and not including the stock owned by such person any stock acquired directly from the Company other than in connection with the acquisition by the Company of a business);

(B)a change in the composition of the Board during any twelve-month period, such that individuals who, as of the Date of the Award, constitute the Board (the “Incumbent Board”) cease for any reason to constitute at least a majority of the Board; provided, however, that any individual becoming a member of the Board subsequent to the date of Date of the Award whose election, or nomination for election by the Company’s shareholders, was approved by a vote of at least a majority of the directors then comprising the Incumbent Board shall be considered as though such individual were a member of the Incumbent Board;

(C)the consummation of a merger or consolidation of the Company with any other corporation or other entity, or the issuance of voting securities in connection with a merger or consolidation of the Company (or any direct or indirect subsidiary of the Company) pursuant to applicable stock exchange requirements, other than (i) a merger or consolidation which results in the securities of the Company outstanding immediately prior thereto continuing to represent (either by remaining outstanding or by being converted into securities of the surviving entity or any parent thereof), in combination with the ownership of any trustee or other fiduciary holding securities under an employee benefit plan of the Company or any of its subsidiaries, at least fifty percent (50%) of the combined voting power of the voting securities of the Company or such surviving entity or any parent thereof outstanding immediately after such merger or consolidation, or (ii) a merger or consolidation effected to implement a recapitalization of the Company (or similar transaction) in which no person (determined pursuant to clause (1) above) is or becomes the beneficial owner, directly or indirectly, of securities of the Company (not including in the securities beneficially owned by such person any securities acquired directly from the Company or its affiliates other than in connection with the acquisition by the Company or its affiliates of a business) representing thirty percent (30%) or more of the total voting power of the stock of the Company (but only if such person did not own 30% or more of the total voting power of the stock of the Company prior to the acquisition of additional securities);

(D)the complete liquidation of the Company or the sale or disposition by the Company of all or substantially all of the Company’s assets, other than a sale or disposition by the Company of all or substantially all of the Company’s assets to (i) a shareholder of the Company (immediately before the asset transfer) in exchange for or with

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respect to the Company’s stock, (ii) an entity, at least fifty percent (50%) of the total value or voting power of which is owned, directly or indirectly, either by the Company or by a person or more than one person acting as a group, that owns fifty percent (50%) or more of the total value or voting power of all the outstanding stock of the Company, or (iii) a person, or more than one person acting as a group, that owns, directly or indirectly, fifty percent (50%) or more of the total value or voting power of all the outstanding stock of the Company; provided, however, that a Change in Control pursuant to this clause (4) shall not be deemed to have occurred unless a person (determined pursuant to clause (1) above) or persons acting as a group acquires (or has acquired during the twelve-month period ending on the date of the most recent acquisition by such person or persons) assets from the Company that have a total gross fair market value equal to or more than forty percent (40%) of the total gross fair market value of all of the assets of the Company immediately before such acquisition or acquisitions.

Notwithstanding the foregoing, with respect to a Change in Control of Discover, no Change in Control shall be deemed to have occurred if there is consummated any transaction or series of integrated transactions immediately following which the beneficial holders of the Company’s common stock immediately prior to such transaction or series of transactions continue to have substantially the same proportionate ownership in an entity which owns substantially all of the assets of the Company immediately prior to such transaction or series of transactions.

d)“Chief Human Resources Officer” means the chief human resources officer of Discover, any successor chief human resources officer, or any other individual or committee appointed by the chief executive officer of Discover with the power and authority of the chief human resources officer.

e)“Chief Risk Officer” means the chief risk officer of Discover, any successor chief risk officer, or any other individual or committee appointed by the chief executive officer of Discover with the power and authority of the chief risk officer.

f)“Committee” means the Compensation and Leadership Development Committee of the Board, any successor committee thereto or any other committee of the Board appointed by the Board with the powers of the Committee under the Plan, or any subcommittee appointed by such Committee.

g)“Company” means Discover and all of its Subsidiaries.

h)“Competitive Activity” means:

(A)becoming, or entering into any arrangement as, an employee, officer, partner, member, proprietor, director, independent contractor, consultant, advisor, representative or agent of, or serving in any similar position or capacity with, a Competitor, where you will be responsible for providing, or managing or supervising others who are providing, services (i) that are similar or substantially related to the services that you provided to the Company, or (ii) that you had direct or indirect managerial or supervisory responsibility for at the Company, or (iii) that call for the application of the same or similar

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specialized knowledge or skills as those utilized by you in your services for the Company, in each such case, at any time during the year preceding the termination of your employment with the Company; or

(B)either alone or in concert with others, forming, or acquiring a five percent (5%) or greater equity ownership, voting interest or profit participation in, a Competitor.

i)“Competitor” means any corporation, partnership or other entity that engages in (or that owns a significant interest in any corporation, partnership or other entity that engages in) (1) the business of consumer lending, including, without limitation, credit card issuance or electronic payment services, or (2) any other business in which you have been involved in or had significant knowledge of, which has been conducted by the Company at any time during your employment with the Company. For the avoidance of doubt, a competitor of any entity which results from a corporate transaction involving the Company that constitutes a Change in Control shall be considered a Competitor for purposes of this Award Certificate.

j) “Covered Employee” means an employee who, as of the Date of the Award, has been identified as a covered employee by Human Resources.

k)“Date of the Award” means the date set forth in Appendix A.

l)“Disability” means a “permanent and total disability,” as defined in Section 22(e)(3) of the Internal Revenue Code.

m)“Discover” means Discover Financial Services, a Delaware corporation.

n)“Employed” and “Employment” refer to employment with the Company and/or Related Employment.    

o)“Good Reason” means the occurrence of any of the following upon, or within six (6) months prior to or twenty-four (24) months after the occurrence of a Change in Control of Discover without your prior written consent:

(A) any material diminution in your assigned duties, responsibilities and/or authority, including the assignment to you of any duties, responsibilities or authority inconsistent with the duties, responsibilities and authority assigned to you, immediately prior to such assignment;

(B)a material diminution in the authority, duties, or responsibilities of the supervisor to whom you are required to report;

(C)any material reduction in your base compensation; provided, however, that Company-initiated across-the-board reductions in compensation affecting substantially all eligible Company employees shall alone not be considered “Good Reason,” unless the compensation reductions exceed twenty percent (20%) of your base compensation;

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(D)A material diminution of the budget over which you have authority;

(E)The Company’s requiring you to be based at a location that (i) is in excess of thirty-five (35) miles from the location of your principal job location or office immediately prior to the Change in Control, or (ii) results in an increase in your normal daily commuting time by more than ninety (90) minutes, except for required travel on Company’s business to an extent substantially consistent with your then present business travel obligations; or

(F)Any other action or inaction that constitutes a material breach by the Company of any agreement pursuant to which you provide services to the Company.

For purposes of paragraphs (1) through (6) above, the duties, responsibilities and/or authority assigned to you shall be deemed to be the greatest of those in effect prior to or after the Change in Control. Unless you become Disabled, your right to terminate your Employment for Good Reason shall not be affected by your incapacity due to physical or mental illness. Your continued Employment shall not constitute consent to, or a waiver of rights with respect to, any circumstance constituting Good Reason. Notwithstanding the foregoing, Good Reason shall not exist unless you give the Company written notice thereof within thirty (30) days after its occurrence and the Company shall not have remedied the action within thirty (30) days after such written notice.

p)“Internal Revenue Code” means the United States Internal Revenue Code of 1986, as amended, and the rules, regulations and guidance thereunder.

q)“Legal Requirement” means any law, regulation, ruling, judicial decision, accounting standard, regulatory guidance or other legal requirement (including any foreign legal requirements).

r)“Plan” means the Discover Financial Services Amended and Restated 2014 Omnibus Incentive Plan, as in effect from time to time.

s)“Pro Ration Fraction” means a fraction, not to exceed 1.0, the numerator of which is the number of days starting with and inclusive of the first day of the calendar year of the Date of the Award and ending on the effective date of your termination of Employment and the denominator of which is the number of days in the calendar year of the Date of the Award.

t)“Related Employment” means your employment with an employer other than the Company (such employer, herein referred to as a “Related Employer”), provided: (1) you undertake such employment at the written request or with the written consent of the Chief Human Resources Officer; (2) immediately prior to undertaking such employment you were an employee of the Company or were engaged in Related Employment (as defined herein); and (3) such employment is recognized by the Company in its discretion as Related Employment; and, provided further that the Company may (i) determine at any time in its sole discretion that employment that was recognized by the Company as Related Employment no longer qualifies as Related Employment, and (ii) condition the designation and benefits of Related Employment on such terms and conditions as the Company may determine in its sole discretion. The designation

18

of employment as Related Employment does not give rise to an employment relationship between you and the Company, or otherwise modify your and the Company’s respective rights and obligations.

u)“Retirement” means the termination of your Employment by you or by the Company for any reason other than for Cause and other than due to your death or Disability, on or after the date on which:

(A)you have attained age 55; and

(B)your combined age and years of service at least 65 years.

v)“Scheduled Vesting Date” means the Scheduled Vesting Dates set forth in Appendix A as the context requires.

w)“Shares”means shares of Stock.

x)“Stock”means the common stock, par value $0.01 per share, of Discover.

y)“Subsidiary” means (i) a corporation or other entity with respect to which Discover, directly or indirectly, has the power, whether through the ownership of voting securities, by contract or otherwise, to elect at least a majority of the members of such corporation’s board of directors or analogous governing body, or (ii) any other corporation or other entity in which Discover, directly or indirectly, has an equity or similar interest and which the Committee designates as a Subsidiary for purposes of the Plan.

z)“Wrongful Solicitation” occurs upon either of the following events:

(A)while Employed, including during any notice period applicable to you in connection with the termination of your Employment, or within one year after the termination of your Employment, directly or indirectly in any capacity (including through any person, corporation, partnership or other business entity of any kind), you hire or solicit, recruit, induce, entice, influence or encourage any Company employee to leave the Company or become hired or engaged by another firm; provided, however, that this clause shall apply only to employees with whom you worked or had professional or business contact, or who worked in or with your business unit, during any notice period applicable to you in connection with the termination of your Employment or during the one year preceding notice of the termination of your Employment; or

(B)while Employed, including during any notice period applicable to you in connection with the termination of your Employment, or within one year after the termination of your Employment, directly or indirectly in any capacity (including through any person, corporation, partnership or other business entity of any kind), you solicit or entice away or in any manner attempt to persuade any client or customer, or prospective client or customer, of the Company (i) to discontinue or diminish his, her or its relationship or prospective relationship with the Company or (ii) to otherwise provide his, her or its

19

business to any person, corporation, partnership or other business entity which engages in any line of business in which the Company is engaged (other than the Company); provided, however, that this clause shall apply only to clients or customers, or prospective clients or customers, that you worked for on an actual or prospective project or assignment during any notice period applicable to you in connection with the termination of your Employment or during the one year preceding notice of the termination of your Employment.

IN WITNESS WHEREOF, Discover has duly executed and delivered this Award Certificate as of the Date of the Award.

DISCOVER FINANCIAL SERVICES

By:

Doug Rose

Senior Vice President, Chief HR Officer

APPENDIX A

Summary of Award

Date of Award:    February 22, 2018

Vesting Schedule:    Scheduled Vesting DateVesting Amount

February 1, 2019              one-third*

February 1, 2020              one-third

February 1, 2021              one-third

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*Any fractional RSUs resulting from the application of the vesting schedule will be aggregated and will vest on the first Scheduled Vesting Date.

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APPENDIX B

Designation of Beneficiary(ies) Under

Discover Equity Compensation Plans

This Designation of Beneficiary shall remain in effect with respect to all awards issued to me under any Discover equity compensation plan, including any awards that may be issued to me after the date hereof, unless and until I modify or revoke it by submitting a later dated beneficiary designation. This Designation of Beneficiary supersedes all my prior beneficiary designations with respect to all my equity awards.

If you have more than one primary beneficiary, benefits will be divided equally among the living beneficiaries unless you specify the percentage. The percentages for all of the primary beneficiaries must total 100%. Contingent beneficiary(ies) receive any survivor benefits with respect to your equity awards, ONLY if all primary beneficiaries predecease you. If you have more than one contingent beneficiary, benefits will be divided equally among the living beneficiaries unless you specify the percentage. The percentages for all of the contingent beneficiaries must total 100%.

I hereby designate the following beneficiary(ies) to receive any survivor benefits with respect to all my equity awards:

Primary Beneficiary(ies)		Relationship	Percentage
(1	)
(2	)
(3	)
(4	)
Contingent Beneficiary(ies)		Relationship	Percentage
(1	)
(2	)
(3	)
(4	)

Address(es) of Primary Beneficiary(ies):

(1)

(2)

(3)

(4)

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Address(es) of Contingent Beneficiary(ies):

(1)

(2)

(3)

(4)

Name: (please print)                Date

Signature

Please sign and email this form to ExecutiveCompensation@discover.com, or return via mail to:

Discover Financial Services

Attn: Human Resources Executive Compensation

2500 Lake Cook Road

Riverwoods, IL 60015

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APPENDIX C

Discover Financial Services

International Supplement

This International Supplement to the Award Certificate for Restricted Stock Units ("Award Certificate") contains supplemental terms and conditions for the Restricted Stock Unit award (“Equity Award”) to employees of Discover Financial Services (or the relevant affiliated company) located in certain jurisdictions outside of the United States. The terms included in this International Supplement are intended to ensure compliance with the laws of the country in which you are Employed or, in certain instances, to make the awards more tax efficient in your country.

You have also received an Award Certificate applicable to your award. The Award Certificate, together with this International Supplement, collectively set forth the terms and conditions of your award. To the extent that this International Supplement amends, deletes or supplements any terms of the Award Certificate, this International Supplement shall control.

Capitalized terms that are used without definition in this International Supplement have the meanings assigned in the Award Certificate.

Employees in the United Kingdom.

If you are Employed in the United Kingdom, the Company will act in accordance with the Data Protection Act of 1998 as amended from time to time regarding any personal information which you provide to it in connection with your Equity Award (including the amount of the award) and you consent to the processing of such personal information in order to facilitate your participation in such equity incentive program, for any purposes required by law or regulation, or for any other legitimate business purpose. By accepting your Equity Award, you agree that from time to time, for the purposes described above, your personal information may be stored and processed by and disclosed and transferred to other offices and companies within the Company and to third parties, some of which are situated outside of the European Union and may not offer as high a level of protection for personal information as countries within the European Union.

All Employees Located Outside the United States.

If you are Employed outside of the United States, please note that your Equity Award is offered, issued and administered by Discover Financial Services, a Delaware corporation, and your local employer is not involved in the grant of awards under such equity incentive program. All documents related to your Equity Award, including the Award Certificate, this International

24

Supplement and the link by which you access these documents, originate and are maintained in the United States.

Your Equity Award is made in virtue of your Employment with, and your services performed for, the appropriate entities within the Company. However, your award does not form part of your entitlement to remuneration or benefits, whether pursuant to any contract of Employment to which you may be a party or otherwise. Similarly, the existence of a contract of Employment between you and any entity within the Company shall not confer on you any right or entitlement to participate in the Equity Award or to receive awards thereunder, or any expectation that you might participate in such equity incentive program or receive additional equity awards in the future.Your Equity Award, the Award Certificate, and/or this International Supplement does not constitutean employment contract and does not create an employment relationship or a promise of continued employment for any period of time.

In addition, your equity award is not part of your base salary or wages and will not be taken into account (except to the extent otherwise required by local law) in determining any other employment-related rights you may have, such as rights to pension or severance pay.

Whether or not you have a contract of Employment with any entity within the Company, your rights and obligations under the terms of your office or Employment shall not be affected by your receipt of the Equity Award. By accepting your receipt of the Equity Award, you waive any and all rights to compensation or damages for any loss of the Equity Award in the event of your termination of your office or Employment for any reason whatsoever. This waiver applies whether or not such termination amounts to a wrongful or unfair dismissal.

You may be subject to applicable exchange control, currency control or similar financial laws that may affect your transactions with respect to your equity award, including without limitation, your ability to bring shares of Discover Financial Services common stock into your jurisdiction or to receive the proceeds of a sale of Discover Financial Services common stock in your jurisdiction. Moreover, you may be subject to certain notification, approval and/or repatriation obligations with respect to securities and funds you receive in connection with your awards. In addition the Company is not responsible for any foreign exchange fluctuations that change the value of your RSU Award. You are encouraged to consult your advisors to ascertain whether any restrictions or obligations apply to you.

Your Equity Award has not been authorized or approved by any applicable securities authorities and may have been offered pursuant to an exemption from registration in your local jurisdiction. Similarly, no prospectus or similar offering or registration document has been prepared, authorized or approved by any applicable securities authorities in your jurisdiction. The grant of awards is being made only to employees of the Company and does not constitute and is not intended to be an offering to the public. For this reason, you must keep all award documents you receive, including but not limited to this International Supplement and the Award Certificate, confidential and you may not distribute or otherwise make public any award documents without the prior written consent of the Company. Moreover, you may not reproduce (in whole or in part) any award documents you receive. In addition, the shares of Company common stock you acquire upon vesting and conversion of your Equity Award may be subject to applicable restrictions on resale in your

25

local jurisdiction. You are encouraged to consult your advisors to ascertain whether any restrictions or obligations apply to you.

The Company recommends that you seek advice of your tax advisors regarding the tax treatment of your awards.

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EX-10.3

Exhibit 10.3

DISCOVER FINANCIAL SERVICES

AMENDED AND RESTATED 2014 OMNIBUS INCENTIVE PLAN

2018 AWARD CERTIFICATE FOR

PERFORMANCE STOCK UNITS

I

TABLE OF CONTENTS FOR AWARD CERTIFICATE

1.Performance Stock Units Generally.    3

2.Performance Measures.    3

3.Vesting Schedule; Conversion; Retention Requirement.    3

4.Special Provisions for Certain “Specified Employees”.    4

5.Dividend Equivalent Payments.    4

6.Death; Disability; Retirement.    5

7.Reduction in Force.    6

8.Change in Control.    6

9.Termination of Employment.    7

10.Forfeiture/Cancellation/Clawback of PSU Awards Under Certain Circumstances.    7

11.Tax and Other Withholding Obligations.    9

12.Satisfaction of Obligations.    9

13.Nontransferability.    10

14.Designation of a Beneficiary.    10

15.Ownership and Possession.    11

16.Securities Law Matters.    11

17.Compliance with Laws and Regulations.    11

18.No Entitlements.    11

19.Consents.    12

20.Electronic Delivery and Consent to Electronic Participation.    13

21.Award Modification.    13

22.Severability.    13

23.Successors.    14

24.Governing Law.    14

25.Section 409A.    14

26.Defined Terms.    14

EMPLOYEES IN THE UNITED KINGDOM.25

ALL EMPLOYEES LOCATED OUTSIDE THE UNITED STATES.25

1

DISCOVER FINANCIAL SERVICES

AMENDED AND RESTATED 2014 OMNIBUS INCENTIVE PLAN

2018 AWARD CERTIFICATE FOR PERFORMANCE STOCK UNITS

Discover has awarded to you performance stock units (“PSUs”) as part of your discretionary long-term incentive compensation for services provided to the Company during the Performance Period and through the Scheduled Vesting Date. This Award Certificate sets forth the general terms and conditions of your performance stock unit award (your “PSU Award”). Capitalized terms used in this Award Certificate that are not defined in the text have the meanings set forth in Section 26 below. Capitalized terms used in this Award Certificate that are not defined in the text or in Section 26 below have the meanings set forth in the Plan.

The number of PSUs in your Target Award has been communicated to you separately. If you are employed outside the United States, please reference the “International Supplement” included herein as Appendix C, which contains supplemental terms and conditions for your PSU Award. This Award Certificate should be read in conjunction with the International Supplement, if applicable, in order for you to understand the terms and conditions of your PSU Award.

Your PSU Award is made pursuant to the Plan. References to “performance stock units” or “PSUs” in this Award Certificate mean only those PSUs included in your PSU Award, and the terms and conditions herein apply only to such PSU Award. If you receive any other award under the Plan or another equity compensation plan, it will be governed by the terms and conditions of the applicable award documentation, which may be different from those herein.

The purpose of this PSU Award is, among other things, to align your interests with the interests of Discover and its shareholders and to reward you for your continued Employment with the Company in the future and your compliance with the Company’s policies (including, without limitation, the Company’s risk policies and Code of Conduct), to protect the Company’s interests in non-public, confidential and/or proprietary information, products, trade secrets, customer relationships, and other legitimate business interests, and to ensure an orderly transition of responsibilities. In view of these purposes, the number of PSUs that you earn will depend on the Company’s performance during the Performance Period. Moreover, you will earn PSUs included in your PSU Award only if you (1) remain in continuous Employment through the Scheduled Vesting Date (subject to limited exceptions set forth herein), (2) are not found to be subject to the forfeiture, cancellation, or clawback provisions set forth in Section 10 below, and (3) satisfy obligations you owe to the Company as set forth in Section 12 below. As the Company deems appropriate and in its sole discretion, the Company will require you to provide a written certification or other evidence, from time to time, to confirm that none of the circumstances described in Section 10 below exist or have occurred, including upon a termination of Employment and/or during a specified period of time prior to the Scheduled Vesting Date. If you fail to timely provide any required certification or other evidence, the Company will cancel your PSU Award. It is your responsibility to provide the Human Resources Department with your up-to-date contact information.

2

1. Performance Stock Units Generally.

Each PSU is a Restricted Stock Unit that is subject to additional conditions as described herein and corresponds to one share of Stock. A PSU constitutes a contingent and unsecured promise by Discover to pay you one share of Discover common stock on the conversion date for the PSU. As the holder of PSUs, you have only the rights of a general unsecured creditor of Discover. You will not be a shareholder with respect to the Shares corresponding to your PSUs unless and until your PSUs convert to Shares.

2. Performance Measures.

The portion, if any, of your Target Award that you can earn will be based on Discover EPS performance as set forth in Appendix A and the other terms and conditions of this Award Certificate, and may vary from zero to 1.5 times the number of PSUs included in your Target Award.

3. Vesting Schedule; Conversion; Retention Requirement.

(a)Vesting Schedule. Except as otherwise provided in this Award Certificate, you will vest in any PSUs that are earned in accordance with Section 2 on the Scheduled Vesting Date, so long as you continue to provide future services to the Company by remaining in continuous Employment through the Scheduled Vesting Date. The special vesting terms set forth in Sections 6, 7, and 8 of this Award Certificate apply (1) if your Employment terminates by reason of your death, Disability, or Retirement, (2) if the Company terminates your Employment in an involuntary termination under the circumstances described in Section 7, or (3) upon a Change in Control. Vested PSUs are subject to the tax withholding provisions set forth in Section 11 of this Award Certificate.

(b)Conversion.

(1)Except as otherwise provided in this Award Certificate, your PSUs, to the extent earned and vested, will convert to Shares (rounded to the nearest whole share) on the Scheduled Vesting Date. The special conversion provisions set forth in Sections 6, 7, and 8 of this Award Certificate apply (i) if your Employment terminates by reason of your death, Disability, or Retirement, (ii) if the Company terminates your Employment in an involuntary termination under the circumstances described in Section 7, or (iii) upon a Change in Control.

(2)The Shares delivered upon conversion of PSUs shall be delivered as soon as administratively practicable after the Scheduled Vesting Date and shall not be subject to any transfer restrictions, other than those that may arise under the securities laws, or the Company’s policies, including, without limitation, its stock ownership guidelines and/or Section 12 below, but will be subject to forfeiture, cancellation, or clawback as set forth in Section 10 below.

(c)Accelerated Conversion. The Committee, in its sole discretion, may determine that any PSUs may be converted to Shares or any dividend equivalents may be paid prior to the Scheduled Vesting Date subject to compliance with all Legal Requirements. In such case the

3

Committee may determine in its sole discretion that the shares or dividend equivalents may not be transferable and may remain subject to applicable vesting, retention, forfeiture, cancellation, clawback and withholding provisions.

(d)Rule of Construction for Timing of Conversion. Whenever this Award Certificate provides for your PSUs to convert to Shares, or your dividend equivalents to be paid, on the Scheduled Vesting Date or upon a different specified event or date, such conversion or payment will be considered to have been timely made, and neither you nor any of your beneficiaries or your estate shall have any claim against the Company for damages based on a delay in conversion of your PSUs (or delivery of Shares following conversion) or payment of your dividend equivalents, as applicable, and the Company shall have no liability to you (or to any of your beneficiaries or your estate) in respect of any such delay, as long as conversion or payment, as applicable, is made by December 31 of the year in which occurs the Scheduled Vesting Date or such other specified event or date or, if later, by the 15th day of the third calendar month following such specified event or date. Similarly, neither you nor any of your beneficiaries or your estate shall have any claim against the Company for damages, and the Company shall have no liability to you (or to any of your beneficiaries or your estate), based on any acceleration of the conversion of your PSUs or payment of your dividend equivalents pursuant to Section 3(c), as applicable.

(e)Retention Requirement. Notwithstanding anything in the Plan or any other provisions of this Award Certificate to the contrary, following delivery thereof, you will be required to hold (and not transfer or otherwise dispose of) one-hundred percent (100%) of the PSUs that vest and convert to Shares, net of taxes ( “Net Shares”), until one (1) year after the Scheduled Vesting Date or such other specified event or date which accelerates the conversion of such Net Shares; provided, that this requirement shall lapse in the event of your death, Disability or a Change in Control.

4. Special Provisions for Certain “Specified Employees”.

Notwithstanding the other provisions of this Award Certificate, to the extent necessary to comply with Section 409A of the Internal Revenue Code, if Discover reasonably considers you to be one of its “specified employees” as defined in Section 409A of the Internal Revenue Code at the time of the termination of your Employment, any PSUs to which you are entitled under this Award Certificate that constitute a deferred compensation arrangement under Section 409A of the Internal Revenue Code and that are payable upon termination of your Employment will not convert to Stock until the date that is six (6) months after the termination of your Employment (or the date of your death, if such event occurs earlier).

5. Dividend Equivalent Payments.

If Discover pays a regular or ordinary dividend on its Stock, you will be credited with cash dividend equivalents with respect to your PSU Award in an amount equal to the amount of the dividend that would have been paid on a number of Shares corresponding to your Target Award. Discover will credit the dividend equivalents as soon as is administratively practicable after it pays the corresponding dividend on its Stock. Your dividend equivalents will vest and be paid at the same time as, and subject to the same vesting and cancellation provisions set forth in this Award Certificate with respect to, your PSUs (provided that, subject to Section 3(d), the dividend equivalents may be paid following the date on which the PSUs convert to Shares as soon as administratively practicable). The amount of dividend equivalents paid to you will be based on the number of PSUs that actually convert to Shares (and will be paid only if your PSUs convert to Shares), provided that such dividend equivalents will be reduced to the extent that application of the performance measures set forth in Appendix A results in your earning less than the Target Award and will be increased to the extent that application of those performance measures results in your earning more than the Target Award. (For example, if you earn eighty percent (80%) of the Target Award based on the performance measures, twenty percent (20%) of the dividend equivalents credited in respect of regular or ordinary dividends will be canceled.) The decision to pay a dividend and, if so, the amount of any such dividend, is determined by Discover in its sole discretion. No dividend equivalents will be paid to you on any canceled PSUs. Discover will decide on the form of payment and may pay dividend equivalents in Shares, in cash or in a combination thereof. Because dividend equivalent payments are considered part of your compensation for income tax purposes, they will be subject to applicable tax and other withholding obligations, as summarized in Section 11.

(a)Pro Rata Reduction. If your PSU Award is subject to a pro rata reduction upon the termination of your Employment (as described below) and your PSU Award is to be paid on a date following such termination, the amount of dividend equivalents credited to you in respect of regular or ordinary dividends paid on Stock following your termination shall continue to be based on the number of Shares corresponding to your Target Award, and the amount paid to you (subject to the other terms and conditions of this Award Certificate) shall be the amount calculated as provided above in this Section 5, in each case multiplied by the Pro Ration Fraction. If your PSU Award is subject to a pro rata reduction upon the termination of your Employment and is paid out on such termination (as described below), the amount of dividend equivalents paid to you shall be calculated

4

based on the number of Shares corresponding to your Target Award (adjusted, if applicable, as provided in this Section 5) multiplied by the Pro Ration Fraction.

(b)Effect of Cancellation. Notwithstanding the foregoing, in the event your PSU Award is canceled in full on or before the Scheduled Vesting Date, all dividend equivalents credited to you in respect of regular or ordinary dividends will be canceled.

6. Death; Disability; Retirement.

The following special vesting and payment terms apply to your PSUs:

(a)Death. If you die, you will vest on the Scheduled Vesting Date in the number of Shares as if you had you remained in Employment through the Scheduled Vesting Date, subject

5

to the performance measures described in Appendix A, provided that your beneficiary or estate promptly notifies the Company of your death. Any such Shares will convert to Shares on the Scheduled Vesting Date and will be delivered to the beneficiary you have designated pursuant to Section 13 or the legal representative of your estate, as applicable. After your death, the cancellation provisions set forth in Section 10(a) will no longer apply.

(b)Disability. If your Employment terminates due to Disability, you will vest on the Scheduled Vesting Date in the number of Shares as if you had you remained in Employment through the Scheduled Vesting Date, subject to the performance measures described in Appendix A. On your Scheduled Vesting Date, subject to Section 4 above, any transfer restrictions and the cancellation provisions described herein, any such Shares will convert to Shares and be delivered to you.

(c)Retirement. If your Employment terminates due to Retirement, the number of PSUs that will vest on the Scheduled Vesting Date will be determined by multiplying (1) the number of Shares that would have been delivered to you, based on the performance measures described in Appendix A had you remained in Employment through the Scheduled Vesting Date, by (2) the Pro Ration Fraction. On the Scheduled Vesting Date, subject to Section 4 above, any transfer restrictions and the cancellation provisions described herein, your PSUs will convert to Shares and be delivered to you.

7. Reduction in Force.

If the Company terminates your Employment due to a reduction in force or an elimination of your position, each as determined by the Company in its sole discretion, the number of PSUs that will vest on the Scheduled Vesting Date will be determined by multiplying (a) the number of Shares that would have been delivered to you, based on the performance measures described in Appendix A had you remained in Employment through the Scheduled Vesting Date, by (b) the Pro Ration Fraction. These shares will convert to Shares and be delivered to you on the later of the Scheduled Vesting Date or the date that is 60 days following your termination of Employment, subject to Section 4 above, provided that you sign (and do not revoke) an agreement and release of claims satisfactory to the Company.

8. Change in Control.

(a)During First Year of Performance Period. If, during the first year of the Performance Period, a Change in Control occurs, then your Target Award (including the value of any dividend equivalents theretofore credited to you) will be converted to a cash award valued as of the date of the Change in Control event as determined by the Company using the EPS Target multiplier set forth in Appendix A, the use of which shall be deemed to be a valuation using the target level. Any such cash award will be paid to you (subject to Section 4 above and the cancellation provisions set forth herein) on the earlier of (1) the Scheduled Vesting Date or (2) the date when the Company terminates your Employment other than for Cause, or if you terminate your Employment for Good Reason. Notwithstanding the foregoing, if, following the Change in Control event but prior to the delivery of such cash award, you voluntarily terminate your Employment other than for Good Reason or you are terminated for Cause, you will forfeit such cash award.

(b)After First Year of Performance Period. If, after the first year of the Performance Period, a Change in Control occurs, then your Target Award (including the value of any dividend equivalents theretofore credited to you) will be converted to a cash award valued as of date of the Change in Control event as determined by the Company based on the performance measures in Appendix A but applied as though the Performance Period ended with the last quarter of Discover ending simultaneously with or before the effective date of the Change in Control event, the use of which shall be deemed to be a valuation using the target level. Any such cash award will be paid to you (subject to Section 4 above and the cancellation provisions set forth herein) on the earlier of (1) the Scheduled Vesting Date or (2) the date when the Company terminates your Employment other than for Cause, or if you terminate your Employment for Good Reason. Notwithstanding the foregoing, if, following the Change in Control event but prior to the delivery of such cash award, you voluntarily terminate your Employment other than for Good Reason or you are terminated for Cause, you will forfeit such cash award.

9. Termination of Employment.

(a)Cancellation of Unvested PSU Awards. Your unvested PSUs, including any dividend equivalents theretofore credited to you, will be canceled if your Employment terminates for any reason other than under the circumstances set forth in this Award Certificate for death, Disability, and Retirement described in Section 6, for an involuntary termination by the Company described in Section 7, or in connection with a Change in Control as provided in Section 8.

(b)General Treatment of Vested PSU Awards. Except as otherwise provided in this Award Certificate, your vested PSUs will convert to Shares on the Scheduled Vesting Date. The tax and other withholding provisions as set forth in Section 11 of this Award Certificate will continue to apply until the date the Shares are delivered.

10. Forfeiture/Cancellation/Clawback of PSU Awards Under Certain Circumstances.

The forfeiture, cancellation, and/or Clawback circumstances and events set forth in this Section 10 are designed, among other things, to incentivize compliance with the Company’s policies (including, without limitation, the Company’s risk policies and Code of Conduct), to protect the Company’s interests in non-public, confidential and/or proprietary information, products, trade secrets, customer relationships, and other legitimate business interests, and to ensure an orderly transition of responsibilities. This Section 10 shall apply notwithstanding any other terms of this Award Certificate (except where sections in this Award Certificate specifically provide that the circumstances set forth in this Section 10 no longer apply).

(a)Breach of Restrictive Covenants. Notwithstanding Discover’s performance based on the measures set forth in Appendix A or your satisfaction of the vesting conditions of this Award Certificate, PSUs (and any dividend equivalents credited thereon) are not earned until the Scheduled Vesting Date and, unless prohibited by applicable law, will be canceled prior to the Scheduled Vesting Date in any of the circumstances set forth below. Although you will become the beneficial owner of Shares following conversion of your PSUs, the Company may, upon notice, issue a transfer restriction with respect to your Shares following conversion of your PSUs (and any dividend equivalents credited thereon) pending any investigation or other review that impacts the determination as to whether the PSUs (and any dividend equivalents credited thereon) are cancellable under the circumstances set forth below. The Shares underlying such PSUs (and any dividend equivalents credited thereon) shall be forfeited and recoverable in the event the Company determines that the PSUs were cancellable under the circumstances set forth below. Notwithstanding any provision of this Award Certificate to the contrary, in the event that at any time prior to one year after the termination of your Employment or service with the Company, you (i) engage, in Competitive Activity; (ii) engage in Wrongful Solicitation or (iii) breach your obligations to the Company under a confidentiality, intellectual property or other restrictive covenant, you shall be required to:

(1) pay to the Company an amount in cash equal to the value of Shares that vested and converted on or after, or within two years prior to, your termination of Employment, which value shall be determined by the Company, in its sole discretion and

shall include an amount for tax adjustments appropriate to reflect your obligation to repay such amounts due to your breach of the restrictive covenants; or

(2)transfer to the Company the number of Shares that vested and converted on or after, or within two years prior to, your termination of Employment, plus an amount calculated by the Company, in its sole discretion, for tax adjustments appropriate to reflect your obligation to transfer such Shares due to your breach of the restrictive covenants.

(b)Clawback.

(1)In the event and to the extent the Committee reasonably determines that the performance considered by the Committee, and on the basis of which the amount of PSUs were granted, was based on Discover’s material noncompliance with any financial reporting requirement under the securities laws which requires Discover to file a restatement of its financial statements, you will forfeit the number of PSUs that were granted during the three-year period preceding the date on which Discover is required to prepare an accounting restatement, less the number of PSUs that would have been granted had your PSUs been granted based on compliance with any such financial reporting requirement under the securities laws (such number of PSUs, the “Clawback PSUs”, to be determined in each case by the Committee in its sole discretion:

(2)In the event and to the extent the Committee reasonably determines that the performance certified by the Committee, and on the basis of which PSUs were converted to Shares, was based on Discover’s material noncompliance with any financial reporting requirement under the securities laws which requires Discover to file a restatement of its financial statements, you will be required:

a. to pay to the Company an amount in cash equal to the value of the Shares that vested and converted hereunder, which value shall be determined using a valuation method established by the Company, in its sole discretion, and shall include an amount for tax adjustments appropriate to reflect your obligation to repay such amounts due to the restatement of the Company’s financial statements; or

b.transfer to the Company the number of Shares that vested and converted hereunder, plus such amount calculated by the Company, in its sole discretion, for tax adjustments appropriate to reflect your obligation to repay such amounts due to the restatement of the Company’s financial statements.

(c)Risk Review. No PSUs will convert to Shares until (1) the Committee certifies the extent to which the performance criteria set forth in Appendix A have been satisfied, and (2) the Chief Human Resources Officer receives confirmation from the Chief Risk Officer that a review has been completed by the Chief Risk Officer to determine whether you engaged in any willful or reckless violation of the Company’s risk policies. If the Chief Risk Officer finds any such

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violation or breach, then the Company may determine that all or a portion of your PSUs will be forfeited. Additionally, if you are a Covered Employee, the Chief Risk Officer will conduct Company and / or Business Unit risk reviews as well as evaluate your individual risk goals. Based on this assessment, the Company may determine that all or a portion of your PSUs will be forfeited.

(d)Authorization. You authorize the Company to deduct any amount or amounts owed by you pursuant to this Section 10 from any amounts payable by or on behalf of the Company to you, including, without limitation, any amount payable to you as salary, wages, paid time off, bonus, severance, change in control severance or the conversion of any equity-based award. This right of offset shall not be an exclusive remedy and the Company’s election not to exercise this right of offset with respect to any amount payable to you shall not constitute a waiver of this right of offset with respect to any other amount payable to you or any other remedy.

11. Tax and Other Withholding Obligations.

Subject to rules and procedures established by Discover, you may be eligible to elect to satisfy the tax or other withholding obligations arising upon conversion of your PSUs or upon any taxable event by paying cash or by having Discover withhold Shares or by tendering Shares, in each case in an amount sufficient to satisfy the tax or other withholding obligations. Shares withheld or tendered will be valued using the fair market value of Discover common stock on the date the Shares are scheduled to convert, or otherwise become taxable, as applicable, using a valuation methodology established by Discover. In order to comply with applicable accounting standards or the Company’s policies in effect from time to time, Discover may limit the amount of Shares that you may have withheld or that you may tender.

12. Satisfaction of Obligations.

Notwithstanding any other provision of this Award Certificate, the Company may, in its sole discretion, take various actions affecting your PSUs in order to collect amounts sufficient to satisfy any obligation that you owe to the Company and any tax or other withholding obligations. The Company’s determination of the amount that you owe the Company shall be conclusive. The fair market value of Stock for purposes of the foregoing provisions shall be determined using a valuation methodology established by Discover. The actions that may be taken by the Company pursuant to this Section 12 include, but are not limited to, the following:

(a)Withholding of Shares. Upon conversion of PSUs, including any accelerated conversion pursuant to Sections 6, 7, or 8 above, or, if later, upon delivery of the Shares, the Company may withhold a number of Shares sufficient to satisfy any obligation that you owe to the Company and any tax or other withholding obligations whether national, federal, state or local tax withholding obligations including any social insurance contributions or employment tax obligation. The Company shall determine the number of Shares to be withheld by dividing the dollar value of your obligation to the Company and any tax or other withholding obligations by the fair market value of Discover common stock on the date the Shares are scheduled to convert, or otherwise become taxable, as applicable. To the extent that the Company retains any Shares or reduces the number of PSUs to cover the withholding obligations, it will do so at the minimum statutory rate. Should the Company withhold in excess of the actual tax withholding obligation, the Company will refund the excess amount to you within a reasonable period and without any interest.

(b)Withholding of Other Compensation. Discover may withhold the payment of dividend equivalents on your PSUs or any other compensation or payments due from Discover to ensure satisfaction of any obligation that you owe the Company or any tax or other withholding obligations or Discover may permit you to satisfy such tax or other withholding obligation by paying such obligation in immediately available funds.

(c)Mobile Employees. You are liable and responsible for all taxes and social insurance contributions owed in connection with the Award, regardless of any action the Company takes with respect to any tax withholding obligations that arise in connection with the Award. The Company does not make any representation or undertaking regarding the tax treatment or the treatment of any tax withholding in connection with the grant, vesting or payment of the Award.

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The Company does not commit and is under no obligation to structure the Award to reduce or eliminate your tax liability. Further, you may be subject to individual income taxation (and possibly social security or other applicable personal or payroll taxes) in each jurisdiction where you have performed services for the Company between the Award Date and the Vesting Date. Taxes for which you are liable, if applicable, may be withheld and deposited by the Company in each jurisdiction in which you have performed services regardless of your status as a resident or non-resident in one or more of the jurisdictions that have a right to impose taxation. You agree that you will comply with all United States and foreign individual income tax return filing obligations that may be imposed with respect to the Award.

13. Nontransferability.

You may not sell, pledge, hypothecate, assign or otherwise transfer your PSUs, other than as provided in Section 14 (which allows you to designate a beneficiary or beneficiaries in the event of your death) or by will or the laws of descent and distribution. This prohibition includes any assignment or other transfer that purports to occur by operation of law or otherwise. During your lifetime, payments relating to the PSUs will be made only to you.

14. Designation of a Beneficiary.

You may make a written designation of beneficiary or beneficiaries to receive all or part of the Shares and any dividend equivalents credited to you pursuant to Section 5 hereof to be paid under this Award Certificate in the event of your death. To make a beneficiary designation, you must complete and file the form attached hereto as Appendix B with the Human Resources Department. Any Shares that become payable upon your death, and as to which a designation of beneficiary is not in effect, will be distributed to your estate. If you previously filed a designation of beneficiary form for your equity awards with the Human Resources Department, such form will also apply to the PSUs granted pursuant to this PSU Award. You may replace or revoke your beneficiary designation at any time. If there is any question as to the legal right of any beneficiary to receive Shares under this PSU Award, Discover may determine in its sole discretion to deliver the Shares in question to your estate. Discover’s determination shall be binding and conclusive on all persons and it will have no further liability to anyone with respect to such Shares.

15. Ownership and Possession.

(a)Generally. Generally, you will not have any rights as a shareholder in the Shares corresponding to your PSUs prior to conversion of your PSUs. Prior to conversion of your PSUs, however, you will receive dividend equivalent credits, as set forth in Section 5 of this Award Certificate. To the extent necessary or advisable to comply with Section 409A of the Internal Revenue Code, with respect to any provision of this Award Certificate that provides for vested PSUs to convert to Shares on or as soon as administratively practicable after a specified event or date, such conversion will be made by the later of the end of the calendar year in which the specified event or date occurs or the 15^th day of the third calendar month following the specified event or date.

(b)Following Conversion. Subject to the terms and conditions of this Award Certificate, following conversion of your PSUs you will be the beneficial owner of Shares issued to you net of taxes and you will be entitled to all rights of ownership, including voting rights and the right to receive cash or stock dividends or other distributions paid on the Shares.

16. Securities Law Matters.

Shares issued upon conversion of your PSUs may be subject to restrictions on transfer by virtue of the Securities Act of 1933, as amended.  Discover may advise the transfer agent to place a stop order against such shares if it determines that such an order is necessary or advisable.  Because Stock will only be maintained in book-entry form, you will not receive a stock certificate representing your interest in such shares.

17. Compliance with Laws and Regulations.

Any sale, assignment, transfer, pledge, mortgage, encumbrance or other disposition of Shares issued upon conversion of your PSUs (whether directly or indirectly, whether or not for value, and whether or not voluntary) must be made in compliance with any applicable constitution, rule, regulation, or policy of any of the exchanges or associations or other institutions with which the

Company or a Related Employer has membership or other privileges, and any applicable law, or applicable rule or regulation of any governmental agency, self-regulatory organization or state or federal regulatory body.

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18. No Entitlements.

(a)No Right to Continued Employment. This PSU Award is not an employment agreement, and nothing in this Award Certificate, the International Supplement, if applicable, or the Plan shall alter your status as an “at-will” employee of the Company or your Employment status at a Related Employer. None of this Award Certificate, the International Supplement, if applicable, or the Plan shall be construed as guaranteeing your Employment by the Company or a Related Employer, or as giving you any right to continue in the employ of the Company or a Related Employer, during any period (including without limitation the period between the Date of the Award and the Scheduled Vesting Date or any portion of this period), nor shall they be construed as giving you any right to be reemployed by the Company or a Related Employer following any termination of Employment.

(b)No Right to Future Awards. This PSU Award, and all other awards of PSUs and other equity-based awards, are discretionary. This PSU Award does not confer on you any right or entitlement to receive another award of PSUs, any other equity-based award or any other award at any time in the future or in respect of any future period.

(c)No Effect on Future Employment Compensation. Discover has made this PSU Award to you in its sole discretion. This PSU Award does not confer on you any right or entitlement to receive compensation in any specific amount for any future fiscal year, and does not diminish in any way the Company’s discretion to determine the amount, if any, of your compensation. In addition, this PSU Award is not part of your base salary or wages and will not be taken into account in determining any other Employment-related rights you may have, such as rights to pension or severance pay, end of service payments, bonuses, long-service awards or similar payments and in no event shall be considered as compensation for, or relating in any way to, past services for the Company.

(d)Termination of Employment. In consideration of the grant of the Award, no claim or entitlement to compensation or damages shall arise from termination of the Award or diminution in value of the Award or Shares acquired through vesting of the Award resulting from termination of your employment by the Company (for any reason whatsoever and whether or not in breach of local labor laws) andyou irrevocably release the Company and the Employer from any such claim that may arise; if, notwithstanding the foregoing, any such claim is found by a court of competent jurisdiction to have arisen, then, by signing this Agreement, you will be deemed irrevocably to have waived your entitlement to pursue such claim; and in the event of termination of your employment (whether or not in breach of local labor laws), your right to receive the Award and vest in the Award under the Plan, if any, will terminate effective as of the date that you are no longer actively employed and will not be extended by any notice period mandated under local law (e.g., active employment would not include a period of “garden leave” or similar period pursuant to local law); the Company shall have the exclusive discretion to determine when you are no longer actively employed for purposes of your Award.

(e)Language. If you have received this Agreement or any other document related to the Plan translated into a language other than English and if the translated version is different that the English version, the English version will control.

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(f)Award Terms Control; Plan Terms Control. In the event of any conflict between any terms applicable to equity awards in any employment agreement, offer letter or other arrangement that you have entered into with the Company and the terms set forth in this Award Certificate, the latter shall control. In the event of any conflict between the terms set forth in this Award Certificate and the terms of the Plan, the latter shall control.

19. Consents.

Your PSU Award is conditioned upon the Company’s making of all filings and the receipt of all consents or authorizations required to comply with, or required to be obtained under, applicable local law.

In accepting this PSU Award, you consent to the collection, use and transfer, in electronic or other form, of your personal data by and among, as applicable, the Company and any other possible recipients for the purpose of implementing, administering and managing your participation in the Plan, as well as for the purpose of the Company’s compliance with applicable law, including, without limitation, Section 953(b) of the Dodd-Frank Wall Street Reform and Consumer Protection Act. You understand that the recipients of your personal data may be located in the U.S. or elsewhere, and the recipients’ country may have different data privacy laws and protections than your country. You understand that you may request a list with the names and addresses of any potential recipients of your personal data, view the personal data, request additional information about the storage of your personal data, require any necessary amendments to your personal data or refuse or withdraw your consent by contacting your local human resources representative, in any case without cost. You understand, however, that refusing or withdrawing your consent may affect your ability to participate in the Plan.

20. Electronic Delivery and Consent to Electronic Participation.

The Company may, in its sole discretion, decide to deliver any documents related to the PSU Award and participation in the Plan or future PSU Awards by electronic means. You hereby consent to receive such documents by electronic delivery and to participate in the Plan through an online or electronic system established and maintained by the Company or another third party designated by the Company, including the acceptance of PSU Awards and the execution of the PSU agreements through electronic signature.

21. Award Modification.

The Committee reserves the right to modify or amend unilaterally the terms and conditions of your PSUs, without first asking your consent, or to waive any terms and conditions that operate in favor of Discover. These amendments may include (but are not limited to) changes that the Committee considers necessary or advisable as a result of changes in any, or the adoption of any new, Legal Requirement. The Committee may not modify your PSUs in a manner that would materially impair your rights in your PSUs without your consent; provided, however, that the Committee may, without your consent, amend or modify your PSUs in any manner that the Committee considers necessary or advisable to comply with or reflect the application of any Legal Requirement or to ensure that your PSUs are not subject to United States federal, state or local income tax or any equivalent taxes in territories outside the United States prior to payment. Discover will notify you of any amendment of your PSUs that affects your rights. Any amendment or waiver of a provision of this Award Certificate (other than any amendment or waiver applicable to all recipients generally), which amendment or waiver operates in your favor or confers a benefit on you, must be in writing and signed by the Chief Human Resources Officer to be effective.

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22. Severability.

In the event the Committee determines that any provision of this Award Certificate would cause you to be in constructive receipt for United States federal or state income tax purposes of any portion of your PSU Award, then such provision will be considered null and void and this Award Certificate will be construed and enforced as if the provision had not been included in this Award Certificate as of the date such provision was determined to cause you to be in constructive receipt of any portion of your PSU Award.

23. Successors.

This Award Certificate shall be binding upon and inure to the benefit of any successor or successors of Discover and any person or persons who shall, upon your death, acquire any rights hereunder in accordance with this Award Certificate or the Plan.

24. Governing Law.

This Award Certificate and the related legal relations between you and Discover will be governed by and construed in accordance with the laws of the State of Delaware, without regard to any conflicts or choice of law, rule or principle that might otherwise refer the interpretation of the PSU Award to the substantive law of another jurisdiction. The Company and you agree that the jurisdiction and venue for any disputes arising under, or any action brought to enforce (or otherwise relating to), the Plan or this Award Certificate shall be exclusively in the courts in the State of Illinois, Counties of Cook or Lake, including the federal courts located therein (should federal jurisdiction exist), and the Company and you hereby submit and consent to said jurisdiction and venue.

25. Section 409A.

This Award Certificate and your PSU Award (including all adjustments, substitutions, dividends, valuations and distributions, and deferrals hereunder) are intended to be exempt from or comply with Section 409A of the Internal Revenue Code pursuant to the guidance issued thereunder by the U.S. Internal Revenue Service in all respects and shall be administered in a manner consistent with such intent. If an unintentional operational failure occurs with respect to requirements under Section 409Aof the Internal Revenue Code, you or your beneficiary shall fully cooperate with Discover to correct the failure, to the extent possible, in accordance with any correction procedure established by the U.S. Internal Revenue Service. Any reference herein to Section 409Aof the Internal Revenue Code shall be interpreted to refer to any successor section of the Internal Revenue Code or other guidance issued by the U.S. Internal Revenue Service, or other agency with jurisdiction, as appropriate. To the extent that full or partial payment of your PSU Award that constitutes a deferral of compensation subject to Section 409Aof the Internal Revenue Code is made upon a termination of Employment, a termination of Employment shall be deemed to occur only if it is a “separation from service” for purposes of Section 409Aof the Internal Revenue Code, and references in this Award Certificate to “termination,” “termination of Employment,” or like terms shall mean a “separation from service.”

26. Defined Terms.

For purposes of this Award Certificate, the following terms shall have the meanings set forth below:

(a)“Board” means the Board of Directors of Discover.

(b)“Cause” means:

(1) any act or omission which constitutes a material breach of your obligations to the Company or your failure or refusal to perform satisfactorily any duties reasonably required of you, which breach, failure or refusal (if susceptible to cure) is not corrected (other than failure to correct by reason of your incapacity due to Disability) within ten (10) business days after written notification thereof to you by the Company;

(2)any act or omission by you that constitutes (i) fraud or intentional misrepresentation, (ii) embezzlement, misappropriation or conversion of assets of, or business opportunities considered by, the Company or (iii)any other act which has caused or may reasonably be expected to cause material injury to the interest or business reputation of the Company; or

(3)your violation of any securities, commodities or banking laws, any rules or regulations issued pursuant to such laws, or rules or regulations of any securities or commodities exchange or association of which the Company is a member or of any policy of the Company relating to compliance with any of the foregoing.

(c)“Change in Control” means, except as provided otherwise below, the first to occur of any of the following events:

(1)except as otherwise provided in clause (3) below, any person (as defined in Section 3(a)(9) of the Securities Exchange Act of 1934 (the “Exchange Act”), as such term is modified in Sections 13(d) and 14(d) of the Exchange Act), other than (i) any employee plan established by the Company or any of its Subsidiaries, (ii) any group of employees holding shares subject to agreements relating to the voting of such shares, (iii) the Company or any of its affiliates (as defined in Rule 12b-2 promulgated under the Exchange Act), (iv) an underwriter temporarily holding securities pursuant to an offering of such securities, or (v) a corporation owned, directly or indirectly, by shareholders of the Company in substantially the same proportions as their ownership of the Company, either (x) acquires ownership of stock of the Company that, together with stock held by such person (not including the stock owned by such person any stock acquired directly from the Company other than in connection with the acquisition by the Company of a business), constitutes more than fifty percent (50%) of the total fair market value of the stock of the Company (but only if such person did not own more than 50% of the total fair market value of the stock of the Company prior to the acquisition of additional stock), or (y) acquires (or has acquired during the twelve-month period ending on the date of the most recent acquisition by such person) ownership of the stock of the Company possessing thirty percent (30%) or more of the total voting power of the stock of the Company (but only if such person did not own 30% or more of the total voting power of the stock of the Company prior to the acquisition of additional stock and not including the stock owned by such person any stock acquired directly from the Company other than in connection with the acquisition by the Company of a business);

(2)a change in the composition of the Board during any twelve-month period, such that individuals who, as of the Date of the Award, constitute the Board (the “Incumbent Board”) cease for any reason to constitute at least a majority of the Board; provided, however, that any individual becoming a member of the Board subsequent to the date of Date of the Award whose election, or nomination for election by the Company’s shareholders, was approved by a vote of at least a majority of the directors then comprising the Incumbent Board shall be considered as though such individual were a member of the Incumbent Board;

(3)the consummation of a merger or consolidation of the Company with any other corporation or other entity, or the issuance of voting securities in connection with a merger or consolidation of the Company (or any direct or indirect subsidiary of the Company) pursuant to applicable stock exchange requirements, other than (i) a merger or consolidation which results in the securities of the Company outstanding immediately prior thereto continuing to represent (either by remaining outstanding or by being converted into securities of the surviving entity or any parent thereof), in combination with the ownership of any trustee or other fiduciary holding securities under an employee benefit plan of the Company or any of its subsidiaries, at least fifty percent (50%) of the combined voting power of the voting securities of the Company or such surviving entity or any parent thereof

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outstanding immediately after such merger or consolidation, or (ii) a merger or consolidation effected to implement a recapitalization of the Company (or similar transaction) in which no person (determined pursuant to clause (1) above) is or becomes the beneficial owner, directly or indirectly, of securities of the Company (not including in the securities beneficially owned by such person any securities acquired directly from the Company or its affiliates other than in connection with the acquisition by the Company or its affiliates of a business) representing thirty percent (30%) or more of the total voting power of the stock of the Company (but only if such person did not own 30% or more of the total voting power of the stock of the Company prior to the acquisition of additional securities);

(4)the complete liquidation of the Company or the sale or disposition by the Company of all or substantially all of the Company’s assets, other than a sale or disposition by the Company of all or substantially all of the Company’s assets to (i) a shareholder of the Company (immediately before the asset transfer) in exchange for or with respect to the Company’s stock, (ii) an entity, at least fifty percent (50%) of the total value or voting power of which is owned, directly or indirectly, either by the Company or by a person or more than one person acting as a group, that owns fifty percent (50%) or more of the total value or voting power of all the outstanding stock of the Company, or (iii) a person, or more than one person acting as a group, that owns, directly or indirectly, fifty percent (50%) or more of the total value or voting power of all the outstanding stock of the Company; provided, however, that a Change in Control pursuant to this clause (4) shall not be deemed to have occurred unless a person (determined pursuant to clause (1) above) or persons acting as a group acquires (or has acquired during the twelve-month period ending on the date of the most recent acquisition by such person or persons) assets from the Company that have a total gross fair market value equal to or more than forty percent (40%) of the total gross fair market value of all of the assets of the Company immediately before such acquisition or acquisitions.

Notwithstanding the foregoing, with respect to a Change in Control of Discover, no Change in Control shall be deemed to have occurred if there is consummated any transaction or series of integrated transactions immediately following which the beneficial holders of the Company’s common stock immediately prior to such transaction or series of transactions continue to have substantially the same proportionate ownership in an entity which owns substantially all of the assets of the Company immediately prior to such transaction or series of transactions.

(d)“Chief Human Resources Officer” means the chief human resources officer of Discover, any successor chief human resources officer, or any other individual or committee appointed by the chief executive officer of Discover with the power and authority of the chief human resources officer.

(e)“Chief Risk Officer” means the chief risk officer of Discover, any successor chief risk officer, or any other individual or committee appointed by the chief executive officer of Discover with the power and authority of the chief risk officer.

(f)“Committee” means the Compensation and Leadership Development Committee of the Board, any successor committee thereto or any other committee of the Board

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appointed by the Board with the powers of the Committee under the Plan, or any subcommittee appointed by such Committee.

(g)“Company” means Discover and all of its Subsidiaries.

(h)“Competitive Activity” means:

(1)becoming, or entering into any arrangement as, an employee, officer, partner, member, proprietor, director, independent contractor, consultant, advisor, representative or agent of, or serving in any similar position or capacity with, a Competitor, where you will be responsible for providing, or managing or supervising others who are providing, services (i) that are similar or substantially related to the services that you provided to the Company, or (ii) that you had direct or indirect managerial or supervisory responsibility for at the Company, or (iii) that call for the application of the same or similar specialized knowledge or skills as those utilized by you in your services for the Company, in each such case, at any time during the year preceding the termination of your employment with the Company; or

(2)either alone or in concert with others, forming, or acquiring a five percent (5%) or greater equity ownership, voting interest or profit participation in, a Competitor.

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(i)“Competitor” means any corporation, partnership or other entity that engages in (or that owns a significant interest in any corporation, partnership or other entity that engages in) (1) the business of consumer lending, including, without limitation, credit card issuance or electronic payment services, or (2) any other business in which you have been involved in or had significant knowledge of, which has been conducted by the Company at any time during your employment with the Company. For the avoidance of doubt, a competitor of any entity which results from a corporate transaction involving the Company that constitutes a Change in Control shall be considered a Competitor for purposes of this Award Certificate.

(j) “Covered Employee” means an employee who, as of the Date of the Award, has been identified as a covered employee by Human Resources.

(k)“Date of the Award” means the date set forth in Appendix A.

(l)“Disability” means a “permanent and total disability,” as defined in Section 22(e)(3) of the Internal Revenue Code.

(m)“Discover” means Discover Financial Services, a Delaware corporation.

(n)“Discover EPS” means sum of EPS for each fiscal year within the Performance Period.

(o)“Employed” and “Employment” refer to employment with the Company and/or Related Employment.    

(p)“EPS” means fully-diluted earnings per share as defined by U.S. GAAP, excluding unusual or non-recurring events identified in the Plan and not reflected in business plan assumptions, as determined by the Committee.

(q)“Good Reason” means the occurrence of any of the following upon, or within six (6) months prior to or twenty-four (24) months after the occurrence of a Change in Control of Discover without your prior written consent:

(1)any material diminution in your assigned duties, responsibilities and/or authority, including the assignment to you of any duties, responsibilities or authority inconsistent with the duties, responsibilities and authority assigned to you, immediately prior to such assignment;

(2)a material diminution in the authority, duties, or responsibilities of the supervisor to whom you are required to report;

(3)any material reduction in your base compensation; provided, however, that Company-initiated across-the-board reductions in compensation affecting substantially all eligible Company employees shall alone not be considered “Good Reason,” unless the compensation reductions exceed twenty percent (20%) of your base compensation;

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(4)A material diminution of the budget over which you have authority;

(5)The Company’s requiring you to be based at a location that (i) is in excess of thirty-five (35) miles from the location of your principal job location or office immediately prior to the Change in Control, or (ii) results in an increase in your normal daily commuting time by more than ninety (90) minutes, except for required travel on Company’s business to an extent substantially consistent with your then present business travel obligations; or

(6)Any other action or inaction that constitutes a material breach by the Company of any agreement pursuant to which you provide services to the Company.

For purposes of paragraphs (1) through (6) above, the duties, responsibilities and/or authority assigned to you shall be deemed to be the greatest of those in effect prior to or after the Change in Control. Unless you become Disabled, your right to terminate your Employment for Good Reason shall not be affected by your incapacity due to physical or mental illness. Your continued Employment shall not constitute consent to, or a waiver of rights with respect to, any circumstance constituting Good Reason. Notwithstanding the foregoing, Good Reason shall not exist unless you give the Company written notice thereof within thirty (30) days after its occurrence and the Company shall not have remedied the action within thirty (30) days after such written notice

(r)“Internal Revenue Code” means the United States Internal Revenue Code of 1986, as amended, and the rules, regulations and guidance thereunder.

(s)“Legal Requirement” means any law, regulation, ruling, judicial decision, accounting standard, regulatory guidance or other legal requirement (including any foreign legal requirements).

(t)“Performance Period” means the period set forth in Appendix A.

(u) “Plan” means the Discover Financial Services Amended and Restated 2014 Omnibus Incentive Plan, as in effect from time to time.

(v)“Pro Ration Fraction” means a fraction, not to exceed 1.0, the numerator of which is the number of days starting with and inclusive of the first day of the Performance Period and ending on the effective date of your termination of Employment and the denominator of which is the number of days in the first calendar year of the Performance Period.

(w)“Related Employment” means your employment with an employer other than the Company (such employer, herein referred to as a “Related Employer”), provided: (1) you undertake such employment at the written request or with the written consent of the Chief Human Resources Officer; (2) immediately prior to undertaking such employment you were an employee of the Company or were engaged in Related Employment (as defined herein); and (3) such employment is recognized by the Company in its discretion as Related Employment; and, provided further that the Company may (i) determine at any time in its sole discretion that employment that was recognized by the Company as Related Employment no longer qualifies as Related

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Employment, and (ii) condition the designation and benefits of Related Employment on such terms and conditions as the Company may determine in its sole discretion. The designation of employment as Related Employment does not give rise to an employment relationship between you and the Company, or otherwise modify your and the Company’s respective rights and obligations.

(x)“Retirement” means the termination of your Employment by you or by the Company for any reason other than for Cause and other than due to your death or Disability, on or after the date on which:

(1)you have attained age 55; and

(2)your combined age and years of service is at least 65 years.

(y)“Scheduled Vesting Date” means the Scheduled Vesting Date set forth in Appendix A.

(z) “Shares” means shares of Stock.

(aa)“Stock” means the common stock, par value $0.01 per share, of Discover.

(bb)“Subsidiary” means (i) a corporation or other entity with respect to which Discover, directly or indirectly, has the power, whether through the ownership of voting securities, by contract or otherwise, to elect at least a majority of the members of such corporation’s board of directors or analogous governing body, or (ii) any other corporation or other entity in which Discover, directly or indirectly, has an equity or similar interest and which the Committee designates as a Subsidiary for purposes of the Plan.

(cc)“Target Award” means the number of PSUs that has been communicated to you separately and that will be earned, subject to the other terms and conditions of this Award Certificate, if the Discover EPS Target is achieved.

(dd)“Wrongful Solicitation” occurs upon either of the following events:

(1)while Employed, including during any notice period applicable to you in connection with the termination of your Employment, or within one year after the termination of your Employment, directly or indirectly in any capacity (including through any person, corporation, partnership or other business entity of any kind), you hire or solicit, recruit, induce, entice, influence or encourage any Company employee to leave the Company or become hired or engaged by another firm; provided, however, that this clause shall apply only to employees with whom you worked or had professional or business contact, or who worked in or with your business unit, during any notice period applicable to you in connection with the termination of your Employment or during the one year preceding notice of the termination of your Employment; or

(2)while Employed, including during any notice period applicable to you in connection with the termination of your Employment, or within one year after the termination of your Employment, directly or indirectly in any capacity (including through

16

any person, corporation, partnership or other business entity of any kind), you solicit or entice away or in any manner attempt to persuade any client or customer, or prospective client or customer, of the Company (i) to discontinue or diminish his, her or its relationship or prospective relationship with the Company or (ii) to otherwise provide his, her or its business to any person, corporation, partnership or other business entity which engages in any line of business in which the Company is engaged (other than the Company); provided, however, that this clause shall apply only to clients or customers, or prospective clients or customers, that you worked for on an actual or prospective project or assignment during any notice period applicable to you in connection with the termination of your Employment or during the one year preceding notice of the termination of your Employment.

IN WITNESS WHEREOF, Discover has duly executed and delivered this Award Certificate as of the Date of the Award.

DISCOVER FINANCIAL SERVICES

By:

Doug Rose

Senior Vice President, Chief HR Officer

APPENDIX A

Summary of Award

Date of Award:        February 22, 2018

Scheduled Vesting Date:    February 1, 2021

Performance Measures:

Your Target Award will be earned based on the Discover EPS. The number of PSUs that you earn based on the Discover EPS (subject to vesting and the other terms and conditions of your PSU Award) will be determined by multiplying the number of PSUs in your Target Award by a multiplier determined as follows:

17

Discover EPS Performance*	Target Award Multiplier
Lower than $12.77	0
$12.77(threshold)	0
$17.88	0.5
$25.54(target)	1.0
$29.37(maximum)	1.5
Greater than $29.37	1.5

* If the Discover EPS is between the EPS Performance levels above, the Target Award Multiplier will be interpolated on a straight-line basis.

Performance Period:        January 1, 2018 to December 31, 2020

18

APPENDIX B

Designation of Beneficiary(ies) Under

Discover Equity Compensation Plans

This Designation of Beneficiary shall remain in effect with respect to all awards issued to me under any Discover equity compensation plan, including any awards that may be issued to me after the date hereof, unless and until I modify or revoke it by submitting a later dated beneficiary designation. This Designation of Beneficiary supersedes all my prior beneficiary designations with respect to all my equity awards.

If you have more than one primary beneficiary, benefits will be divided equally among the living beneficiaries unless you specify the percentage. The percentages for all of the primary beneficiaries must total 100%. Contingent beneficiary(ies) receive any survivor benefits with respect to your equity awards, ONLY if all primary beneficiaries predecease you. If you have more than one contingent beneficiary, benefits will be divided equally among the living beneficiaries unless you specify the percentage. The percentages for all of the contingent beneficiaries must total 100%.

I hereby designate the following beneficiary(ies) to receive any survivor benefits with respect to all my equity awards:

Primary Beneficiary(ies)		Relationship	Percentage
(1	)
(2	)
(3	)
(4	)
Contingent Beneficiary(ies)		Relationship	Percentage
(1	)
(2	)
(3	)
(4	)

Address(es) of Primary Beneficiary(ies):

(1)

(2)

(3)

(4)

19

Address(es) of Contingent Beneficiary(ies):

(1)

(2)

(3)

(4)

Name: (please print)                Date

Signature

Please sign and email this form to ExecutiveCompensation@discover.com, or return via mail to:

Discover Financial Services

Attn: Human Resources Executive Compensation

2500 Lake Cook Road

Riverwoods, IL 60015

20

APPENDIX C

Discover Financial Services

International Supplement

This International Supplement to the Award Certificate for Performance Stock Units ("Award Certificate") contains supplemental terms and conditions for the Performance Stock Unit award (“Equity Award”) to employees of Discover Financial Services (or the relevant affiliated company) located in certain jurisdictions outside of the United States. The terms included in this International Supplement are intended to ensure compliance with the laws of the country in which you are Employed or, in certain instances, to make the awards more tax efficient in your country.

You have also received an Award Certificate applicable to your award. The Award Certificate, together with this International Supplement, collectively set forth the terms and conditions of your award. To the extent that this International Supplement amends, deletes or supplements any terms of the Award Certificate, this International Supplement shall control.

Capitalized terms that are used without definition in this International Supplement have the meanings assigned in the Award Certificate.

21

Employees in the United Kingdom.

If you are Employed in the United Kingdom, the Company will act in accordance with the Data Protection Act of 1998 as amended from time to time regarding any personal information which you provide to it in connection with your Equity Award (including the amount of the award) and you consent to the processing of such personal information in order to facilitate your participation in such equity incentive program, for any purposes required by law or regulation, or for any other legitimate business purpose. By accepting your Equity Award, you agree that from time to time, for the purposes described above, your personal information may be stored and processed by and disclosed and transferred to other offices and companies within the Company and to third parties, some of which are situated outside of the European Union and may not offer as high a level of protection for personal information as countries within the European Union.

All Employees Located Outside the United States.

If you are Employed outside of the United States, please note that your Equity Award is offered, issued and administered by Discover Financial Services, a Delaware corporation, and your local employer is not involved in the grant of awards under such equity incentive program. All documents related to your Equity Award, including the Award Certificate, this International Supplement and the link by which you access these documents, originate and are maintained in the United States.

Your Equity Award is made in virtue of your Employment with, and your services performed for, the appropriate entities within the Company. However, your award does not form part of your entitlement to remuneration or benefits, whether pursuant to any contract of Employment to which you may be a party or otherwise. Similarly, the existence of a contract of Employment between you and any entity within the Company shall not confer on you any right or entitlement to participate in the Equity Award or to receive awards thereunder, or any expectation that you might participate in such equity incentive program or receive additional equity awards in the future.Your Equity Award, the Award Certificate, and/or this International Supplement does not constitutean employment contract and does not create an employment relationship or a promise of continued employment for any period of time.

In addition, your equity award is not part of your base salary or wages and will not be taken into account (except to the extent otherwise required by local law) in determining any other employment-related rights you may have, such as rights to pension or severance pay.

Whether or not you have a contract of Employment with any entity within the Company, your rights and obligations under the terms of your office or Employment shall not be affected by your receipt of the Equity Award. By accepting your receipt of the Equity Award, you waive any and all rights to compensation or damages for any loss of the Equity Award in the event of your termination of your office or Employment for any reason whatsoever. This waiver applies whether or not such termination amounts to a wrongful or unfair dismissal.

You may be subject to applicable exchange control, currency control or similar financial laws that may affect your transactions with respect to your equity award, including without

22

limitation, your ability to bring shares of Discover Financial Services common stock into your jurisdiction or to receive the proceeds of a sale of Discover Financial Services common stock in your jurisdiction. Moreover, you may be subject to certain notification, approval and/or repatriation obligations with respect to securities and funds you receive in connection with your awards. In addition the Company is not responsible for any foreign exchange fluctuations that change the value of your PSU Award. You are encouraged to consult your advisors to ascertain whether any restrictions or obligations apply to you.

Your Equity Award has not been authorized or approved by any applicable securities authorities and may have been offered pursuant to an exemption from registration in your local jurisdiction. Similarly, no prospectus or similar offering or registration document has been prepared, authorized or approved by any applicable securities authorities in your jurisdiction. The grant of awards is being made only to employees of the Company and does not constitute and is not intended to be an offering to the public. For this reason, you must keep all award documents you receive, including but not limited to this International Supplement and the Award Certificate, confidential and you may not distribute or otherwise make public any award documents without the prior written consent of the Company. Moreover, you may not reproduce (in whole or in part) any award documents you receive. In addition, the shares of Company common stock you acquire upon vesting and conversion of your Equity Award may be subject to applicable restrictions on resale in your local jurisdiction. You are encouraged to consult your advisors to ascertain whether any restrictions or obligations apply to you.

    The Company recommends that you seek advice of your tax advisors regarding the tax treatment of your awards.

23

EX-10.4

Exhibit 10.4

DISCOVER FINANCIAL SERVICES

DIRECTORS’ COMPENSATION PLAN

AMENDMENT TO

2017 DIRECTORS’ ANNUAL EQUITY AWARD

AWARD CERTIFICATE FOR RESTRICTED STOCK UNITS

Discover awarded you restricted stock units as an incentive for you to continue to provide services as a Director of the Company from the date of the grant on May 11, 2017 through the Scheduled Vesting Date on May 11, 2018 (“2017 RSU”). Effective February 22, 2018, the 2017 RSU is hereby amended to change the Scheduled Vesting Date to immediately prior to May 2, 2018, the first annual meeting of shareholders following the date of grant.

IN WITNESS WHEREOF, Discover has duly executed and delivered this Amendment to the 2017 RSU as of February 22, 2018.

DISCOVER FINANCIAL SERVICES

By:

Doug Rose

Senior Vice President, Chief HR Officer

EX-10.5

Exhibit 10.5

Amendment No. 6 to the Discover Financial Services
Directors’ Compensation Plan

Effective February 22, 2018, the Discover Financial Services Directors’ Compensation Plan (the “Plan”), is hereby amended in the following respects:

• The Plan is amended by replacing the text of Subsection 5(b)(i) Restriction Period in Section 5 Initial and Annual Awards of Restricted Stock Units in its entirety with the following:

(i)    Restriction Period. Restricted Stock Units granted pursuant to Section 5(a)(i) shall be subject to a restriction period whereby 50% of such units shall vest on the first anniversary of the date of grant and the remaining units shall vest on the second anniversary of the date of grant. Each grant of Restricted Stock Units pursuant to Section 5(a)(ii) shall vest on the earlier of the first anniversary of the date of grant or immediately prior to the first annual meeting of shareholders following the date of grant. Notwithstanding the foregoing, the Plan Administrators, in their discretion, may specify in the agreement circumstances under which the award shall become immediately transferable and nonforfeitable or under which the award shall be forfeited.

EX-12.1

Exhibit 12.1

DISCOVER FINANCIAL SERVICES

COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES AND COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES AND PREFERRED STOCK DIVIDENDS

(dollars in millions)

	For the Three Months Ended March 31,				For the Calendar Years Ended December 31,
	2018		2017		2017		2016		2015		2014		2013
Earnings:
Income before income tax expense	$	856	$	868	$	3,537	$	3,656	$	3,612	$	3,694	$	3,944
Losses from unconsolidated investees	11		14		55		58		50		29		18
Total earnings	$	867	$	882	$	3,592	$	3,714	$	3,662	$	3,723	$	3,962
Fixed charges:(1)
Total interest expense	$	469	$	386	$	1,648	$	1,398	$	1,263	$	1,134	$	1,146
Interest factor in rents	1		1		4		5		6		5		5
Total fixed charges	$	470	$	387	$	1,652	$	1,403	$	1,269	$	1,139	$	1,151
Combined fixed charges and preferred stock dividends:(1)
Total interest expense	$	469	$	386	$	1,648	$	1,398	$	1,263	$	1,134	$	1,146
Interest factor in rents	1		1		4		5		6		5		5
Preferred stock dividends	20		14		87		57		59		60		60
Total combined fixed charges and preferred stock dividends	$	490	$	401	$	1,739	$	1,460	$	1,328	$	1,199	$	1,211
Earnings before income tax expense and fixed charges	$	1,337	$	1,269	$	5,244	$	5,117	$	4,931	$	4,862	$	5,113
Earnings before income tax expense and combined fixed charges and preferred stock dividends	$	1,357	$	1,283	$	5,331	$	5,174	$	4,990	$	4,922	$	5,173
Ratio of earnings to fixed charges	2.8		3.3		3.2		3.6		3.9		4.3		4.4
Ratio of earnings to combined fixed charges and preferred stock dividends	2.8		3.2		3.1		3.5		3.8		4.1		4.3

(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, an estimate of interest within rental expense 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: May 1, 2018

/s/ DAVID W. NELMS

David W. Nelms

Chairman of the Board 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: May 1, 2018

/s/ R. MARK GRAF

R. Mark Graf

Executive Vice President, Chief Financial 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 March 31, 2018, as filed with the Securities and Exchange Commission (the “Report”), each of David W. Nelms, Chairman of the Board and Chief Executive Officer of the Company, and R. Mark Graf, Executive Vice President and Chief Financial 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: May 1, 2018

/s/ DAVID W. NELMS

David W. Nelms

Chairman of the Board and Chief Executive Officer

Date: May 1, 2018

/s/ R. MARK GRAF

R. Mark Graf

Executive Vice President, Chief Financial Officer

XML

Document and Entity Information - shares	3 Months Ended
	Mar. 31, 2018	Apr. 27, 2018
Document Information [Line Items]
Document type	10-Q
Amendment flag	false
Document period end date	Mar. 31, 2018
Document fiscal year focus	2018
Document fiscal period focus	Q1
Entity registrant name	Discover Financial Services
Entity central index key	0001393612
Current fiscal year end date	--12-31
Entity filer category	Large Accelerated Filer
Entity common stock, shares outstanding		348,977,139

XML

Condensed Consolidated Statements of Financial Condition - USD ($) $ in Millions	Mar. 31, 2018	Dec. 31, 2017
Assets
Cash and cash equivalents	$ 17,011	$ 13,306
Restricted cash	87	81
Investment securities (includes $1,340 and $1,395 at fair value at March 31, 2018 and December 31, 2017, respectively)	1,543	1,568
Loan receivables
Loan receivables	82,744	84,248
Allowance for loan losses	(2,736)	(2,621)
Net loan receivables	80,008	81,627
Premises and equipment, net	848	825
Goodwill	255	255
Intangible assets, net	162	163
Other assets	2,053	2,262
Total assets	101,967	100,087
Deposits:
Interest-bearing deposit accounts	60,530	58,165
Non-interest bearing deposit accounts	600	599
Total deposits	61,130	58,764
Long-term borrowings	26,244	26,326
Accrued expenses and other liabilities	3,722	4,105
Total liabilities	91,096	89,195
Commitments, contingencies and guarantees (Notes 8, 11 and 12)
Stockholders’ Equity:
Common stock, par value $0.01 per share; 2,000,000,000 shares authorized; 564,510,213 and 563,497,702 shares issued at March 31, 2018 and December 31, 2017, respectively	6	6
Preferred stock, par value $0.01 per share; 200,000,000 shares authorized; 5,700 shares issued and outstanding and aggregate liquidation preference of $570 at March 31, 2018 and December 31, 2017	563	563
Additional paid-in capital	4,068	4,042
Retained earnings	17,211	16,687
Accumulated other comprehensive loss	(139)	(152)
Treasury stock, at cost; 213,093,774 and 205,577,507 shares at March 31, 2018 and December 31, 2017, respectively	(10,838)	(10,254)
Total stockholders’ equity	10,871	10,892
Total liabilities and stockholders’ equity	101,967	100,087
Variable Interest Entity, Primary Beneficiary [Member]
Assets
Restricted cash	87	81
Loan receivables
Loan receivables	29,894	31,781
Allowance for loan losses	(1,006)	(998)
Other assets	6	5
Deposits:
Long-term borrowings	16,385	16,536
Accrued expenses and other liabilities	$ 17	$ 16

XML

Condensed Consolidated Statements of Financial Condition (Parenthetical) - USD ($)		Mar. 31, 2018	Dec. 31, 2017
Statement of Financial Position [Abstract]
Amount of total investment securities at fair value (in dollars)	[1]	$ 1,340,000,000	$ 1,395,000,000
Common stock, par value per share (in dollars per share)		$ 0.01	$ 0.01
Common stock, shares authorized		2,000,000,000	2,000,000,000
Common stock, shares issued		564,510,213	563,497,702
Preferred stock, par or stated value per share (in dollars per share)		$ 0.01	$ 0.01
Preferred stock, shares authorized		200,000,000	200,000,000
Preferred stock, shares issued		5,700	5,700
Preferred stock, shares outstanding		5,700	5,700
Preferred stock, liquidation preference (in dollars)		$ 570,000,000	$ 570,000,000
Treasury stock, shares		213,093,774	205,577,507

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

XML

Condensed Consolidated Statements of Income - USD ($) $ in Millions	3 Months Ended
	Mar. 31, 2018	Mar. 31, 2017
Interest income
Credit card loans	$ 2,090	$ 1,876
Other loans	417	367
Investment securities	7	7
Other interest income	55	28
Total interest income	2,569	2,278
Interest expense
Deposits	262	191
Long-term borrowings	207	195
Total interest expense	469	386
Net interest income	2,100	1,892
Provision for loan losses	751	586
Net interest income after provision for loan losses	1,349	1,306
Other income
Discount and interchange revenue, net	254	233
Protection products revenue	53	58
Loan fee income	96	89
Transaction processing revenue	43	39
Other income	29	28
Total other income	475	447
Other expense
Employee compensation and benefits	405	363
Marketing and business development	185	168
Information processing and communications	82	80
Professional fees	155	147
Premises and equipment	26	25
Other expense	115	102
Total other expense	968	885
Income before income tax expense	856	868
Income tax expense	190	304
Net income	666	564
Net income allocated to common stockholders	$ 646	$ 551
Basic earnings per common share (in dollars per share)	$ 1.82	$ 1.43
Diluted earnings per common share (in dollars per share)	1.82	1.43
Dividends declared per common share (in dollars per share)	$ 0.35	$ 0.30

XML

Condensed Consolidated Statements of Comprehensive Income - USD ($) $ in Millions	3 Months Ended
	Mar. 31, 2018	Mar. 31, 2017
Net income	$ 666	$ 564
Other comprehensive income, net of taxes
Unrealized (loss) gain on available-for-sale investment securities, net of tax	(7)	1
Unrealized gain on cash flow hedges, net of tax	19	5
Unrealized pension and post-retirement plan gain, net of tax	1	0
Other comprehensive income	13	6
Comprehensive income	$ 679	$ 570

XML

Condensed Consolidated Statements of Changes in Stockholders' Equity - USD ($) $ in Millions	Total	Preferred Stock [Member]	Common Stock [Member]	Additional Paid-in Capital [Member]	Retained Earnings [Member]	Accumulated Other Comprehensive Loss [Member]	Treasury Stock [Member]
Preferred stock, shares outstanding, balance at beginning of period (in shares) at Dec. 31, 2016		575,000
Common stock, shares outstanding, balance at beginning of period (in shares) at Dec. 31, 2016			562,414,000
Stockholders' equity, balance at beginning of period at Dec. 31, 2016	$ 11,323	$ 560	$ 5	$ 3,962	$ 15,130	$ (161)	$ (8,173)
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Net income	564				564
Other comprehensive income (loss)	6					6
Purchases of treasury stock	(520)						(520)
Common stock issued under employee benefit plans (in shares)			20,000
Common stock issued under employee benefit plans	1		$ 0	1
Common stock issued and stock-based compensation expense (in shares)			968,000
Common stock issued and stock-based compensation expense	17		$ 1	16
Dividends — common stock	(117)				(117)
Dividends — preferred stock	(9)				(9)
Preferred stock, shares outstanding, balance at end of period (in shares) at Mar. 31, 2017		575,000
Common stock, shares outstanding, balance at end of period (in shares) at Mar. 31, 2017			563,402,000
Stockholders' equity, balance at end of period at Mar. 31, 2017	$ 11,265	$ 560	$ 6	3,979	15,568	(155)	(8,693)
Preferred stock, shares outstanding, balance at beginning of period (in shares) at Dec. 31, 2017	5,700	6,000
Common stock, shares outstanding, balance at beginning of period (in shares) at Dec. 31, 2017			563,498,000
Stockholders' equity, balance at beginning of period at Dec. 31, 2017	$ 10,892	$ 563	$ 6	4,042	16,687	(152)	(10,254)
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Net income	666				666
Other comprehensive income (loss)	13					13
Purchases of treasury stock	(584)						(584)
Common stock issued under employee benefit plans (in shares)			23,000
Common stock issued under employee benefit plans	2		$ 0	2
Common stock issued and stock-based compensation expense (in shares)			989,000
Common stock issued and stock-based compensation expense	24		$ 0	24
Dividends — common stock	(126)				(126)
Dividends — preferred stock	$ (16)				(16)
Preferred stock, shares outstanding, balance at end of period (in shares) at Mar. 31, 2018	5,700	6,000
Common stock, shares outstanding, balance at end of period (in shares) at Mar. 31, 2018			564,510,000
Stockholders' equity, balance at end of period at Mar. 31, 2018	$ 10,871	$ 563	$ 6	$ 4,068	$ 17,211	$ (139)	$ (10,838)

XML

Condensed Consolidated Statements of Cash Flows - USD ($) $ in Millions	3 Months Ended
	Mar. 31, 2018	Mar. 31, 2017
Cash flows from operating activities
Net income	$ 666	$ 564
Adjustments to reconcile net income to net cash provided by (used for) operating activities:
Provision for loan losses	751	586
Depreciation and amortization	107	93
Amortization of deferred revenues and accretion of accretable yield on acquired loans	(101)	(98)
Net loss on investments and other assets	11	14
Other, net	(96)	11
Changes in assets and liabilities:
Decrease in other assets	251	181
Decrease in accrued expenses and other liabilities	(351)	(338)
Net cash provided by operating activities	1,238	1,013
Cash flows from investing activities
Maturities of available-for-sale investment securities	44	52
Maturities of held-to-maturity investment securities	4	4
Purchases of held-to-maturity investment securities	(33)	(17)
Net principal disbursed on loans originated for investment	959	1,010
Purchases of other investments	0	(14)
Purchases of premises and equipment	(58)	(47)
Net cash used for investing activities	916	988
Cash flows from financing activities
Proceeds from issuance of securitized debt	1,666	1,290
Maturities and repayment of securitized debt	(1,794)	(925)
Proceeds from issuance of other long-term borrowings	822	1,005
Maturities and repayment of other long-term borrowings	(751)	0
Proceeds from issuance of common stock	2	1
Purchases of treasury stock	(584)	(520)
Net increase in deposits	2,338	1,529
Dividends paid on common and preferred stock	(142)	(127)
Net cash provided by financing activities	1,557	2,253
Net increase in cash, cash equivalents and restricted cash	3,711	4,254
Cash, cash equivalents and restricted cash, at beginning of period	13,387	12,009
Cash, cash equivalents and restricted cash, at end of period	17,098	16,263
Cash and cash equivalents	17,011	15,163
Restricted cash	$ 87	$ 1,100

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Background and Basis of Presentation

3 Months Ended

Mar. 31, 2018

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”). The Company provides direct banking products and services and payment services through its subsidiaries. The Company offers its customers credit card loans, private student loans, personal loans, home equity loans and deposit products. The Company also operates the Discover Network, the PULSE network (“PULSE”) and Diners Club International (“Diners Club”). The Discover Network processes transactions for Discover-branded credit and debit cards and provides payment transaction processing and settlement services. 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 charge cards and/or provide card acceptance services.

The Company’s business activities are managed in two segments, Direct Banking and Payment Services, based on the products and services provided. For a detailed description of the operations of each segment, as well as the allocation conventions used in business segment reporting, see Note 15: Segment Disclosures.

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 interim period. 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 2017 audited consolidated financial statements filed with the Company’s annual report on Form 10-K for the year ended December 31, 2017.

Recently Issued Accounting Pronouncements

In February 2018, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2018-02, Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income. The ASU permits, but does not require, issuers to reclassify into retained earnings any tax effects that are stranded in accumulated other comprehensive income (“AOCI”) as a result of the change in the statutory federal tax rate enacted by the Tax Cuts and Jobs Act of 2017 (“TCJA”). Tax effects that are stranded in AOCI for other reasons, such as prior changes in tax law or changes in a valuation allowance, may not be reclassified directly through retained earnings. The guidance is effective for fiscal years beginning after December 15, 2018. The Company is permitted to early adopt the guidance in any interim or annual period and apply it either (1) in the period of adoption, or (2) retrospectively to each period in which the effect of the change in the federal corporate income tax rate is recognized. The Company has not elected to early adopt the ASU as of March 31, 2018. The reclassification of stranded tax effects from AOCI to retained earnings will not be material to the Company’s consolidated statements of financial condition and will have no impact on the Company’s cash flows or consolidated statements of income.

In August 2017, the FASB issued ASU No. 2017-12, Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for Hedging Activities. The amendments of ASU 2017-12 are intended to improve the financial reporting of hedging relationships to better reflect the economic results of an entity’s risk management activities through changes to both the designation and measurement guidance for qualifying hedges and improvements to the presentation of hedge results. The amendments expand an entity’s ability to apply hedge accounting for both financial and non-financial risk components and allow for a simplified approach for fair value hedging of interest rate risk. ASU 2017-12 eliminates the requirement to separately measure and report hedge ineffectiveness and generally requires the entire change in fair value of a hedging instrument to be presented in the same income statement line as the hedged item. Additionally, the standard simplifies the hedge documentation and effectiveness assessment requirements under the previous guidance and amends the disclosures about hedging activities.

The Company early adopted ASU 2017-12 effective January 1, 2018. Accordingly, the Company is no longer required to separately measure and immediately recognize ineffectiveness related to cash flow hedges. The Company has also elected to measure changes in the fair value of hedged items designated under certain existing fair value hedges transitioned at adoption using the benchmark rate component of the contractual rate cash flows. As a result, the Company recorded separate cumulative-effect adjustments to (a) AOCI with respect to cash flow hedges and (b) the basis adjustment for certain hedged items with respect to fair value hedges. This resulted in an immaterial adjustment to the opening balance of retained earnings as of January 1, 2018, and thus did not have a material impact to the Company’s financial statements.

In January 2017, the FASB issued ASU No. 2017-04, Intangibles—Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment. The purpose of this ASU is to simplify the test for goodwill impairment by eliminating Step 2 of the current impairment test. Under the current rules, if the reporting unit’s carrying value exceeds its fair value (Step 1), goodwill impairment is measured as the difference between the carrying value of goodwill and its implied fair value. To compute the implied fair value of goodwill under Step 2, an entity has to perform procedures to determine the fair value at the impairment testing date of its assets and liabilities (including unrecognized assets and liabilities) following the procedure that would be required in determining the fair value of assets acquired and liabilities assumed in a business combination. Under the new standard, the Company will perform its annual goodwill impairment test by comparing the fair value of a reporting unit with its carrying amount. The Company should recognize an impairment charge for the amount by which the carrying amount exceeds the reporting unit’s fair value; however, the loss recognized should not exceed the total amount of goodwill allocated to that reporting unit. The amendments in this ASU apply to the Company’s annual or any interim goodwill impairment tests in fiscal years beginning after December 15, 2019. Early adoption is permitted for interim or annual goodwill impairment tests performed on testing dates after January 1, 2017. The amendments in this ASU apply on a prospective basis. All of the Company’s recorded goodwill is associated with its PULSE debit business. This ASU has no impact on cash flows, and its adoption is not expected to have any impact on the Company’s condensed consolidated financial condition or results of operations because the estimated fair value of the PULSE reporting unit is well in excess of its carrying value. The Company did not early adopt this standard, but is still evaluating whether it will prior to the 2020 effective date.

In November 2016, the FASB issued ASU No. 2016-18, Statement of Cash Flows (Topic 230): Restricted Cash. Whereas restricted cash balances have traditionally been excluded from the statement of cash flows, this ASU requires restricted cash and restricted cash equivalents to be included within the beginning and ending totals of cash, cash equivalents and restricted cash presented on the statement of cash flows for all periods presented. Restricted cash and restricted cash equivalent inflows and outflows with external parties are required to be classified within the operating, investing, and/or financing activity sections of the statement of cash flows whereas transfers between cash and cash equivalents and restricted cash and restricted cash equivalents should no longer be presented on the statement of cash flows. ASU 2016-18 also requires the nature of the restrictions to be disclosed to help provide information about the sources and uses of these balances during a reporting period and a reconciliation of the cash, cash equivalents and restricted cash totals on the statement of cash flows to the related balance sheet line items when cash, cash equivalents, and restricted cash are presented in more than one line item on the balance sheet. The reconciliation can be presented either on the face of the statement of cash flows or in the notes to the financial statements and must be provided for each period that a balance sheet is presented. The ASU became effective for the Company on January 1, 2018 and did not have a material impact to the Company’s statement of cash flows.

In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments. This ASU replaces the incurred loss model with the current expected credit loss ("CECL") approach. For loans carried at amortized cost, the allowance for loan losses will be based on management’s current estimate of all expected credit losses over the remaining contractual term of the loans. Upon the origination of a loan, the Company will have to record its estimate of all expected credit losses on that loan through an immediate charge to earnings. Updates to that estimate each period will be recorded through provision expense. The CECL estimate is to be based on historical experience, current conditions and reasonable and supportable forecasts. No specific method for estimating credit loss is mandated, permitting companies to use judgment in selecting the approach that is most appropriate in their circumstances.

The CECL approach is expected to affect the Company’s allowance for loan losses as a result of: (1) encompassing expected losses, not simply those deemed to be already incurred, (2) extending the loss estimate period over the entire life of the loan, and (3) reclassification of the credit loss component of the purchased credit-impaired ("PCI") loan portfolio out of loan carrying value and into the allowance for loan losses. All loans carried at amortized cost, including PCI loans and loans modified in a troubled debt restructuring ("TDR") will be measured under the CECL approach. Existing specialized measurement guidance for PCI loans, which the ASU refers to as purchased credit-deteriorated ("PCD"), and TDRs will be eliminated, although certain separate disclosure guidance will be retained. Measurement of credit impairment of available-for-sale debt securities will generally remain unchanged under the new rules, but any such impairment will be recorded through an allowance, rather than a direct write-down of the security.

The ASU is effective beginning January 1, 2020, with early adoption permitted no sooner than January 1, 2019. Management is not considering early adoption at this time. On the date of adoption, the allowance for loan losses will be adjusted to the CECL estimate for loans held at that date with an offsetting adjustment to retained earnings. Additionally, the carrying value of PCD loans will be increased through an offsetting addition to the allowance for loan losses for the CECL estimate on those loans. The CECL allowance will be re-evaluated in subsequent periods and adjusted through provision expense as needed. The Company is actively engaged in cross-functional implementation efforts and planning for loss modeling requirements consistent with lifetime expected loss estimates. The Company has also been involved in efforts to identify and resolve various implementation issues specific to the application of the standard to credit card receivables. Adoption of the standard has the potential to materially impact stockholders' equity and regulatory capital as well as the Company's financial condition and results of operations. The extent of the impact upon adoption will likely depend on the characteristics of the Company's loan portfolio and economic conditions at that date, as well as forecasted conditions thereafter.

In March 2016, the FASB issued ASU No. 2016-08, Principal versus Agent Considerations (Reporting Revenue Gross versus Net). This guidance became effective for the Company on January 1, 2018, along with ASU 2014-09, Revenue from Contracts with Customers (Topic 606), discussed below. This ASU did not result in a change to the accounting or reporting of the Company's revenue arrangements that involve a principal-agent relationship. Therefore, its adoption has had no impact on the Company's condensed consolidated financial condition, results of operations or cash flows. The guidance in this ASU provides clarification on the principal versus agent concept in relation to revenue recognition guidance issued as part of ASU 2014-09. Topic 606 requires a company to determine whether it is a principal or an agent in a transaction in which another party is involved in providing goods or services to a customer by evaluating the nature of its promise to the customer. ASU 2016-08 provides clarification for identifying the good, service or right being transferred in a revenue transaction and identifies the principal as the party that controls the good, service or right prior to its transfer to the customer. The ASU provides further clarity on how to evaluate control in this context.

In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842). The guidance will require lessees to capitalize most leases on their balance sheet whereas under current GAAP only capital leases are recognized on the lessee’s balance sheet. Leases which today are identified as capital leases will generally be identified as financing leases under the new guidance but otherwise their accounting treatment will remain relatively unchanged. Leases identified today as operating leases will generally remain in that category under the new standard, but both a right-of-use asset and a liability for remaining lease payments will now be required to be recognized on the balance sheet for this type of lease. The manner in which expenses associated with all leases are reported on the income statement will remain mostly unchanged. Lessor accounting also remains substantially unchanged by the new standard. The new guidance will become effective for the Company on January 1, 2019, and management does not expect it to have a material impact on the condensed consolidated financial statements.

In January 2016, the FASB issued ASU No. 2016-01, Financial Instruments—Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities. This ASU became effective for the Company on January 1, 2018 and has not had a material impact to the financial statements. The ASU has had limited impact on the Company since it does not change the guidance for classifying and measuring investments in debt securities or loans. The standard requires entities to measure certain cost-method equity investments at fair value with changes in value recognized in net income. Equity investments that do not have readily determinable fair values are carried at cost, less any impairment, plus or minus changes resulting from any observable price changes in orderly transactions for an identical or similar investment of the same issuer. This ASU requires public entities to use the exit price notion when measuring the fair value of financial instruments for disclosure purposes and requires separate presentation of financial assets and financial liabilities by measurement category and form of financial asset (i.e., securities or loans) on the balance sheet or the accompanying notes to the financial statements.

In May 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers (Topic 606). The guidance in this ASU supersedes existing revenue recognition requirements in Topic 605, Revenue Recognition, including an assortment of transaction-specific and industry-specific rules. The new revenue recognition model became effective for the Company on January 1, 2018. The model generally results in the same revenue recognition patterns as have historically been applied to the Company’s revenues that are subject to this guidance. The timing and measurement of fee revenues associated with the Company’s credit card arrangements and costs associated with the Company’s credit card reward programs have not been affected as a result of the adoption of Accounting Standards Codification ("ASC") 606. Accounting and reporting for the Company’s transaction processing services, including discount and interchange revenue and other transaction processing fees, remains substantially unchanged from treatments under GAAP in effect prior to 2018. As permitted by the ASU, management has elected to adopt this standard using a modified retrospective approach, which means that the cumulative effect of initially applying the standard is recognized at the date of initial application through an adjustment to beginning retained earnings, but no restatement of prior periods is made. Based on its evaluations, management has concluded that no adjustment to beginning retained earnings is required as of January 1, 2018, the date of adoption. See Note 16: Revenue from Contracts with Customers for additional information resulting from this standard.

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Investments

3 Months Ended

Mar. 31, 2018

Investments, Debt and Equity Securities [Abstract]

Investments

Investments

The Company’s investment securities consist of the following (dollars in millions):
	March 31, 2018		December 31, 2017
U.S. Treasury securities(1)	$	672	$	672
States and political subdivisions of states	—		1
Residential mortgage-backed securities - Agency(2)	871		895
Total investment securities	$	1,543	$	1,568

(1) Includes $38 million and $48 million of U.S. Treasury securities pledged as swap collateral as of March 31, 2018 and December 31, 2017, respectively.

(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 millions):
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
At March 31, 2018
Available-for-Sale Investment Securities(1)
U.S. Treasury securities	$	675	$	—	$	(3	)	$	672
Residential mortgage-backed securities - Agency	683		—		(15		)	668
Total available-for-sale investment securities	$	1,358	$	—	$	(18	)	$	1,340
Held-to-Maturity Investment Securities(2)
Residential mortgage-backed securities - Agency(3)	$	203	$	1	$	(4	)	$	200
Total held-to-maturity investment securities	$	203	$	1	$	(4	)	$	200
At December 31, 2017
Available-for-Sale Investment Securities(1)
U.S. Treasury securities	$	675	$	—	$	(3	)	$	672
Residential mortgage-backed securities - Agency	728		1		(6		)	723
Total available-for-sale investment securities	$	1,403	$	1	$	(9	)	$	1,395
Held-to-Maturity Investment Securities(2)
States and political subdivisions of states	$	1	$	—	$	—		$	1
Residential mortgage-backed securities - Agency(3)	172		1		(1		)	172
Total held-to-maturity investment securities	$	173	$	1	$	(1	)	$	173

(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.

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 (dollars in millions):
	Number of Securities in a Loss Position	Less than 12 months					More than 12 months
		Fair Value		Unrealized Losses			Fair Value		Unrealized Losses
At March 31, 2018
Available-for-Sale Investment Securities
U.S. Treasury securities	1	$	—	$	—		$	672	$	(3	)
Residential mortgage-backed securities - Agency	31	$	546	$	(10	)	$	122	$	(5	)
Held-to-Maturity Investment Securities
Residential mortgage-backed securities - Agency	80	$	125	$	(2	)	$	40	$	(2	)
At December 31, 2017
Available-for-Sale Investment Securities
U.S. Treasury securities	1	$	—	$	—		$	672	$	(3	)
Residential mortgage-backed securities - Agency	27	$	457	$	(3	)	$	132	$	(3	)
Held-to-Maturity Investment Securities
Residential mortgage-backed securities - Agency	45	$	56	$	—		$	38	$	(1	)

There were no losses related to other-than-temporary impairments and no proceeds from sales or recognized gains and losses on available-for-sale securities during the three months ended March 31, 2018 and 2017. See Note 7: Accumulated Other Comprehensive Income for unrealized gains and losses on available-for-sale securities during the three months ended March 31, 2018 and 2017.

Maturities of available-for-sale debt securities and held-to-maturity debt securities are provided in the table below (dollars in millions):
	One Year or Less		After One Year Through Five Years		After Five Years Through Ten Years		After Ten Years		Total
At March 31, 2018
Available-for-Sale Investment Securities—Amortized Cost
U.S. Treasury securities	$	675	$	—	$	—	$	—	$	675
Residential mortgage-backed securities - Agency(1)	—		78		506		99		683
Total available-for-sale investment securities	$	675	$	78	$	506	$	99	$	1,358
Held-to-Maturity Investment Securities—Amortized Cost
Residential mortgage-backed securities - Agency(1)	$	—	$	—	$	—	$	203	$	203
Total held-to-maturity investment securities	$	—	$	—	$	—	$	203	$	203
Available-for-Sale Investment Securities—Fair Values
U.S. Treasury securities	$	672	$	—	$	—	$	—	$	672
Residential mortgage-backed securities - Agency(1)	—		77		493		98		668
Total available-for-sale investment securities	$	672	$	77	$	493	$	98	$	1,340
Held-to-Maturity Investment Securities—Fair Values
Residential mortgage-backed securities - Agency(1)	$	—	$	—	$	—	$	200	$	200
Total held-to-maturity investment securities	$	—	$	—	$	—	$	200	$	200

(1) Maturities of residential mortgage-backed securities are reflective of the contractual maturities of the investment.

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. The related commitment for future investments is recorded in accrued expenses and other liabilities within the condensed consolidated statements of financial condition. The portion of each investment's operating results allocable to the Company is recorded in other expense within the condensed consolidated statements of income. The Company reduces the carrying value of the investments by recognizing any amounts that are in excess of future net tax benefits in other expense. 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 March 31, 2018 and December 31, 2017, the Company had outstanding investments in these entities of $286 million and $297 million, respectively, and related contingent liabilities of $66 million. Of the above outstanding equity investments, the Company had $279 million and $288 million of investments related to affordable housing projects as of March 31, 2018 and December 31, 2017, respectively, which had $66 million related contingent liabilities.

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Loan Receivables

3 Months Ended

Mar. 31, 2018

Loans and Leases Receivable Disclosure [Abstract]

Loan Receivables

Loan Receivables

The Company has three loan portfolio segments: credit card loans, other loans and PCI loans.

The Company's classes of receivables within the three portfolio segments are depicted in the table below (dollars in millions):
	March 31, 2018			December 31, 2017
Loan receivables
Credit card loans(1)	$	65,577		$	67,291
Other loans
Personal loans	7,307			7,374
Private student loans	7,416			7,076
Other	488			423
Total other loans	15,211			14,873
PCI loans(2)	1,956			2,084
Total loan receivables	82,744			84,248
Allowance for loan losses	(2,736		)	(2,621		)
Net loan receivables	$	80,008		$	81,627

(1) Amounts include $21.1 billion and $21.2 billion underlying investors’ interest in trust debt at March 31, 2018 and December 31, 2017, respectively, and $8.1 billion and $9.9 billion in seller's interest at March 31, 2018 and December 31, 2017, respectively. See Note 4: Credit Card and Student Loan Securitization Activities for additional information.

(2) Amounts include $712 million and $762 million of loans pledged as collateral against the notes issued from the Student Loan Corporation ("SLC") securitization trusts at March 31, 2018 and December 31, 2017, respectively. See Note 4: Credit Card and Student Loan Securitization Activities for additional information.

Credit Quality Indicators

The Company regularly reviews its collection experience (including delinquencies and net charge-offs) in determining its allowance for loan losses.

Information related to the delinquent and non-accruing loans in the Company’s loan portfolio 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 millions):
	30-89 Days Delinquent		90 or More Days Delinquent		Total Past Due		90 or More Days Delinquent and Accruing		Total Non-accruing(1)
At March 31, 2018
Credit card loans(2)	$	752	$	777	$	1,529	$	719	$	209
Other loans
Personal loans(3)	73		28		101		26		11
Private student loans (excluding PCI)(4)	118		49		167		48		10
Other	2		1		3		—		19
Total other loans (excluding PCI)	193		78		271		74		40
Total loan receivables (excluding PCI)	$	945	$	855	$	1,800	$	793	$	249
At December 31, 2017
Credit card loans(2)	$	781	$	751	$	1,532	$	693	$	203
Other loans
Personal loans(3)	73		30		103		28		10
Private student loans (excluding PCI)(4)	134		33		167		33		2
Other	3		1		4		—		18
Total other loans (excluding PCI)	210		64		274		61		30
Total loan receivables (excluding PCI)	$	991	$	815	$	1,806	$	754	$	233

(1) The Company estimates that the gross interest income that would have been recorded in accordance with the original terms of non-accruing credit card loans was $9 million and $8 million for the three months ended March 31, 2018 and 2017, 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. This amount was estimated based on customers' current balances and most recent interest rates.

(2) Credit card loans that are 90 or more days delinquent and accruing interest include $83 million and $72 million of loans accounted for as TDRs at March 31, 2018 and December 31, 2017, respectively.

(3) Personal loans that are 90 or more days delinquent and accruing interest include $4 million and $5 million of loans accounted for as TDRs at March 31, 2018 and December 31, 2017, respectively.

(4) Private student loans that are 90 or more days delinquent and accruing interest include $7 million and $5 million of loans accounted for as TDRs at March 31, 2018 and December 31, 2017, respectively.

Information related to the net charge-offs in the Company's loan portfolio 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 millions):
	For the Three Months Ended March 31,
	2018				2017
	Net Charge-offs		Net  Charge-off Rate(1)		Net Charge-offs		Net  Charge-off Rate(1)
Credit card loans	$	540	3.32	%	$	422	2.84	%
Other loans
Personal loans	73		4.03	%	51		3.16	%
Private student loans (excluding PCI)	22		1.17	%	14		0.83	%
Other	—		—	%	2		3.45	%
Total other loans	95		2.52	%	67		2.02	%
Net charge-offs (excluding PCI)	$	635	3.17	%	$	489	2.69	%
Net charge-offs (including PCI)	$	635	3.09	%	$	489	2.60	%

(1) Net charge-off rate represents net charge-off dollars (annualized) divided by average loans for the reporting period.

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 FICO or other credit scores, relating to the customer’s broader credit performance. FICO 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 portion of delinquent accounts have FICO scores below 660.

The following table provides the most recent FICO scores available for the Company’s customers as a percentage of each class of loan receivables:
	Credit Risk Profile by FICO Score
	660 and  Above		Less than 660 or No Score
At March 31, 2018
Credit card loans	81	%	19	%
Personal loans	95	%	5	%
Private student loans (excluding PCI)(1)	95	%	5	%
At December 31, 2017
Credit card loans	82	%	18	%
Personal loans	95	%	5	%
Private student loans (excluding PCI)(1)	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 March 31, 2018 and December 31, 2017, there were $40 million and $29 million, respectively, of private student loans, including PCI, in forbearance, representing 0.7% and 0.5%, respectively, of total student loans in repayment and forbearance.

Allowance for Loan Losses

The following tables provide changes in the Company’s allowance for loan losses (dollars in millions):
	For the Three Months Ended March 31, 2018
	Credit Card			Personal Loans			Student Loans(1)			Other			Total
Balance at beginning of period	$	2,147		$	301		$	162		$	11		$	2,621
Additions
Provision for loan losses	645			73			31			2			751
Deductions
Charge-offs	(663		)	(81		)	(25		)	—			(769		)
Recoveries	123			8			3			—			134
Net charge-offs	(540		)	(73		)	(22		)	—			(635		)
Other(2)	—			—			(1		)	—			(1		)
Balance at end of period	$	2,252		$	301		$	170		$	13		$	2,736
	For the Three Months Ended March 31, 2017
	Credit Card			Personal Loans			Student Loans(1)			Other			Total
Balance at beginning of period	$	1,790		$	200		$	158		$	19		$	2,167
Additions
Provision for loan losses	524			58			12			(8		)	586
Deductions
Charge-offs	(535		)	(57		)	(17		)	(2		)	(611		)
Recoveries	113			6			3			—			122
Net charge-offs	(422		)	(51		)	(14		)	(2		)	(489		)
Balance at end of period	$	1,892		$	207		$	156		$	9		$	2,264

(1) Includes both PCI and non-PCI private student loans.

(2) Net change in reserves on PCI pools having no remaining non-accretable difference.

Net charge-offs of principal are recorded against the allowance for loan losses, as shown in the preceding table. Information regarding net charge-offs of interest and fee revenues on credit card and other loans is as follows (dollars in millions):
	For the Three Months Ended March 31,
	2018		2017
Interest and fees accrued subsequently charged off, net of recoveries (recorded as a reduction of interest income)	$	109	$	84
Fees accrued subsequently charged off, net of recoveries (recorded as a reduction to other income)	$	27	$	22

The following tables provide additional detail of the Company’s allowance for loan losses and recorded investment in its loan portfolio by impairment methodology (dollars in millions):
	Credit Card		Personal Loans		Student Loans(1)		Other Loans		Total
At March 31, 2018
Allowance for loans evaluated for impairment as
Collectively evaluated for impairment in accordance with ASC 450-20	$	2,007	$	266	$	122	$	5	$	2,400
Evaluated for impairment in accordance with ASC 310-10-35(2)(3)	245		35		21		8		309
Acquired with deteriorated credit quality, evaluated in accordance with ASC 310-30	—		—		27		—		27
Total allowance for loan losses	$	2,252	$	301	$	170	$	13	$	2,736
Recorded investment in loans evaluated for impairment as
Collectively evaluated for impairment in accordance with ASC 450-20	$	64,054	$	7,186	$	7,271	$	435	$	78,946
Evaluated for impairment in accordance with ASC 310-10-35(2)(3)	1,523		121		145		53		1,842
Acquired with deteriorated credit quality, evaluated in accordance with ASC 310-30	—		—		1,956		—		1,956
Total recorded investment	$	65,577	$	7,307	$	9,372	$	488	$	82,744
At December 31, 2017
Allowance for loans evaluated for impairment as
Collectively evaluated for impairment in accordance with ASC 450-20	$	1,921	$	269	$	112	$	4	$	2,306
Evaluated for impairment in accordance with ASC 310-10-35(2)(3)	226		32		21		7		286
Acquired with deteriorated credit quality, evaluated in accordance with ASC 310-30	—		—		29		—		29
Total allowance for loan losses	$	2,147	$	301	$	162	$	11	$	2,621
Recorded investment in loans evaluated for impairment as
Collectively evaluated for impairment in accordance with ASC 450-20	$	65,975	$	7,263	$	6,939	$	370	$	80,547
Evaluated for impairment in accordance with ASC 310-10-35(2)(3)	1,316		111		137		53		1,617
Acquired with deteriorated credit quality, evaluated in accordance with ASC 310-30	—		—		2,084		—		2,084
Total recorded investment	$	67,291	$	7,374	$	9,160	$	423	$	84,248

(1) Includes both PCI and non-PCI private student loans.

(2) Loan receivables evaluated for impairment in accordance with ASC 310-10-35 include credit card loans, personal loans and student loans collectively evaluated for impairment in accordance with ASC Subtopic 310-40, Receivables, which consists of modified loans accounted for as TDRs. Other loans are individually evaluated for impairment and generally do not represent TDRs.

(3) The unpaid principal balance of credit card loans was $1.3 billion and $1.1 billion at March 31, 2018 and December 31, 2017, respectively. The unpaid principal balance of personal loans was $121 million and $109 million at March 31, 2018 and December 31, 2017, respectively. The unpaid principal balance of student loans was $145 million and $135 million at March 31, 2018 and December 31, 2017, respectively. All loans accounted for as TDRs have a related allowance for loan losses.

Troubled Debt Restructurings

The Company has internal loan modification programs that provide relief to credit card, personal loan and student loan borrowers who may be experiencing financial hardship. The Company continually evaluates new programs to determine which of them meet the definition of a TDR. The internal loan modification programs include both temporary and permanent programs which vary by product. External loan modification programs are also available for credit card and personal loans. Temporary and permanent modifications on credit card and personal loans, as well as temporary modifications on student loans and certain grants of student loan forbearance, result in the loans being considered individually impaired. In addition, loans that defaulted or graduated from modification programs or forbearance are considered to be individually impaired.

For credit card customers, the Company offers temporary hardship programs consisting of an interest rate reduction and in some cases a reduced minimum payment, 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 modification 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 permanent loan modifications for customers who request financial assistance through external sources, such as a consumer credit counseling agency program. 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. Modified credit card loans that are deemed to meet the definition of TDRs includes loans in both temporary and permanent programs.

For personal loan customers, in certain situations the Company offers 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 12 months with the option of a final balloon payment required at the end of the loan term or an extension of the maturity date with the total term not exceeding nine years. Further, in certain circumstances the interest rate on the loan is reduced. The permanent program involves changing the terms of the loan in order to pay off the outstanding balance over a longer term and also in certain circumstances reducing the interest rate on the loan. Similar to the temporary programs, the total term may not exceed nine years. The Company also allows permanent loan modifications for customers who request financial assistance through external sources, similar to the 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 TDRs.

To assist student loan borrowers who are experiencing temporary financial difficulties but are willing to resume making payments, the Company may offer hardship forbearance or programs that include payment deferral, temporary payment reduction, temporary interest rate reduction or extended terms. A modified loan typically meets the definition of a TDR based on the cumulative length of the concession period and an evaluation of the credit quality of the borrower, based on FICO scores.

The Company monitors borrower performance after using payment programs or forbearance and the Company believes the programs help to prevent defaults and are useful in assisting customers experiencing financial difficulties. The Company plans to continue to use payment programs and forbearance and, as a result, expects to have additional loans classified as TDRs in the future.

Additional information about modified loans classified as TDRs is shown below (dollars in millions):
	Average recorded investment in loans		Interest income recognized during period loans were impaired(1)		Gross interest income that would have been recorded with original terms(2)
For the Three Months Ended March 31, 2018
Credit card loans(3)	$	1,413	$	34	$	26
Personal loans	$	117	$	3	$	1
Private student loans	$	142	$	3	$	—
For the Three Months Ended March 31, 2017
Credit card loans(3)	$	1,108	$	25	$	20
Personal loans	$	84	$	2	$	1
Private student loans	$	94	$	2	$	—

(1) The Company does not separately track interest income on loans in 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 additional 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 loans and the average interest rate earned on loans in the modification programs to the average loans in the modification programs.

(3) Includes credit card loans that were modified in TDRs, but are no longer enrolled in a TDR program due to noncompliance with the terms of the modification or due to successful completion of a program after which charging privileges may be reinstated based on customer-level evaluation. The average balance of credit card loans that were no longer enrolled in a TDR program was $399 million and $311 million, respectively, for the three months ended March 31, 2018 and 2017.

In order to evaluate the primary financial effects that resulted from credit card loans entering into a loan modification program during the three months ended March 31, 2018 and 2017, the Company quantified the amount by which interest and fees were reduced during the periods. During the three months ended March 31, 2018 and 2017, the Company forgave approximately $12 million and $11 million, respectively, of interest and fees as a result of accounts entering into a credit card loan modification program.

The following table provides information on loans that entered a loan modification program during the period (dollars in millions):
	For the Three Months Ended March 31,
	2018			2017
	Number of Accounts	Balances		Number of Accounts	Balances
Accounts that entered a loan modification program during the period
Credit card loans	60,055	$	380	30,893	$	181
Personal loans	2,128	$	29	1,563	$	18
Private student loans	906	$	16	1,017	$	17

The following table presents the carrying value of loans that experienced a payment default during the period that had been modified in a TDR during the 15 months preceding the end of each period (dollars in millions):
	For the Three Months Ended March 31,
	2018			2017
	Number of Accounts	Aggregated Outstanding Balances Upon Default		Number of Accounts	Aggregated Outstanding Balances Upon Default
TDRs that subsequently defaulted
Credit card loans(1)(2)	8,814	$	47	8,166	$	44
Personal loans(2)	575	$	8	307	$	4
Private student loans(3)	271	$	5	185	$	3

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

(2) For credit card loans and personal loans, a customer defaults from a modification program after two consecutive missed payments. The outstanding balance upon default is generally the loan balance at the end of the month prior to default.

(3) For student loans, defaults have been defined as loans that are 60 or more days delinquent. The outstanding balance upon default is generally the loan balance at the end of the month prior to default.

Of the account balances that defaulted as shown above for the three months ended March 31, 2018 and 2017, approximately 37% and 38%, respectively, of the total balances were charged off at the end of the month in which they defaulted. For accounts that have defaulted from a loan modification program and have not been subsequently charged off, the balances are included in the allowance for loan loss analysis discussed above under "— 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 acquired private student loan portfolio comprise the Company’s only PCI loans at March 31, 2018 and December 31, 2017. Total PCI student loans had an outstanding balance of $2.0 billion and $2.2 billion, including accrued interest, and a related carrying amount of $2.0 billion and $2.1 billion as of March 31, 2018 and December 31, 2017, respectively.

The following table provides changes in accretable yield for the acquired loans during each period (dollars in millions):
	For the Three Months Ended March 31,
	2018			2017
Balance at beginning of period	$	669		$	796
Accretion into interest income	(36		)	(41		)
Balance at end of period	$	633		$	755

Periodically, the Company updates the estimate of cash flows expected to be collected based on management's latest expectations of future credit losses, borrower prepayments and certain other assumptions that affect cash flows. No provision expense was recorded during the three months ended March 31, 2018 and 2017. The allowance for PCI loan losses at March 31, 2018 and December 31, 2017 was $27 million and $29 million, respectively. For the three months ended March 31, 2018 and 2017, there were no changes in cash flow assumptions. Changes to accretable yield are recognized prospectively as an adjustment to yield over the remaining life of the pools.

At March 31, 2018, the 30 or more days delinquency and 90 or more days delinquency rates on PCI student loans (which include loans not yet in repayment) were 2.92% and 0.83%, respectively. At December 31, 2017, the 30 or more days delinquency and 90 or more days delinquency rates on PCI student loans (which include loans not yet in repayment) were 3.24% and 0.93%, 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 was 0.99% and 0.53% for the three months ended March 31, 2018 and 2017, respectively.

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Credit Card and Student Loan Securitization Activities

3 Months Ended

Mar. 31, 2018

Variable Interest Entities Disclosure [Abstract]

Credit Card and Student Loan Securitization Activities

Credit Card and Student Loan Securitization Activities

The Company’s securitizations are accounted for as secured borrowings and the related trusts are treated as consolidated subsidiaries of the Company. For a description of the Company’s principles of consolidation with respect to VIEs, see Note 1: Background and Basis of Presentation of the Company’s annual report on Form 10-K for the year ended December 31, 2017.

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”). Credit card loan receivables are transferred into DCMT and beneficial interests in DCMT are transferred into DCENT. DCENT issues debt securities to investors that are reported in long-term borrowings.

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 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 subordinated classes are held by wholly-owned subsidiaries of Discover Bank. The Company is exposed to credit-related risk of loss associated with trust assets as of the balance sheet date through the retention of these subordinated interests. The estimated probable incurred loss is included in the allowance for loan losses estimate.

The Company’s retained interests in the assets of the trusts, consisting of investments in DCENT notes held by subsidiaries of Discover Bank, constitute intercompany positions which are eliminated in the preparation of the Company’s condensed consolidated statements 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. Further, the transferred credit card loan receivables are owned by the trust and are not available to third-party creditors of the Company. The trusts have ownership of cash balances, the amounts of which are reported in restricted cash. 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. 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 carrying values of these restricted assets, which are presented on the Company’s condensed consolidated statements of financial condition as relating to securitization activities, are shown in the table below (dollars in millions):
	March 31, 2018			December 31, 2017
Restricted cash	$	29		$	26
Investors’ interests held by third-party investors	15,950			16,025
Investors’ interests held by wholly-owned subsidiaries of Discover Bank	5,126			5,133
Seller’s interest	8,106			9,861
Loan receivables(1)	29,182			31,019
Allowance for loan losses allocated to securitized loan receivables(1)	(1,006		)	(998		)
Net loan receivables	28,176			30,021
Other	6			5
Carrying value of assets of consolidated variable interest entities	$	28,211		$	30,052

(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 trusts are subject to credit, payment and interest rate risks on the transferred credit card loan receivables. To protect investors in the securities, there are certain features or triggering events that could cause an early amortization of the debt securities, including triggers related to the impact of the performance of the trust receivables on the availability and adequacy of cash flows to meet contractual requirements. As of March 31, 2018, no economic or other early amortization events have occurred.

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

Student loan trust receivables underlying third-party investors’ interests are recorded in PCI loans and the related debt issued by the trusts is reported in long-term borrowings. The assets of the trusts 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 trusts. With the exception of the trusts’ restricted assets, the trusts and investors have no recourse to the Company’s other assets or the Company's general credit for a shortage in cash flows.

Currently there are two 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. 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 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.

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.

The carrying values of these restricted assets, which are presented on the Company’s condensed consolidated statements of financial condition as relating to securitization activities, are shown in the table below (dollars in millions):
	March 31, 2018		December 31, 2017
Restricted cash	$	58	$	55
Student loan receivables	712		762
Carrying value of assets of consolidated variable interest entities	$	770	$	817

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Deposits

3 Months Ended

Mar. 31, 2018

Deposits [Abstract]

Deposits

Deposits

The Company offers its deposit products 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”). Direct-to-consumer deposits include certificates of deposit, money market accounts, online savings and checking accounts and IRA certificates of deposit, while brokered deposits include certificates of deposit and sweep accounts.

The following table provides a summary of interest-bearing deposit accounts (dollars in millions):
	March 31, 2018		December 31, 2017
Certificates of deposit in amounts less than $100,000	$	24,063	$	23,768
Certificates of deposit in amounts $100,000 or greater(1)	6,035		5,984
Savings deposits, including money market deposit accounts	30,432		28,413
Total interest-bearing deposits	$	60,530	$	58,165

(1) Includes $1.4 billion in certificates of deposit greater than $250,000, the Federal Deposit Insurance Corporation ("FDIC") insurance limit, as of March 31, 2018 and December 31, 2017.

The following table summarizes certificates of deposit in amounts of $100,000 or greater by contractual maturity (dollars in millions):
Maturity Period	March 31, 2018
Three months or less	$	778
Over three months through six months	830
Over six months through twelve months	1,739
Over twelve months	2,688
Total	$	6,035

The following table summarizes certificates of deposit maturing over the remainder of this year, over each of the next four years, and thereafter (dollars in millions):
Year	March 31, 2018
2018	$	10,263
2019	7,408
2020	4,370
2021	2,912
2022	2,094
Thereafter	3,051
Total	$	30,098

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Long-Term Borrowings

3 Months Ended

Mar. 31, 2018

Debt Disclosure [Abstract]

Long-Term Borrowings

Long-Term Borrowings

Long-term borrowings consist of borrowings 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 outstanding balances (dollars in millions):
	March 31, 2018					December 31, 2017
	Maturity	Interest Rate	Weighted-Average Interest Rate	Outstanding Amount		Outstanding Amount
Securitized Debt
Fixed-rate asset-backed securities(1)	2018-2024	1.39%-3.03%	1.92%	$	9,478	$	8,888
Floating-rate asset-backed securities(2)(3)	2018-2024	2.01%-2.59%	2.25%	6,337		7,038
Total Discover Card Master Trust I and Discover Card Execution Note Trust				15,815		15,926
Floating-rate asset-backed securities(4)(5)(6)	2031-2036	1.89%-5.50%	3.45%	570		610
Total SLC Private Student Loan Trusts				570		610
Total long-term borrowings - owed to securitization investors				16,385		16,536
Discover Financial Services (Parent Company)
Fixed-rate senior notes	2019-2027	3.75%-10.25%	4.25%	2,718		2,710
Fixed-rate retail notes	2018-2031	2.85%-4.40%	3.71%	328		302
Discover Bank
Fixed-rate senior bank notes(1)	2018-2026	2.60%-4.25%	3.37%	6,115		6,080
Fixed-rate subordinated bank notes	2019-2020	7.00%-8.70%	7.49%	698		698
Total long-term borrowings				$	26,244	$	26,326

(1) The Company uses interest rate swaps to hedge portions of these long-term borrowings against changes in fair value attributable to changes in London Interbank Offered Rate ("LIBOR"). Use of these interest rate swaps impacts carrying value of the debt. See Note 14: Derivatives and Hedging Activities.

(2) Discover Card Execution Note Trust floating-rate asset-backed securities include issuances with the following interest rate terms: 1-month LIBOR + 23 to 60 basis points and Commercial paper rate + 55 basis points as of March 31, 2018.

(3) The Company uses interest rate swaps to manage its exposure to changes in interest rates related to future cash flows resulting from interest payments on a portion of these long-term borrowings. There is no impact on debt carrying value from use of these interest rate swaps. See Note 14: Derivatives and Hedging Activities.

(4) SLC Private Student Loan Trusts floating-rate asset-backed securities include issuances with the following interest rate terms: 3-month LIBOR + 17 to 45 basis points and Prime rate + 100 basis points as of March 31, 2018.

(5) 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.

(6) Includes $226 million of senior notes maturing in 2031 and $344 million of senior and subordinated notes maturing in 2036 as of March 31, 2018.

The following table summarizes long-term borrowings maturing over the remainder of this year, over each of the next four years, and thereafter (dollars in millions):
Year	March 31, 2018
2018	$	3,270
2019	5,988
2020	4,694
2021	1,036
2022	2,776
Thereafter	8,480
Total	$	26,244

The Company has access to committed borrowing capacity through private securitizations to support the funding of its credit card loan receivables. As of March 31, 2018, the total commitment of secured credit facilities through private providers was $6.0 billion, $500 million of which was drawn as of March 31, 2018. Access to the unused portions of the secured credit facilities is subject to the terms of the agreements with each of the providers which have various expirations in calendar years 2019 through 2020. 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.

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Accumulated Other Comprehensive Income

3 Months Ended

Mar. 31, 2018

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

Accumulated Other Comprehensive Income

Accumulated Other Comprehensive Income

Changes in each component of AOCI were as follows (dollars in millions):
	Unrealized Loss on Available-for-Sale Investment Securities, Net of Tax			Gain (Loss) on Cash Flow Hedges, Net of Tax			Loss on Pension Plan, Net of Tax			AOCI
For the Three Months Ended March 31, 2018
Balance at December 31, 2017	$	(5	)	$	10		$	(157	)	$	(152	)
Net change	(7		)	19			1			13
Balance at March 31, 2018	$	(12	)	$	29		$	(156	)	$	(139	)
For the Three Months Ended March 31, 2017
Balance at December 31, 2016	$	(3	)	$	(13	)	$	(145	)	$	(161	)
Net change	1			5			—			6
Balance at March 31, 2017	$	(2	)	$	(8	)	$	(145	)	$	(155	)

The table below presents each component of other comprehensive income (loss) ("OCI") before reclassifications and amounts reclassified from AOCI for each component of OCI before- and after-tax (dollars in millions):
	Before Tax			Tax Benefit (Expense)			Net of Tax
For the Three Months Ended March 31, 2018
Available-for-Sale Investment Securities
Net unrealized holding loss arising during the period	$	(9	)	$	2		$	(7	)
Net change	$	(9	)	$	2		$	(7	)
Cash Flow Hedges
Net unrealized gain arising during the period	$	24		$	(6	)	$	18
Amounts reclassified from AOCI	1			—			1
Net change	$	25		$	(6	)	$	19
Pension Plan
Unrealized gain arising during the period	$	1		$	—		$	1
Net change	$	1		$	—		$	1
For the Three Months Ended March 31, 2017
Available-for-Sale Investment Securities
Net unrealized holding gain arising during the period	$	2		$	(1	)	$	1
Net change	$	2		$	(1	)	$	1
Cash Flow Hedges
Net unrealized gain arising during the period	$	6		$	(3	)	$	3
Amounts reclassified from AOCI	5			(3		)	2
Net change	$	11		$	(6	)	$	5

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Income Taxes

3 Months Ended

Mar. 31, 2018

Income Tax Disclosure [Abstract]

Income Taxes

Income Taxes

The following table presents the calculation of the Company's effective income tax rate (dollars in millions, except effective income tax rate):
	For the Three Months Ended March 31,
	2018			2017
Income before income tax expense	$	856		$	868
Income tax expense	$	190		$	304
Effective income tax rate	22.2		%	35.0		%

Income tax expense and the effective tax rate decreased$114 million and 12.8%, respectively, for the three months ended March 31, 2018, as compared to the same period in 2017as a result of a reduction in the U.S. federal statutory income tax rate from 35% to 21% offset by other provisions of the TCJA. For the three months ended March 31, 2018, the effective tax rate was also favorably impacted by the resolution of certain tax matters.

The Company is subject to examination by the Internal Revenue Service ("IRS") and tax authorities in various state, local and foreign tax jurisdictions. 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 IRS is currently examining the years 2011-2015. At this time, the potential change in unrecognized tax benefits is not expected to be significant over the next 12 months. The Company believes that its reserves are sufficient to cover any tax, penalties and interest that would result from such examinations.

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Earnings Per Share

3 Months Ended

Mar. 31, 2018

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 millions, except per share amounts):
	For the Three Months Ended March 31,
	2018			2017
Numerator
Net income	$	666		$	564
Preferred stock dividends	(16		)	(9		)
Net income available to common stockholders	650			555
Income allocated to participating securities	(4		)	(4		)
Net income allocated to common stockholders	$	646		$	551
Denominator
Weighted-average shares of common stock outstanding	355			386
Weighted-average shares of common stock outstanding and common stock equivalents	355			386
Basic earnings per common share	$	1.82		$	1.43
Diluted earnings per common share	$	1.82		$	1.43

There were no anti-dilutive securities on the computation of diluted EPS for the three months ended March 31, 2018 and 2017.

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Capital Adequacy

3 Months Ended

Mar. 31, 2018

Regulatory Capital Requirements [Abstract]

Capital Adequacy

Capital Adequacy

The Company is subject to the capital adequacy guidelines of the Federal Reserve, and Discover Bank, the Company’s main banking subsidiary, is subject to various regulatory capital requirements as administered by 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 Discover Bank. Under capital adequacy guidelines and the regulatory framework for prompt corrective action, the Company and Discover Bank must meet specific capital guidelines that involve quantitative measures of assets, liabilities and certain off-balance sheet items, as calculated under regulatory guidelines. Capital amounts and classification are also subject to qualitative judgments by the regulators about components, risk weightings and other factors.

In 2013, the Federal Reserve, the Office of the Comptroller of the Currency, and the FDIC issued final capital rules under the Basel Committee’s December 2010 framework (referred to as “Basel III”) establishing a new comprehensive capital framework for U.S. banking organizations. The final capital rules ("Basel III rules") substantially revise Basel I rules regarding the risk-based capital requirements applicable to bank holding companies and depository institutions, including the Company. The Basel III rules became effective for the Company on January 1, 2015. This timing is based on the Company being classified as a "Standardized Approach" entity.

Among other things, the Basel III rules (i) introduced a new capital measure called Common Equity Tier 1 (“CET1”), (ii) specify that Tier 1 capital consists of CET1 and additional Tier 1 capital instruments meeting specified requirements, (iii) apply most deductions/adjustments to regulatory capital measures to CET1 and not to the other components of capital, thus potentially requiring higher levels of CET1 in order to meet minimum ratios and (iv) expand the scope of the deductions/adjustments from capital as compared to existing regulations.

The Basel III minimum capital ratios are as follows:

• 8.0% Total capital (i.e., Tier 1 plus Tier 2) to risk-weighted assets;

• 6.0% Tier 1 capital (i.e., CET1 plus Additional Tier 1) to risk-weighted assets;

• 4.0% Tier 1 capital to average consolidated assets as reported on consolidated financial statements (known as the “leverage ratio”); and

• 4.5% CET1 to risk-weighted assets.

As of March 31, 2018, the Company and Discover Bank met all Basel III minimum capital ratio requirements to which they were subject. The Company and Discover Bank also met the requirements to be considered "well-capitalized" under Regulation Y and prompt corrective action regulations, respectively, and there have been no conditions or events that management believes have changed the Company's or Discover Bank's category. To be categorized as “well-capitalized,” the Company and Discover Bank must maintain minimum capital ratios as set forth in the table below.

The following table shows the actual capital amounts and ratios of the Company and Discover Bank and comparisons of each to the regulatory minimum and “well-capitalized” requirements (dollars in millions):
	Actual				Minimum Capital Requirements			Capital Requirements To Be Classified as Well-Capitalized
	Amount		Ratio(1)		Amount		Ratio	Amount(2)		Ratio(2)
March 31, 2018
Total capital (to risk-weighted assets)
Discover Financial Services	$	11,901	14.0	%	$	6,792	≥8.0%	$	8,490	≥10.0%
Discover Bank	$	12,372	14.7	%	$	6,716	≥8.0%	$	8,395	≥10.0%
Tier 1 capital (to risk-weighted assets)
Discover Financial Services	$	10,644	12.5	%	$	5,094	≥6.0%	$	5,094	≥6.0%
Discover Bank	$	10,563	12.6	%	$	5,037	≥6.0%	$	6,716	≥8.0%
Tier 1 capital (to average assets)
Discover Financial Services	$	10,644	10.6	%	$	4,016	≥4.0%	N/A		N/A
Discover Bank	$	10,563	10.6	%	$	3,973	≥4.0%	$	4,967	≥5.0%
CET1 capital (to risk-weighted assets)
Discover Financial Services	$	10,081	11.9	%	$	3,820	≥4.5%	N/A		N/A
Discover Bank	$	10,563	12.6	%	$	3,778	≥4.5%	$	5,457	≥6.5%
December 31, 2017
Total capital (to risk-weighted assets)
Discover Financial Services	$	11,952	13.8	%	$	6,946	≥8.0%	$	8,683	≥10.0%
Discover Bank	$	12,364	14.4	%	$	6,872	≥8.0%	$	8,589	≥10.0%
Tier 1 capital (to risk-weighted assets)
Discover Financial Services	$	10,677	12.3	%	$	5,210	≥6.0%	$	5,210	≥6.0%
Discover Bank	$	10,533	12.3	%	$	5,154	≥6.0%	$	6,872	≥8.0%
Tier 1 capital (to average assets)
Discover Financial Services	$	10,677	10.8	%	$	3,949	≥4.0%	N/A		N/A
Discover Bank	$	10,533	10.8	%	$	3,912	≥4.0%	$	4,890	≥5.0%
CET1 capital (to risk-weighted assets)
Discover Financial Services	$	10,114	11.6	%	$	3,907	≥4.5%	N/A		N/A
Discover Bank	$	10,533	12.3	%	$	3,865	≥4.5%	$	5,583	≥6.5%

(1) Capital ratios are calculated based on the Basel III Standardized Approach rules, subject to applicable transition provisions.

(2) The Basel III rules do not establish well-capitalized thresholds for these measures for bank holding companies. Existing well-capitalized thresholds established in the Federal Reserve's Regulation Y have been included where available.

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Commitments, Contingencies and Guarantees

3 Months Ended

Mar. 31, 2018

Commitments Contingencies and Guarantees [Abstract]

Commitments, Contingencies and Guarantees

Commitments, Contingencies and Guarantees

In the normal course of business, the Company enters into a number of off-balance sheet commitments, transactions and obligations under guarantee arrangements that expose the Company to varying degrees of risk. The Company's commitments, contingencies and guarantee relationships are described below.

Commitments

Lease Commitments

The Company leases various office space and equipment under capital and non-cancelable operating leases, which expire at various dates through 2029. Future minimum payments on capital leases were not material at March 31, 2018. The following table shows future minimum payments on non-cancelable operating leases with original terms in excess of one year (dollars in millions):
	March 31, 2018
2018	$	10
2019	12
2020	11
2021	10
2022	7
Thereafter	41
Total minimum lease payments	$	91

Unused Credit Arrangements

At March 31, 2018, the Company had unused credit arrangements for loans of approximately $190.7 billion. Such arrangements arise primarily from agreements with customers for unused lines of credit on certain credit cards and certain other loan products, provided there is no violation of conditions in the related agreements. These arrangements, 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.

Contingencies

See Note 12: Litigation and Regulatory Matters for a description of potential liability arising from pending litigation or regulatory proceedings involving the Company.

Guarantees

The Company has obligations under certain guarantee arrangements, including contracts, indemnification agreements, and representations and warranties, 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.

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, and the principal amount of any student loan secured borrowings, plus any unpaid interest for the corresponding secured borrowings. The Company has recorded substantially all of the maximum potential amount of future payments in long-term borrowings on the Company’s condensed consolidated statements 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 sold loans it originated 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 was required by these investors to make certain representations and warranties relating to credit information, loan documentation and collateral. These representations and warranties may extend through the contractual life of the mortgage loan, even though the Company closed the mortgage origination business. Subsequent to the sale, if underwriting deficiencies, borrower fraud or documentation defects are discovered in individual mortgage loans, the Company may be obligated 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 March 31, 2018, this amount was not material and was included in accrued expenses and other liabilities on the condensed consolidated statements of financial condition.

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.

• Network Alliance Guarantee. Discover Network, Diners Club and PULSE have entered into contractual relationships with certain international payment networks in which DFS Services LLC retains the counterparty exposure if a network 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 potential counterparty defaults on its settlement and the time at which the Company disables the settlement of any further transactions for the defaulting party. 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, would be $164 million for merchant guarantees as of March 31, 2018. The maximum potential counterparty exposures to these settlement guarantees for ATM guarantees would be immaterial as of March 31, 2018. The maximum potential counterparty exposures for network alliance guarantees would be $33 million as of March 31, 2018.

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 March 31, 2018, the Company had not recorded any contingent liability in the consolidated financial statements for these counterparty exposures, and management believes that the probability of any payments under these arrangements is low.

Discover Network Merchant Chargeback Guarantees

The Company operates the Discover Network, issues payment cards and permits third parties to issue payment cards. 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. Losses related to merchant chargebacks were not material for the three months ended March 31, 2018 and 2017.

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 (in millions):
	For the Three Months Ended March 31,
	2018		2017
Aggregate sales transaction volume(1)	$	36,017	$	32,654

(1) 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 did not record any contingent liability in the condensed consolidated financial statements for merchant chargeback guarantees as of March 31, 2018 or December 31, 2017. 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. As of March 31, 2018 and December 31, 2017, the Company had escrow deposits and settlement withholdings of $9 million and $10 million, respectively, which are recorded in interest-bearing deposit accounts and accrued expenses and other liabilities on the Company's condensed consolidated statements of financial condition.

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Litigation and Regulatory Matters

3 Months Ended

Mar. 31, 2018

Loss Contingency [Abstract]

Litigation and Regulatory Matters

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 litigation process is not predictable and can lead to unexpected results. The Company contests liability and/or the amount of damages as appropriate in each pending matter.

The Company has historically offered its customers an arbitration clause in its customer agreements. The arbitration clause allows the Company and its customers to quickly and economically resolve disputes. Additionally, the arbitration clause has in some instances limited the costs of, and the Company’s exposure to, litigation. Future legal and regulatory challenges and prohibitions may cause the Company to discontinue its offering and use of such clauses. From time to time, the Company is involved in legal actions challenging its arbitration clause. Bills may be periodically introduced in Congress to directly or indirectly prohibit the use of pre-dispute arbitration clauses. On July 10, 2017, the Consumer Financial Protection Bureau (the "CFPB") issued a final arbitration rule (the "Arbitration Rule") that would have effectively banned consumer financial companies from including class action waivers in arbitration clauses. On November 1, 2017, a resolution of disapproval of the Arbitration Rule was signed into law and the Arbitration Rule was blocked from taking effect and cannot be reissued in substantially the same form, nor can a new rule that is substantially similar be issued unless specifically authorized by a law enacted after the date of the resolution of disapproval.

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, consumer regulatory, accounting, tax and other operational matters, some of which may result in significant adverse judgments, settlements, fines, penalties, injunctions, decreases in regulatory ratings, customer restitution or other relief, which could materially impact the Company's condensed consolidated financial statements, increase its cost of operations, or limit its ability to execute its business strategies and engage in certain business activities. For example, the Company is currently the subject of an action by the Federal Reserve with respect to anti-money laundering and related compliance programs as referred to below. This agreement followed the consent order that Discover Bank entered into with the FDIC on June 13, 2014 related to Discover Bank's anti-money laundering and related compliance programs. This consent order was terminated in August 2017. In addition, certain subsidiaries of the Company are subject to a consent order with the CFPB regarding certain student loan servicing practices, as described below. Pursuant to powers granted under federal banking laws, regulatory agencies have broad and sweeping discretion, and may assess civil money penalties, require changes to certain business practices or require customer restitution at any time. The existing supervisory action related to anti-money laundering and related laws and regulations will limit for a period of time the Company's ability to enter into certain types of acquisitions and make certain types of investments.

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 and regulatory settlement related expense was not material for the three months ended March 31, 2018 and 2017.

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 $140 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 condensed 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 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 May 26, 2015, the Company entered into a written agreement with the Federal Reserve Bank of Chicago where the Company agreed to enhance the Company’s enterprise-wide anti-money laundering and related compliance programs. The agreement does not include civil money penalties.

On July 22, 2015, the Company announced that its subsidiaries, Discover Bank, SLC and Discover Products Inc. (the “Discover Subsidiaries”), agreed to a consent order with the CFPB resolving the agency’s investigation with respect to certain student loan servicing practices. The CFPB’s investigation into these practices has been previously disclosed by the Company, initially in February 2014. The order required the Discover Subsidiaries to provide redress of approximately $16 million to consumers who may have been affected by the activities described in the order related to certain collection calls, overstatements of minimum payment due amounts in billing statements, and provision of interest paid information to consumers, and provide regulatory disclosures with respect to loans acquired in default. In addition, the Discover Subsidiaries were required to pay a $2.5 million civil money penalty to the CFPB. As required by the consent order, on October 19, 2015, the Discover Subsidiaries submitted to the CFPB a redress plan and a compliance plan designed to ensure that the Discover Subsidiaries provide redress and otherwise comply with the terms of the order.

On September 4, 2015, the District Attorney of Trinity County, California filed a protection products lawsuit against the Company in California state court (The People of the State of California Ex Rel, Eric L. Heryford, District Attorney, Trinity County v. Discover Financial Services, et al.). The District Attorney subsequently dismissed this lawsuit on February 19, 2016 and filed a new complaint in federal court in the Eastern District of California on March 4, 2016 alleging the same cause of action. An amended complaint was filed on March 25, 2016. The lawsuit asserts various claims under California's Unfair Competition Law with respect to the Company's marketing and administration of various protection products. Plaintiff seeks declaratory relief, statutory civil penalties, and attorneys’ fees. The Company filed a motion to dismiss the first amended complaint on April 26, 2016. The Company is not in a position at this time to assess the likely outcome or its exposure, if any, with respect to this matter, but will seek to vigorously defend against all claims asserted by the plaintiff.

On March 8, 2016, a class action lawsuit was filed against the Company, other credit card networks, other issuing banks, and EMVCo in the U.S. District Court for the Northern District of California (B&R Supermarket, Inc., d/b/a Milam’s Market, et al. v. Visa, Inc. et al.) alleging violations of the Sherman Antitrust Act, California's Cartwright Act, and unjust enrichment. Plaintiffs allege a conspiracy by defendants to shift fraud liability to merchants with the migration to the EMV security standard and chip technology. Plaintiffs assert joint and several liability among the defendants and seek unspecified damages, including treble damages, attorneys' fees, costs and injunctive relief. On July 15, 2016, plaintiffs filed an amended complaint that includes additional named plaintiffs, reasserts the original claims, and includes additional state law causes of action. The defendants filed motions to dismiss on August 5, 2016. On September 30, 2016, the court granted the motions to dismiss for certain issuing banks and EMVCo but denied the motions to dismiss filed by the networks, including the Company. In May 2017, while discovery was proceeding and after class certification was fully briefed but not yet ruled upon, the Court entered an order transferring the entire action to a federal court in New York that is presiding over certain related claims that are pending in the actions consolidated as MDL 1720. In June 2017, the federal court in New York declined to consolidate the B&R case with MDL 1720, but ordered the parties to coordinate discovery across the actions to the extent they involved related issues. On July 6, 2017, the Company requested permission to file a motion to dismiss the claims against it in the federal court in New York. On August 24, 2017, the Court held a status conference at which it set a briefing schedule on Discover’s motion to dismiss. In September 2017, Discover filed its motion to dismiss. On November 29, 2017, the Court heard argument on class certification and took the motion under advisement. On January 23, 2018, the Court heard argument on Discover's motion to dismiss. On March 11, 2018, the Court entered an order denying the plaintiffs' motion of class certification without prejudice to filing a renewed motion with additional detail on the proposed class period and alleged antitrust injuries. Plaintiffs have requested permission to file such a motion on July 16, 2018. Discovery is ongoing, and for most fact issues and defenses is scheduled to conclude on April 30, 2018, subject to a proposed extension through June 14, 2018 for certain discovery related to questions in the Court’s March 11, 2018 class certification order. The Company is not in a position at this time to assess the likely outcome or its exposure, if any, with respect to this matter, but will seek to vigorously defend against all claims asserted by the plaintiffs.

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Fair Value Measurements

3 Months Ended

Mar. 31, 2018

Fair Value Disclosures [Abstract]

Fair Value Measurements

Fair Value Measurements

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 Topic 820, Fair Value Measurement, provides a three-level hierarchy for classifying financial instruments, 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. It also 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.

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 millions):
	Quoted Price in Active Markets for Identical Assets  (Level 1)		Significant Other Observable Inputs  (Level 2)		Significant Unobservable Inputs  (Level 3)		Total
Balance at March 31, 2018
Assets
Fair value - OCI
U.S. Treasury securities	$	672	$	—	$	—	$	672
Residential mortgage-backed securities - Agency	—		668		—		668
Available-for-sale investment securities	$	672	$	668	$	—	$	1,340
Derivative financial instruments - cash flow hedges(1)	$	—	$	7	$	—	$	7
Fair value - Net income
Derivative financial instruments - fair value hedges(1)	$	—	$	3	$	—	$	3
Liabilities
Fair value - OCI
Derivative financial instruments - cash flow hedges(1)	$	—	$	1	$	—	$	1
Balance at December 31, 2017
Assets
Fair value - OCI
U.S. Treasury securities	$	672	$	—	$	—	$	672
Residential mortgage-backed securities - Agency	—		723		—		723
Available-for-sale investment securities	$	672	$	723	$	—	$	1,395
Derivative financial instruments - cash flow hedges(1)	$	—	$	2	$	—	$	2
Fair value - Net income
Derivative financial instruments - fair value hedges(1)	$	—	$	4	$	—	$	4
Liabilities
Fair value - OCI
Derivative financial instruments - cash flow hedges(1)	$	—	$	3	$	—	$	3

(1) Derivative instrument carrying values in an asset or liability position are presented as part of Other assets or Accrued expenses and other liabilities, respectively, in the Company's condensed consolidated statements of financial condition.

Fair value hedge derivative financial instruments in a liability position were immaterial at March 31, 2018 and December 31, 2017. There were no transfers between Levels 1 and 2 within the fair value hierarchy for the three months ended March 31, 2018 and 2017.

Available-for-Sale Investment Securities

Investment securities classified as available-for-sale consist of U.S. Treasury securities and residential mortgage-backed securities. The fair value estimates of investment securities classified as Level 1, consisting of U.S. Treasury securities, are determined based on quoted market prices for the same securities. The Company classifies residential mortgage-backed securities as Level 2, the fair value estimates of which 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 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 March 31, 2018, amounts reported in residential mortgage-backed securities reflect government-rated obligations issued by Fannie Mae, Freddie Mac and Ginnie Mae with a par value of $668 million, a weighted-average coupon of 2.81% and a weighted-average remaining maturity of three years.

Derivative Financial Instruments

The Company's derivative financial instruments consist of interest rate swaps and foreign exchange forward contracts. These instruments are classified as Level 2 as their fair values are estimated using proprietary pricing models, containing certain assumptions based on readily observable market-based inputs, including interest rate curves, option volatility and foreign currency forward and spot rates. 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 the 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 the observable market interest rate curves. The Company considers collateral and master netting agreements that mitigate credit exposure to counterparties in determining the counterparty credit risk valuation adjustment. The fair values of the currency instruments are valued comparing the contracted forward exchange rate pertaining to the specific contract maturities to the current market exchange rate.

The Company validates the fair value estimates of interest rate swaps primarily through comparison to the fair value estimates computed by the counterparties to each of 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 exchange forward contracts through independent calculation of the fair value estimates.

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 the initial recognition of the assets is applicable if one or more of the assets is determined to be impaired. During the three months ended March 31, 2018 and 2017, the Company had no material impairments related to these assets.

Financial Instruments Measured at Other Than Fair Value

In accordance with ASU 2016-01, Financial Instruments—Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities, the Company uses the exit price notion when measuring the fair value of financial instruments. See Note 1: Background and Basis of Presentation for additional information.

The following tables disclose the estimated fair value of the Company's financial assets and financial liabilities that are not required to be carried at fair value (dollars in millions):
	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 March 31, 2018
Assets
Amortized cost
States and political subdivisions of states	$	—	$	—	$	—	$	—	$	—
Residential mortgage-backed securities - Agency	—		200		—		200		203
Held-to-maturity investment securities	$	—	$	200	$	—	$	200	$	203
Net loan receivables	$	—	$	—	$	83,634	$	83,634	$	80,008
Carrying value approximates fair value(1)
Cash and cash equivalents	$	17,011	$	—	$	—	$	17,011	$	17,011
Restricted cash	$	87	$	—	$	—	$	87	$	87
Accrued interest receivables(2)	$	—	$	830	$	—	$	830	$	830
Liabilities
Amortized cost
Time deposits(3)	$	—	$	30,005	$	—	$	30,005	$	30,098
Long-term borrowings - owed to securitization investors	$	—	$	15,848	$	596	$	16,444	$	16,385
Other long-term borrowings	—		10,148		—		10,148		9,859
Long-term borrowings	$	—	$	25,996	$	596	$	26,592	$	26,244
Carrying value approximates fair value(1)
Accrued interest payables(2)	$	—	$	210	$	—	$	210	$	210
(1) The carrying values of these assets and liabilities approximate fair value due to the nature of their liquidity (i.e., due or payable in less than one year).
(2) Accrued interest receivable and payable carrying values are presented as part of Other assets or Accrued expenses and other liabilities, respectively, in the Company's
condensed consolidated statements of financial condition.
(3) Excludes deposits without contractually defined maturities for all periods presented.

The following tables disclose the estimated fair value of the Company's financial assets and financial liabilities that are not required to be carried at fair value (dollars in millions):
	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 December 31, 2017
Assets
Amortized cost
States and political subdivisions of states	$	—	$	1	$	—	$	1	$	1
Residential mortgage-backed securities - Agency	—		172		—		172		172
Held-to-maturity investment securities	$	—	$	173	$	—	$	173	$	173
Net loan receivables	$	—	$	—	$	85,108	$	85,108	$	81,627
Carrying value approximates fair value(1)
Cash and cash equivalents	$	13,306	$	—	$	—	$	13,306	$	13,306
Restricted cash	$	81	$	—	$	—	$	81	$	81
Accrued interest receivables(2)	$	—	$	818	$	—	$	818	$	818
Liabilities
Amortized cost
Time deposits(3)	$	—	$	29,848	$	—	$	29,848	$	29,752
Long-term borrowings - owed to securitization investors	$	—	$	15,851	$	640	$	16,491	$	16,536
Other long-term borrowings	—		10,293		—		10,293		9,790
Long-term borrowings	$	—	$	26,144	$	640	$	26,784	$	26,326
Carrying value approximates fair value(1)
Accrued interest payables(2)	$	—	$	214	$	—	$	214	$	214

(1) The carrying values of these assets and liabilities approximate fair value due to the nature of their liquidity (i.e., due or payable in less than one year).

(2) Accrued interest receivable and payable carrying values are presented as part of Other assets or Accrued expenses and other liabilities, respectively, in the Company's condensed consolidated statements of financial condition.

(3) Excludes deposits without contractually defined maturities for all periods presented.

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Derivatives and Hedging Activities

3 Months Ended

Mar. 31, 2018

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 foreign currency are not designated as hedges and do not qualify for hedge accounting.

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 related counterparties.

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. See Note 13: Fair Value Measurements for a description of the valuation methodologies of derivatives. Cash collateral posted and held balances are recorded in other assets and deposits, respectively, in the condensed consolidated statements of financial condition. Collateral amounts recorded in the condensed consolidated statements of financial condition are based on the net collateral posted or held position for each applicable legal entity's master netting arrangement with each counterparty. Certain cash collateral amounts associated with derivative positions that are cleared through an exchange are legally characterized as settlement of the derivative positions. Such collateral amounts are reflected as offsets to the associated derivatives balances recorded in other assets or in accrued expenses and other liabilities, instead of as collateral in other assets or deposits.

Derivatives Designated as Hedges

Derivatives designated and qualifying as a hedge of the exposure to variability in expected future cash flows arising from changes in interest rates, 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 interest payments on credit card securitized debt and deposits. The Company's outstanding cash flow hedges are for an initial maximum period of seven years for securitized debt and deposits. The derivatives are designated as hedges of the risk of changes in cash flows on the Company's LIBOR or Federal Funds rate-based interest payments, and qualify for hedge accounting in accordance with ASC Topic 815, Derivatives and Hedging (“ASC 815”).

Prior to adopting ASU 2017-12, the ineffective portion of the change in the fair value of derivatives designated as cash flow hedges, if any, was required to be separately measured and recognized directly in earnings. As a result of adopting ASU 2017-12, the entire change in the fair value of derivatives designated as cash flow hedges is recorded in OCI and is subsequently reclassified into earnings in the period that the hedged forecasted cash flows affect earnings. Amounts reported in AOCI related to derivatives at March 31, 2018 will be reclassified to interest expense as interest payments are accrued on certain of the Company's floating-rate securitized debt and deposits. During the next 12 months, the Company estimates it will reclassify $7 million of pretax benefit to interest expense 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. The Company uses interest rate swaps to manage its exposure to changes in fair value of certain fixed-rate long-term borrowings, including securitized debt and bank or other senior notes, and deposits attributable to changes in LIBOR, a benchmark interest rate as defined by ASC 815. 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 long-term borrowings and deposits relating to the risk being hedged are recorded in interest expense. The changes generally provide substantial offset to one another, with any difference in interest expense.

Derivatives Not Designated as Hedges

Foreign Exchange Forward Contracts

The Company has foreign exchange forward contracts that are economic hedges and are not designated as accounting hedges. The Company enters into foreign exchange forward contracts to manage foreign currency risk. Changes in the fair value of these contracts are recorded in other income.

Derivatives Cleared Through an Exchange

The legal characterization of cash variation margin payments on derivatives cleared through an exchange are legally considered settlement payments and are accounted for with corresponding derivative positions as one unit of account and not separately as collateral. With settlement payments on derivative positions cleared through this exchange reflected as offsets to the associated derivative asset and liability balances, the fair values of derivative instruments and collateral balances shown are generally reduced.

Derivatives Activity

The following table summarizes the fair value (including accrued interest) and outstanding notional amounts of derivative instruments and related collateral balances (dollars in millions):
	March 31, 2018									December 31, 2017
	Notional Amount		Number of Outstanding Derivative Contracts	Derivative Assets			Derivative Liabilities			Notional Amount		Derivative Assets			Derivative Liabilities
Derivatives designated as hedges
Interest rate swaps—cash flow hedge	$	3,000	6	$	7		$	1		$	3,800	$	2		$	3
Interest rate swaps—fair value hedge	$	7,230	9	3			—			$	7,333	4			—
Derivatives not designated as hedges
Foreign exchange forward contracts(1)	$	23	7	—			—			$	23	—			—
Total gross derivative assets/liabilities(2)				10			1					6			3
Less: Collateral held/posted(3)				(8		)	(1		)			(1		)	(3		)
Total net derivative assets/liabilities				$	2		$	—				$	5		$	—

(1) The foreign exchange forward contracts have notional amounts of EUR 6 million, GBP 5 million, SGD 1 million and INR 464 million as of March 31, 2018 and notional amounts of EUR 7 million, GBP 5 million, SGD 1 million and INR 464 million as of December 31, 2017.

(2) In addition to the derivatives disclosed in the table, the Company enters into forward contracts to purchase when-issued mortgage-backed securities as part of its community reinvestment initiatives. At March 31, 2018, the Company had one outstanding contract with a notional amount of $47 million and immaterial fair value. At December 31, 2017, the Company had one outstanding contract with a notional amount of $54 million and immaterial fair value.

(3) Collateral amounts, which consist of both cash and investment securities, are limited to the related derivative asset/liability balance and do not include excess collateral received/pledged.

The following amounts were recorded on the statements of financial condition related to cumulative basis adjustment for fair value hedges (dollars in millions):
	March 31, 2018
	Carrying Amount of the Hedged Assets (Liabilities)		Cumulative Amount of Fair Value Hedging Adjustment Included in the Carrying Amount of the Hedged Assets (Liabilities)
Long-term borrowings	$	7,027	$	157

The following table summarizes the impact of the derivative instruments on income and indicates where within the condensed consolidated financial statements such impact is reported (dollars in millions):
	Location and Amount of (Loss) Gain Recognized in Income
	Interest (Expense)
	Deposits			Long-Term Borrowings			Other Income
For the Three Months Ended March 31, 2018
Total amounts of income and expense line items presented in the statements of income in which the effects of fair value or cash flow hedges are recorded	$	(262	)	$	(207	)	$	29
The effects of cash flow and fair value hedging:
Loss on cash flow hedging relationship
Amounts reclassified from OCI into earnings	$	(1	)	$	—		$	—
Gain (loss) on fair value hedging relationship
Gain on hedged items	$	—		$	48		$	—
Loss on interest rate swaps	—			(52		)	—
Total loss on fair value hedges	$	—		$	(4	)	$	—
The effects of derivatives not designated in hedging relationships:
Loss on derivatives not designated as hedges	$	—		$	—		$	(1	)
For the Three Months Ended March 31, 2017
Total amounts of income and expense line items presented in the statements of income in which the effects of fair value or cash flow hedges are recorded	$	(191	)	$	(195	)	$	28
The effects of cash flow and fair value hedging:
Loss on cash flow hedging relationship
Amounts reclassified from OCI into earnings	$	(2	)	$	(3	)	$	—
Gain (loss) on fair value hedging relationship
Gain on hedged items	$	1		$	15		$	—
Loss on interest rate swaps	(1		)	(9		)	—
Total gain on fair value hedges	$	—		$	6		$	—

For the three months ended March 31, 2017, the loss on derivatives not designated as hedges was immaterial. For the impact of the derivative instruments on OCI, see Note 7: Accumulated Other Comprehensive Income.

Collateral Requirements and Credit-Risk Related Contingency Features

The Company has master netting arrangements and minimum collateral posting thresholds with its counterparties for its fair value and cash flow hedge interest rate swaps and foreign exchange forward contracts. The Company has not sought a legal opinion in relation to the enforceability of its master netting arrangements and, as such, does not report any of these positions on a net basis.Collateral is required by either the Company or its subsidiaries or the counterparty depending on the net fair value position of these derivatives held with that counterparty. The Company may also be required to post collateral with a counterparty for its fair value and cash flow hedge interest rate swaps depending on the credit rating it or Discover Bank receives from specified major credit rating agencies. Collateral receivable or payable amounts are generally not offset against the fair value of these derivatives, but are recorded separately in other assets or deposits. However, certain cash collateral amounts related to positions cleared through an exchange are reflected as offsets to the associated derivatives balances recorded in other assets and accrued expenses and other liabilities.

At March 31, 2018, Discover Bank’s credit rating met specified thresholds set by its counterparties. However, if its credit rating is reduced below investment grade, Discover Bank would be required to post additional collateral. The amount of additional collateral as of March 31, 2018 would have been $20 million. DFS (Parent Company) had no outstanding derivatives as of March 31, 2018, and therefore, no collateral was required.

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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Segment Disclosures

3 Months Ended

Mar. 31, 2018

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-branded credit cards issued to individuals on the Discover Network and other consumer products and services, including private student loans, personal loans, home equity loans, and other consumer lending and deposit products. The majority of Direct Banking revenues relate to interest income earned on the segment's loan products. Additionally, the Company’s credit card products generate substantially all revenues related to discount and interchange, protection 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 Network Partners business, which provides payment transaction processing and settlement services on the Discover Network. The majority of Payment Services revenues relate to transaction processing revenue from PULSE and royalty and licensee revenue 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:

• The Company aggregates operating segments when determining reportable segments.

• 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, with the exception of an allocation of direct and incremental costs driven by the Company's Payment Services segment.

• 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 between the operating segments in the information reviewed by the Company’s chief operating decision maker.

The following table presents segment data (dollars in millions):
	Direct Banking		Payment Services			Total
For the Three Months Ended March 31, 2018
Interest income
Credit card loans	$	2,090	$	—		$	2,090
Private student loans	147		—			147
PCI student loans	37		—			37
Personal loans	226		—			226
Other	69		—			69
Total interest income	2,569		—			2,569
Interest expense	469		—			469
Net interest income	2,100		—			2,100
Provision for loan losses	751		—			751
Other income	394		81			475
Other expense	932		36			968
Income before income tax expense	$	811	$	45		$	856
For the Three Months Ended March 31, 2017
Interest income
Credit card loans	$	1,876	$	—		$	1,876
Private student loans	124		—			124
PCI student loans	41		—			41
Personal loans	198		—			198
Other	39		—			39
Total interest income	2,278		—			2,278
Interest expense	386		—			386
Net interest income	1,892		—			1,892
Provision for loan losses	594		(8		)	586
Other income	375		72			447
Other expense	849		36			885
Income before income tax expense	$	824	$	44		$	868

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Revenue from Contracts with Customers

3 Months Ended

Mar. 31, 2018

Revenue from Contract with Customer [Abstract]

Revenue from Contracts with Customers

Revenue from Contracts with Customers

FASB ASC Topic 606, Revenue from Contracts with Customers, generally applies to the sales of any good or service for which no other specific accounting guidance is provided. ASC 606 defines a principles-based model under which revenue from a contract is allocated to the distinct performance obligations within the contract and recognized in income as each performance obligation is satisfied. The Company’s revenue that is subject to this model includes discount and interchange, protection products fees, transaction processing revenue, and amounts classified as other income.

The following table presents revenue from contracts with customers disaggregated by business segment and reconciles revenue from contracts with customers to total other income (dollars in millions):
	Direct Banking		Payment Services		Total
For the Three Months Ended March 31, 2018
Other income subject to ASC 606
Discount and interchange revenue, net(1)	$	242	$	12	$	254
Protection products	53		—		53
Transaction processing revenue	—		43		43
Other income	3		26		29
Total other income subject to ASC 606(2)	298		81		379
Other income not subject to ASC 606
Loan Fee Income	96		—		96
Total other income not subject to ASC 606	96		—		96
Total other income by operating segment	$	394	$	81	$	475
For the Three Months Ended March 31, 2017
Other income subject to ASC 606
Discount and interchange revenue, net(1)	$	223	$	10	$	233
Protection products	58		—		58
Transaction processing revenue	—		39		39
Other income	5		23		28
Total other income subject to ASC 606(2)	286		72		358
Other income not subject to ASC 606
Loan Fee Income	89		—		89
Total other income not subject to ASC 606	89		—		89
Total other income by operating segment	$	375	$	72	$	447

(1) Net of rewards, including Cashback Bonus rewards, of $392 million and $363 million for the three months ended March 31, 2018 and 2017, respectively.

(2) Excludes $1 million of deposit product fees that are reported within net interest income for the three months ended March 31, 2018. Deposit product fees were immaterial for the three months ended March 31, 2017.

Discount and Interchange Revenue

The Company earns discount revenue from fees charged to merchants with whom it has entered into card acceptance agreements for processing credit card purchase transactions. The Company earns acquirer interchange revenue primarily from merchant acquirers on all Discover Network card transactions and certain Diners Club transactions made by credit card customers at merchants with whom merchant acquirers have entered into card acceptance agreements for processing credit card purchase transactions. These card acceptance arrangements generally renew automatically and do not have fixed durations. Under these agreements, the Company stands ready to process payment transactions as and when each is presented to it. The Company earns discount, interchange and similar fees only if and when transactions are processed. Contractually defined per-transaction fee amounts typically apply to each type of transaction processed and are recognized as revenue at the time each transaction is captured for settlement. These fees are typically collected by the Company as part of the process of settling transactions daily with merchants and acquirers and are fully earned at the time settlement is made.

The Company pays issuer interchange to card-issuing entities that have entered into contractual arrangements to issue cards on the Discover Network and on certain transactions on the Diners Club network. This cost is contractually established and is based on the card-issuing organization’s transaction volume. The Company classifies this cost as a reduction of discount and interchange revenue. Costs of cardholder reward arrangements, including the Cashback Bonus reward program, are classified as reductions of discount and interchange revenue pursuant to guidance under ASC 606 governing consideration payable to a customer. For both issuer interchange and cardholder rewards, the Company accrues the cost at the time each underlying card transaction is captured for settlement.

Protection Products

The Company earns revenue related to fees received for marketing ancillary products and services, including payment protection and identity theft protection services, to its credit card customers. A portion of this revenue comprises amounts earned for arranging for the delivery of products offered by third-party service providers. The amount of revenue recorded is generally based on either a percentage of a customer’s outstanding balance or a flat fee, in either case assessed monthly, and is recognized as earned. These contracts are month-to-month arrangements that are cancellable at any time. The Company recognizes each monthly fee in the period to which the service or coverage relates.

Transaction Processing Revenue

Transaction processing revenue represents switch fees charged to financial institutions and merchants under network participation agreements for processing ATM, debit and POS transactions over the PULSE network, as well as various participation and membership fees. Network participation agreements generally renew automatically and do not have fixed durations, although the Company does enter into fixed-term pricing or incentive arrangements with certain network participants. The impact of such incentives is not material to the Company’s consolidated statements of income. Similar to discount and interchange fees, switch fees are contractually defined per-transaction fee amounts and are assessed and recognized as revenue at the time each transaction is captured for settlement. These fees are typically collected by the Company as part of the process of settling transactions daily with network participants. Membership and other participation fees are recognized over the periods to which each fee relates.

Other Income

Other income includes sales-based royalty revenues earned by Diners Club, merchant fees, certain payments from merchants related to reward programs, revenues from network partners and other miscellaneous revenue items. Sales-based royalty revenues are recognized as the related sales are reported by Diners franchisees. All remaining items of other income are recognized as the related performance obligations are satisfied.

Future Revenue Associated with Customer Contracts

For contracts under which the Company processes payment card transactions, the Company has the right to assess fees for services performed and to collect those fees through the settlement process. The Company generates essentially all of its discount and interchange revenue and transaction processing revenue, as well as some revenue reported as other income, through such contracts. There is no specified quantity of service promised in these contracts as the number of payment transactions is dependent upon cardholder behavior which is outside the control of the Company and its network customers (i.e., merchants, acquirers, issuers, and other network participants). As noted above, these contracts are typically without fixed durations and renew automatically. For these reasons, the Company does not make or disclose an estimate of revenue associated with performance obligations attributable to the remaining terms of these contracts. Future revenue associated with the Company’s sales-based royalty revenues earned from Diners Club licensees is similarly variable and open ended, and therefore the Company does not make or disclose an estimate of royalties associated with performance obligations attributable to the remaining terms of the licensing and royalty arrangements. Because of the nature of the services and the manner of collection associated with the majority of the Company's revenue from contracts with customers, material receivables or deferred revenues are not generated.

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Subsequent Events

3 Months Ended

Mar. 31, 2018

Subsequent Events [Abstract]

Subsequent Events

Subsequent Events

The Company has evaluated events and transactions that have occurred subsequent to March 31, 2018 and determined that there were no subsequent events that would require recognition or disclosure in the condensed consolidated financial statements.

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Background and Basis of Presentation (Policies)

3 Months Ended

Mar. 31, 2018

Organization, Consolidation and Presentation of Financial Statements [Abstract]

Basis of Presentation and Significant Accounting Policies

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 interim period. All such adjustments are of a normal, recurring nature.

Use of Estimates

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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Investments (Tables)

3 Months Ended

Mar. 31, 2018

Investments, Debt and Equity Securities [Abstract]

Schedule of Investment Securities

The Company’s investment securities consist of the following (dollars in millions):
	March 31, 2018		December 31, 2017
U.S. Treasury securities(1)	$	672	$	672
States and political subdivisions of states	—		1
Residential mortgage-backed securities - Agency(2)	871		895
Total investment securities	$	1,543	$	1,568

(1) Includes $38 million and $48 million of U.S. Treasury securities pledged as swap collateral as of March 31, 2018 and December 31, 2017, respectively.

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

Schedule of Amortized Cost, Gross Unrealized Gains, Gross Unrealized Losses and Fair Value

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 millions):
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
At March 31, 2018
Available-for-Sale Investment Securities(1)
U.S. Treasury securities	$	675	$	—	$	(3	)	$	672
Residential mortgage-backed securities - Agency	683		—		(15		)	668
Total available-for-sale investment securities	$	1,358	$	—	$	(18	)	$	1,340
Held-to-Maturity Investment Securities(2)
Residential mortgage-backed securities - Agency(3)	$	203	$	1	$	(4	)	$	200
Total held-to-maturity investment securities	$	203	$	1	$	(4	)	$	200
At December 31, 2017
Available-for-Sale Investment Securities(1)
U.S. Treasury securities	$	675	$	—	$	(3	)	$	672
Residential mortgage-backed securities - Agency	728		1		(6		)	723
Total available-for-sale investment securities	$	1,403	$	1	$	(9	)	$	1,395
Held-to-Maturity Investment Securities(2)
States and political subdivisions of states	$	1	$	—	$	—		$	1
Residential mortgage-backed securities - Agency(3)	172		1		(1		)	172
Total held-to-maturity investment securities	$	173	$	1	$	(1	)	$	173

(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.

Schedule of Fair Value of Securities in a Continuous Unrealized Loss Position for Less Than 12 Months and More Than 12 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 (dollars in millions):
	Number of Securities in a Loss Position	Less than 12 months					More than 12 months
		Fair Value		Unrealized Losses			Fair Value		Unrealized Losses
At March 31, 2018
Available-for-Sale Investment Securities
U.S. Treasury securities	1	$	—	$	—		$	672	$	(3	)
Residential mortgage-backed securities - Agency	31	$	546	$	(10	)	$	122	$	(5	)
Held-to-Maturity Investment Securities
Residential mortgage-backed securities - Agency	80	$	125	$	(2	)	$	40	$	(2	)
At December 31, 2017
Available-for-Sale Investment Securities
U.S. Treasury securities	1	$	—	$	—		$	672	$	(3	)
Residential mortgage-backed securities - Agency	27	$	457	$	(3	)	$	132	$	(3	)
Held-to-Maturity Investment Securities
Residential mortgage-backed securities - Agency	45	$	56	$	—		$	38	$	(1	)

Schedule of Maturities of Available-for-Sale Debt Securities and Held-to-Maturity Debt Securities

Maturities of available-for-sale debt securities and held-to-maturity debt securities are provided in the table below (dollars in millions):
	One Year or Less		After One Year Through Five Years		After Five Years Through Ten Years		After Ten Years		Total
At March 31, 2018
Available-for-Sale Investment Securities—Amortized Cost
U.S. Treasury securities	$	675	$	—	$	—	$	—	$	675
Residential mortgage-backed securities - Agency(1)	—		78		506		99		683
Total available-for-sale investment securities	$	675	$	78	$	506	$	99	$	1,358
Held-to-Maturity Investment Securities—Amortized Cost
Residential mortgage-backed securities - Agency(1)	$	—	$	—	$	—	$	203	$	203
Total held-to-maturity investment securities	$	—	$	—	$	—	$	203	$	203
Available-for-Sale Investment Securities—Fair Values
U.S. Treasury securities	$	672	$	—	$	—	$	—	$	672
Residential mortgage-backed securities - Agency(1)	—		77		493		98		668
Total available-for-sale investment securities	$	672	$	77	$	493	$	98	$	1,340
Held-to-Maturity Investment Securities—Fair Values
Residential mortgage-backed securities - Agency(1)	$	—	$	—	$	—	$	200	$	200
Total held-to-maturity investment securities	$	—	$	—	$	—	$	200	$	200

(1) Maturities of residential mortgage-backed securities are reflective of the contractual maturities of the investment.

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Loan Receivables (Tables)

3 Months Ended

Mar. 31, 2018

Loans and Leases Receivable Disclosure [Abstract]

Schedule of Loan Receivables

The Company's classes of receivables within the three portfolio segments are depicted in the table below (dollars in millions):
	March 31, 2018			December 31, 2017
Loan receivables
Credit card loans(1)	$	65,577		$	67,291
Other loans
Personal loans	7,307			7,374
Private student loans	7,416			7,076
Other	488			423
Total other loans	15,211			14,873
PCI loans(2)	1,956			2,084
Total loan receivables	82,744			84,248
Allowance for loan losses	(2,736		)	(2,621		)
Net loan receivables	$	80,008		$	81,627

(1) Amounts include $21.1 billion and $21.2 billion underlying investors’ interest in trust debt at March 31, 2018 and December 31, 2017, respectively, and $8.1 billion and $9.9 billion in seller's interest at March 31, 2018 and December 31, 2017, respectively. See Note 4: Credit Card and Student Loan Securitization Activities for additional information.

(2) Amounts include $712 million and $762 million of loans pledged as collateral against the notes issued from the Student Loan Corporation ("SLC") securitization trusts at March 31, 2018 and December 31, 2017, respectively. See Note 4: Credit Card and Student Loan Securitization Activities for additional information.

Schedule of Delinquent and Non-Accruing Loans

Information related to the delinquent and non-accruing loans in the Company’s loan portfolio 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 millions):
	30-89 Days Delinquent		90 or More Days Delinquent		Total Past Due		90 or More Days Delinquent and Accruing		Total Non-accruing(1)
At March 31, 2018
Credit card loans(2)	$	752	$	777	$	1,529	$	719	$	209
Other loans
Personal loans(3)	73		28		101		26		11
Private student loans (excluding PCI)(4)	118		49		167		48		10
Other	2		1		3		—		19
Total other loans (excluding PCI)	193		78		271		74		40
Total loan receivables (excluding PCI)	$	945	$	855	$	1,800	$	793	$	249
At December 31, 2017
Credit card loans(2)	$	781	$	751	$	1,532	$	693	$	203
Other loans
Personal loans(3)	73		30		103		28		10
Private student loans (excluding PCI)(4)	134		33		167		33		2
Other	3		1		4		—		18
Total other loans (excluding PCI)	210		64		274		61		30
Total loan receivables (excluding PCI)	$	991	$	815	$	1,806	$	754	$	233

(1) The Company estimates that the gross interest income that would have been recorded in accordance with the original terms of non-accruing credit card loans was $9 million and $8 million for the three months ended March 31, 2018 and 2017, 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. This amount was estimated based on customers' current balances and most recent interest rates.

(2) Credit card loans that are 90 or more days delinquent and accruing interest include $83 million and $72 million of loans accounted for as TDRs at March 31, 2018 and December 31, 2017, respectively.

(3) Personal loans that are 90 or more days delinquent and accruing interest include $4 million and $5 million of loans accounted for as TDRs at March 31, 2018 and December 31, 2017, respectively.

(4) Private student loans that are 90 or more days delinquent and accruing interest include $7 million and $5 million of loans accounted for as TDRs at March 31, 2018 and December 31, 2017, respectively.

Schedule of Net Charge-offs

Information related to the net charge-offs in the Company's loan portfolio 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 millions):
	For the Three Months Ended March 31,
	2018				2017
	Net Charge-offs		Net  Charge-off Rate(1)		Net Charge-offs		Net  Charge-off Rate(1)
Credit card loans	$	540	3.32	%	$	422	2.84	%
Other loans
Personal loans	73		4.03	%	51		3.16	%
Private student loans (excluding PCI)	22		1.17	%	14		0.83	%
Other	—		—	%	2		3.45	%
Total other loans	95		2.52	%	67		2.02	%
Net charge-offs (excluding PCI)	$	635	3.17	%	$	489	2.69	%
Net charge-offs (including PCI)	$	635	3.09	%	$	489	2.60	%

(1) Net charge-off rate represents net charge-off dollars (annualized) divided by average loans for the reporting period.

Schedule of Credit Risk Profile by FICO Score

The following table provides the most recent FICO scores available for the Company’s customers as a percentage of each class of loan receivables:
	Credit Risk Profile by FICO Score
	660 and  Above		Less than 660 or No Score
At March 31, 2018
Credit card loans	81	%	19	%
Personal loans	95	%	5	%
Private student loans (excluding PCI)(1)	95	%	5	%
At December 31, 2017
Credit card loans	82	%	18	%
Personal loans	95	%	5	%
Private student loans (excluding PCI)(1)	95	%	5	%

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

Schedule of Changes in the Allowance for Loan Losses

The following tables provide changes in the Company’s allowance for loan losses (dollars in millions):
	For the Three Months Ended March 31, 2018
	Credit Card			Personal Loans			Student Loans(1)			Other			Total
Balance at beginning of period	$	2,147		$	301		$	162		$	11		$	2,621
Additions
Provision for loan losses	645			73			31			2			751
Deductions
Charge-offs	(663		)	(81		)	(25		)	—			(769		)
Recoveries	123			8			3			—			134
Net charge-offs	(540		)	(73		)	(22		)	—			(635		)
Other(2)	—			—			(1		)	—			(1		)
Balance at end of period	$	2,252		$	301		$	170		$	13		$	2,736
	For the Three Months Ended March 31, 2017
	Credit Card			Personal Loans			Student Loans(1)			Other			Total
Balance at beginning of period	$	1,790		$	200		$	158		$	19		$	2,167
Additions
Provision for loan losses	524			58			12			(8		)	586
Deductions
Charge-offs	(535		)	(57		)	(17		)	(2		)	(611		)
Recoveries	113			6			3			—			122
Net charge-offs	(422		)	(51		)	(14		)	(2		)	(489		)
Balance at end of period	$	1,892		$	207		$	156		$	9		$	2,264

(1) Includes both PCI and non-PCI private student loans.

(2) Net change in reserves on PCI pools having no remaining non-accretable difference.

Schedule of Net Charge-offs of Interest and Fee Revenues on Loan Receivables

Net charge-offs of principal are recorded against the allowance for loan losses, as shown in the preceding table. Information regarding net charge-offs of interest and fee revenues on credit card and other loans is as follows (dollars in millions):
	For the Three Months Ended March 31,
	2018		2017
Interest and fees accrued subsequently charged off, net of recoveries (recorded as a reduction of interest income)	$	109	$	84
Fees accrued subsequently charged off, net of recoveries (recorded as a reduction to other income)	$	27	$	22

Schedule of Allowance for Loan Losses and Recorded Investment in its Loan Portfolio by Impairment Methodology

The following tables provide additional detail of the Company’s allowance for loan losses and recorded investment in its loan portfolio by impairment methodology (dollars in millions):
	Credit Card		Personal Loans		Student Loans(1)		Other Loans		Total
At March 31, 2018
Allowance for loans evaluated for impairment as
Collectively evaluated for impairment in accordance with ASC 450-20	$	2,007	$	266	$	122	$	5	$	2,400
Evaluated for impairment in accordance with ASC 310-10-35(2)(3)	245		35		21		8		309
Acquired with deteriorated credit quality, evaluated in accordance with ASC 310-30	—		—		27		—		27
Total allowance for loan losses	$	2,252	$	301	$	170	$	13	$	2,736
Recorded investment in loans evaluated for impairment as
Collectively evaluated for impairment in accordance with ASC 450-20	$	64,054	$	7,186	$	7,271	$	435	$	78,946
Evaluated for impairment in accordance with ASC 310-10-35(2)(3)	1,523		121		145		53		1,842
Acquired with deteriorated credit quality, evaluated in accordance with ASC 310-30	—		—		1,956		—		1,956
Total recorded investment	$	65,577	$	7,307	$	9,372	$	488	$	82,744
At December 31, 2017
Allowance for loans evaluated for impairment as
Collectively evaluated for impairment in accordance with ASC 450-20	$	1,921	$	269	$	112	$	4	$	2,306
Evaluated for impairment in accordance with ASC 310-10-35(2)(3)	226		32		21		7		286
Acquired with deteriorated credit quality, evaluated in accordance with ASC 310-30	—		—		29		—		29
Total allowance for loan losses	$	2,147	$	301	$	162	$	11	$	2,621
Recorded investment in loans evaluated for impairment as
Collectively evaluated for impairment in accordance with ASC 450-20	$	65,975	$	7,263	$	6,939	$	370	$	80,547
Evaluated for impairment in accordance with ASC 310-10-35(2)(3)	1,316		111		137		53		1,617
Acquired with deteriorated credit quality, evaluated in accordance with ASC 310-30	—		—		2,084		—		2,084
Total recorded investment	$	67,291	$	7,374	$	9,160	$	423	$	84,248

(1) Includes both PCI and non-PCI private student loans.

(2) Loan receivables evaluated for impairment in accordance with ASC 310-10-35 include credit card loans, personal loans and student loans collectively evaluated for impairment in accordance with ASC Subtopic 310-40, Receivables, which consists of modified loans accounted for as TDRs. Other loans are individually evaluated for impairment and generally do not represent TDRs.

(3) The unpaid principal balance of credit card loans was $1.3 billion and $1.1 billion at March 31, 2018 and December 31, 2017, respectively. The unpaid principal balance of personal loans was $121 million and $109 million at March 31, 2018 and December 31, 2017, respectively. The unpaid principal balance of student loans was $145 million and $135 million at March 31, 2018 and December 31, 2017, respectively. All loans accounted for as TDRs have a related allowance for loan losses.

Schedule of Troubled Debt Restructurings

Additional information about modified loans classified as TDRs is shown below (dollars in millions):
	Average recorded investment in loans		Interest income recognized during period loans were impaired(1)		Gross interest income that would have been recorded with original terms(2)
For the Three Months Ended March 31, 2018
Credit card loans(3)	$	1,413	$	34	$	26
Personal loans	$	117	$	3	$	1
Private student loans	$	142	$	3	$	—
For the Three Months Ended March 31, 2017
Credit card loans(3)	$	1,108	$	25	$	20
Personal loans	$	84	$	2	$	1
Private student loans	$	94	$	2	$	—

(1) The Company does not separately track interest income on loans in 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 additional 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 loans and the average interest rate earned on loans in the modification programs to the average loans in the modification programs.

(3) Includes credit card loans that were modified in TDRs, but are no longer enrolled in a TDR program due to noncompliance with the terms of the modification or due to successful completion of a program after which charging privileges may be reinstated based on customer-level evaluation. The average balance of credit card loans that were no longer enrolled in a TDR program was $399 million and $311 million, respectively, for the three months ended March 31, 2018 and 2017.

Schedule of Loans That Entered a Modification Program During the Period

The following table provides information on loans that entered a loan modification program during the period (dollars in millions):
	For the Three Months Ended March 31,
	2018			2017
	Number of Accounts	Balances		Number of Accounts	Balances
Accounts that entered a loan modification program during the period
Credit card loans	60,055	$	380	30,893	$	181
Personal loans	2,128	$	29	1,563	$	18
Private student loans	906	$	16	1,017	$	17

Schedule of Troubled Debt Restructurings That Subsequently Defaulted

The following table presents the carrying value of loans that experienced a payment default during the period that had been modified in a TDR during the 15 months preceding the end of each period (dollars in millions):
	For the Three Months Ended March 31,
	2018			2017
	Number of Accounts	Aggregated Outstanding Balances Upon Default		Number of Accounts	Aggregated Outstanding Balances Upon Default
TDRs that subsequently defaulted
Credit card loans(1)(2)	8,814	$	47	8,166	$	44
Personal loans(2)	575	$	8	307	$	4
Private student loans(3)	271	$	5	185	$	3

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

(2) For credit card loans and personal loans, a customer defaults from a modification program after two consecutive missed payments. The outstanding balance upon default is generally the loan balance at the end of the month prior to default.

(3) For student loans, defaults have been defined as loans that are 60 or more days delinquent. The outstanding balance upon default is generally the loan balance at the end of the month prior to default.

Schedule of Changes in Accretable Yield for the Acquired Loans

The following table provides changes in accretable yield for the acquired loans during each period (dollars in millions):
	For the Three Months Ended March 31,
	2018			2017
Balance at beginning of period	$	669		$	796
Accretion into interest income	(36		)	(41		)
Balance at end of period	$	633		$	755

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Credit Card and Student Loan Securitization Activities (Tables)

3 Months Ended

Mar. 31, 2018

Variable Interest Entities Disclosure [Abstract]

Schedule of Restricted Credit Card Securitized Assets [Text Block]

The carrying values of these restricted assets, which are presented on the Company’s condensed consolidated statements of financial condition as relating to securitization activities, are shown in the table below (dollars in millions):
	March 31, 2018			December 31, 2017
Restricted cash	$	29		$	26
Investors’ interests held by third-party investors	15,950			16,025
Investors’ interests held by wholly-owned subsidiaries of Discover Bank	5,126			5,133
Seller’s interest	8,106			9,861
Loan receivables(1)	29,182			31,019
Allowance for loan losses allocated to securitized loan receivables(1)	(1,006		)	(998		)
Net loan receivables	28,176			30,021
Other	6			5
Carrying value of assets of consolidated variable interest entities	$	28,211		$	30,052

(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.

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 statements of financial condition as relating to securitization activities, are shown in the table below (dollars in millions):
	March 31, 2018		December 31, 2017
Restricted cash	$	58	$	55
Student loan receivables	712		762
Carrying value of assets of consolidated variable interest entities	$	770	$	817

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Deposits (Tables)

3 Months Ended

Mar. 31, 2018

Deposits [Abstract]

Schedule of Interest Bearing Deposit Accounts

The following table provides a summary of interest-bearing deposit accounts (dollars in millions):
	March 31, 2018		December 31, 2017
Certificates of deposit in amounts less than $100,000	$	24,063	$	23,768
Certificates of deposit in amounts $100,000 or greater(1)	6,035		5,984
Savings deposits, including money market deposit accounts	30,432		28,413
Total interest-bearing deposits	$	60,530	$	58,165

(1) Includes $1.4 billion in certificates of deposit greater than $250,000, the Federal Deposit Insurance Corporation ("FDIC") insurance limit, as of March 31, 2018 and December 31, 2017.

Schedule of $100,000 or More Certificates of Deposit Maturities

The following table summarizes certificates of deposit in amounts of $100,000 or greater by contractual maturity (dollars in millions):
Maturity Period	March 31, 2018
Three months or less	$	778
Over three months through six months	830
Over six months through twelve months	1,739
Over twelve months	2,688
Total	$	6,035

Schedule of Certificates of Deposit Maturities

The following table summarizes certificates of deposit maturing over the remainder of this year, over each of the next four years, and thereafter (dollars in millions):
Year	March 31, 2018
2018	$	10,263
2019	7,408
2020	4,370
2021	2,912
2022	2,094
Thereafter	3,051
Total	$	30,098

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Long-Term Borrowings (Tables)

3 Months Ended

Mar. 31, 2018

Debt Disclosure [Abstract]

Schedule of Long-Term Borrowings and Weighted Average Interest Rates

Long-term borrowings consist of borrowings 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 outstanding balances (dollars in millions):
	March 31, 2018					December 31, 2017
	Maturity	Interest Rate	Weighted-Average Interest Rate	Outstanding Amount		Outstanding Amount
Securitized Debt
Fixed-rate asset-backed securities(1)	2018-2024	1.39%-3.03%	1.92%	$	9,478	$	8,888
Floating-rate asset-backed securities(2)(3)	2018-2024	2.01%-2.59%	2.25%	6,337		7,038
Total Discover Card Master Trust I and Discover Card Execution Note Trust				15,815		15,926
Floating-rate asset-backed securities(4)(5)(6)	2031-2036	1.89%-5.50%	3.45%	570		610
Total SLC Private Student Loan Trusts				570		610
Total long-term borrowings - owed to securitization investors				16,385		16,536
Discover Financial Services (Parent Company)
Fixed-rate senior notes	2019-2027	3.75%-10.25%	4.25%	2,718		2,710
Fixed-rate retail notes	2018-2031	2.85%-4.40%	3.71%	328		302
Discover Bank
Fixed-rate senior bank notes(1)	2018-2026	2.60%-4.25%	3.37%	6,115		6,080
Fixed-rate subordinated bank notes	2019-2020	7.00%-8.70%	7.49%	698		698
Total long-term borrowings				$	26,244	$	26,326

(1) The Company uses interest rate swaps to hedge portions of these long-term borrowings against changes in fair value attributable to changes in London Interbank Offered Rate ("LIBOR"). Use of these interest rate swaps impacts carrying value of the debt. See Note 14: Derivatives and Hedging Activities.

(2) Discover Card Execution Note Trust floating-rate asset-backed securities include issuances with the following interest rate terms: 1-month LIBOR + 23 to 60 basis points and Commercial paper rate + 55 basis points as of March 31, 2018.

(3) The Company uses interest rate swaps to manage its exposure to changes in interest rates related to future cash flows resulting from interest payments on a portion of these long-term borrowings. There is no impact on debt carrying value from use of these interest rate swaps. See Note 14: Derivatives and Hedging Activities.

(4) SLC Private Student Loan Trusts floating-rate asset-backed securities include issuances with the following interest rate terms: 3-month LIBOR + 17 to 45 basis points and Prime rate + 100 basis points as of March 31, 2018.

(5) 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.

(6) Includes $226 million of senior notes maturing in 2031 and $344 million of senior and subordinated notes maturing in 2036 as of March 31, 2018.

Schedule of Long-Term Borrowings Maturities

The following table summarizes long-term borrowings maturing over the remainder of this year, over each of the next four years, and thereafter (dollars in millions):
Year	March 31, 2018
2018	$	3,270
2019	5,988
2020	4,694
2021	1,036
2022	2,776
Thereafter	8,480
Total	$	26,244

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Accumulated Other Comprehensive Income (Tables)

3 Months Ended

Mar. 31, 2018

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

Schedule of Changes in Accumulated Other Comprehensive Income (Loss)

Changes in each component of AOCI were as follows (dollars in millions):
	Unrealized Loss on Available-for-Sale Investment Securities, Net of Tax			Gain (Loss) on Cash Flow Hedges, Net of Tax			Loss on Pension Plan, Net of Tax			AOCI
For the Three Months Ended March 31, 2018
Balance at December 31, 2017	$	(5	)	$	10		$	(157	)	$	(152	)
Net change	(7		)	19			1			13
Balance at March 31, 2018	$	(12	)	$	29		$	(156	)	$	(139	)
For the Three Months Ended March 31, 2017
Balance at December 31, 2016	$	(3	)	$	(13	)	$	(145	)	$	(161	)
Net change	1			5			—			6
Balance at March 31, 2017	$	(2	)	$	(8	)	$	(145	)	$	(155	)

Schedule of Other Comprehensive Income Before Reclassifications and Amounts Reclassified from AOCI

The table below presents each component of other comprehensive income (loss) ("OCI") before reclassifications and amounts reclassified from AOCI for each component of OCI before- and after-tax (dollars in millions):
	Before Tax			Tax Benefit (Expense)			Net of Tax
For the Three Months Ended March 31, 2018
Available-for-Sale Investment Securities
Net unrealized holding loss arising during the period	$	(9	)	$	2		$	(7	)
Net change	$	(9	)	$	2		$	(7	)
Cash Flow Hedges
Net unrealized gain arising during the period	$	24		$	(6	)	$	18
Amounts reclassified from AOCI	1			—			1
Net change	$	25		$	(6	)	$	19
Pension Plan
Unrealized gain arising during the period	$	1		$	—		$	1
Net change	$	1		$	—		$	1
For the Three Months Ended March 31, 2017
Available-for-Sale Investment Securities
Net unrealized holding gain arising during the period	$	2		$	(1	)	$	1
Net change	$	2		$	(1	)	$	1
Cash Flow Hedges
Net unrealized gain arising during the period	$	6		$	(3	)	$	3
Amounts reclassified from AOCI	5			(3		)	2
Net change	$	11		$	(6	)	$	5

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Income Taxes (Tables)

3 Months Ended

Mar. 31, 2018

Income Tax Disclosure [Abstract]

Schedule of Effective Income Tax Rate Calculation

The following table presents the calculation of the Company's effective income tax rate (dollars in millions, except effective income tax rate):
	For the Three Months Ended March 31,
	2018			2017
Income before income tax expense	$	856		$	868
Income tax expense	$	190		$	304
Effective income tax rate	22.2		%	35.0		%

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Earnings Per Share (Tables)

3 Months Ended

Mar. 31, 2018

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 millions, except per share amounts):
	For the Three Months Ended March 31,
	2018			2017
Numerator
Net income	$	666		$	564
Preferred stock dividends	(16		)	(9		)
Net income available to common stockholders	650			555
Income allocated to participating securities	(4		)	(4		)
Net income allocated to common stockholders	$	646		$	551
Denominator
Weighted-average shares of common stock outstanding	355			386
Weighted-average shares of common stock outstanding and common stock equivalents	355			386
Basic earnings per common share	$	1.82		$	1.43
Diluted earnings per common share	$	1.82		$	1.43

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Capital Adequacy (Tables)

3 Months Ended

Mar. 31, 2018

Regulatory Capital Requirements [Abstract]

Schedule of Minimum and Well-Capitalized Requirements

The following table shows the actual capital amounts and ratios of the Company and Discover Bank and comparisons of each to the regulatory minimum and “well-capitalized” requirements (dollars in millions):
	Actual				Minimum Capital Requirements			Capital Requirements To Be Classified as Well-Capitalized
	Amount		Ratio(1)		Amount		Ratio	Amount(2)		Ratio(2)
March 31, 2018
Total capital (to risk-weighted assets)
Discover Financial Services	$	11,901	14.0	%	$	6,792	≥8.0%	$	8,490	≥10.0%
Discover Bank	$	12,372	14.7	%	$	6,716	≥8.0%	$	8,395	≥10.0%
Tier 1 capital (to risk-weighted assets)
Discover Financial Services	$	10,644	12.5	%	$	5,094	≥6.0%	$	5,094	≥6.0%
Discover Bank	$	10,563	12.6	%	$	5,037	≥6.0%	$	6,716	≥8.0%
Tier 1 capital (to average assets)
Discover Financial Services	$	10,644	10.6	%	$	4,016	≥4.0%	N/A		N/A
Discover Bank	$	10,563	10.6	%	$	3,973	≥4.0%	$	4,967	≥5.0%
CET1 capital (to risk-weighted assets)
Discover Financial Services	$	10,081	11.9	%	$	3,820	≥4.5%	N/A		N/A
Discover Bank	$	10,563	12.6	%	$	3,778	≥4.5%	$	5,457	≥6.5%
December 31, 2017
Total capital (to risk-weighted assets)
Discover Financial Services	$	11,952	13.8	%	$	6,946	≥8.0%	$	8,683	≥10.0%
Discover Bank	$	12,364	14.4	%	$	6,872	≥8.0%	$	8,589	≥10.0%
Tier 1 capital (to risk-weighted assets)
Discover Financial Services	$	10,677	12.3	%	$	5,210	≥6.0%	$	5,210	≥6.0%
Discover Bank	$	10,533	12.3	%	$	5,154	≥6.0%	$	6,872	≥8.0%
Tier 1 capital (to average assets)
Discover Financial Services	$	10,677	10.8	%	$	3,949	≥4.0%	N/A		N/A
Discover Bank	$	10,533	10.8	%	$	3,912	≥4.0%	$	4,890	≥5.0%
CET1 capital (to risk-weighted assets)
Discover Financial Services	$	10,114	11.6	%	$	3,907	≥4.5%	N/A		N/A
Discover Bank	$	10,533	12.3	%	$	3,865	≥4.5%	$	5,583	≥6.5%

(1) Capital ratios are calculated based on the Basel III Standardized Approach rules, subject to applicable transition provisions.

(2) The Basel III rules do not establish well-capitalized thresholds for these measures for bank holding companies. Existing well-capitalized thresholds established in the Federal Reserve's Regulation Y have been included where available.

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Commitments, Contingencies and Guarantees (Tables)

3 Months Ended

Mar. 31, 2018

Guarantor Obligations [Line Items]

Schedule of Lease Commitments

The Company leases various office space and equipment under capital and non-cancelable operating leases, which expire at various dates through 2029. Future minimum payments on capital leases were not material at March 31, 2018. The following table shows future minimum payments on non-cancelable operating leases with original terms in excess of one year (dollars in millions):
	March 31, 2018
2018	$	10
2019	12
2020	11
2021	10
2022	7
Thereafter	41
Total minimum lease payments	$	91

Merchant Chargeback Guarantees [Member]

Guarantor Obligations [Line Items]

Schedule of Maximum Potential Counterparty Exposures Related to Settlement Guarantees and Merchant Chargeback Guarantee

The table below summarizes certain information regarding merchant chargeback guarantees (in millions):
	For the Three Months Ended March 31,
	2018		2017
Aggregate sales transaction volume(1)	$	36,017	$	32,654

(1) 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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Fair Value Measurements (Tables)

3 Months Ended

Mar. 31, 2018

Fair Value Disclosures [Abstract]

Schedule of 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 millions):
	Quoted Price in Active Markets for Identical Assets  (Level 1)		Significant Other Observable Inputs  (Level 2)		Significant Unobservable Inputs  (Level 3)		Total
Balance at March 31, 2018
Assets
Fair value - OCI
U.S. Treasury securities	$	672	$	—	$	—	$	672
Residential mortgage-backed securities - Agency	—		668		—		668
Available-for-sale investment securities	$	672	$	668	$	—	$	1,340
Derivative financial instruments - cash flow hedges(1)	$	—	$	7	$	—	$	7
Fair value - Net income
Derivative financial instruments - fair value hedges(1)	$	—	$	3	$	—	$	3
Liabilities
Fair value - OCI
Derivative financial instruments - cash flow hedges(1)	$	—	$	1	$	—	$	1
Balance at December 31, 2017
Assets
Fair value - OCI
U.S. Treasury securities	$	672	$	—	$	—	$	672
Residential mortgage-backed securities - Agency	—		723		—		723
Available-for-sale investment securities	$	672	$	723	$	—	$	1,395
Derivative financial instruments - cash flow hedges(1)	$	—	$	2	$	—	$	2
Fair value - Net income
Derivative financial instruments - fair value hedges(1)	$	—	$	4	$	—	$	4
Liabilities
Fair value - OCI
Derivative financial instruments - cash flow hedges(1)	$	—	$	3	$	—	$	3

(1) Derivative instrument carrying values in an asset or liability position are presented as part of Other assets or Accrued expenses and other liabilities, respectively, in the Company's condensed consolidated statements of financial condition.

Schedule of Financial Instruments Measured at Other Than Fair Value

The following tables disclose the estimated fair value of the Company's financial assets and financial liabilities that are not required to be carried at fair value (dollars in millions):
	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 March 31, 2018
Assets
Amortized cost
States and political subdivisions of states	$	—	$	—	$	—	$	—	$	—
Residential mortgage-backed securities - Agency	—		200		—		200		203
Held-to-maturity investment securities	$	—	$	200	$	—	$	200	$	203
Net loan receivables	$	—	$	—	$	83,634	$	83,634	$	80,008
Carrying value approximates fair value(1)
Cash and cash equivalents	$	17,011	$	—	$	—	$	17,011	$	17,011
Restricted cash	$	87	$	—	$	—	$	87	$	87
Accrued interest receivables(2)	$	—	$	830	$	—	$	830	$	830
Liabilities
Amortized cost
Time deposits(3)	$	—	$	30,005	$	—	$	30,005	$	30,098
Long-term borrowings - owed to securitization investors	$	—	$	15,848	$	596	$	16,444	$	16,385
Other long-term borrowings	—		10,148		—		10,148		9,859
Long-term borrowings	$	—	$	25,996	$	596	$	26,592	$	26,244
Carrying value approximates fair value(1)
Accrued interest payables(2)	$	—	$	210	$	—	$	210	$	210
(1) The carrying values of these assets and liabilities approximate fair value due to the nature of their liquidity (i.e., due or payable in less than one year).
(2) Accrued interest receivable and payable carrying values are presented as part of Other assets or Accrued expenses and other liabilities, respectively, in the Company's
condensed consolidated statements of financial condition.
(3) Excludes deposits without contractually defined maturities for all periods presented.

The following tables disclose the estimated fair value of the Company's financial assets and financial liabilities that are not required to be carried at fair value (dollars in millions):
	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 December 31, 2017
Assets
Amortized cost
States and political subdivisions of states	$	—	$	1	$	—	$	1	$	1
Residential mortgage-backed securities - Agency	—		172		—		172		172
Held-to-maturity investment securities	$	—	$	173	$	—	$	173	$	173
Net loan receivables	$	—	$	—	$	85,108	$	85,108	$	81,627
Carrying value approximates fair value(1)
Cash and cash equivalents	$	13,306	$	—	$	—	$	13,306	$	13,306
Restricted cash	$	81	$	—	$	—	$	81	$	81
Accrued interest receivables(2)	$	—	$	818	$	—	$	818	$	818
Liabilities
Amortized cost
Time deposits(3)	$	—	$	29,848	$	—	$	29,848	$	29,752
Long-term borrowings - owed to securitization investors	$	—	$	15,851	$	640	$	16,491	$	16,536
Other long-term borrowings	—		10,293		—		10,293		9,790
Long-term borrowings	$	—	$	26,144	$	640	$	26,784	$	26,326
Carrying value approximates fair value(1)
Accrued interest payables(2)	$	—	$	214	$	—	$	214	$	214

(1) The carrying values of these assets and liabilities approximate fair value due to the nature of their liquidity (i.e., due or payable in less than one year).

(2) Accrued interest receivable and payable carrying values are presented as part of Other assets or Accrued expenses and other liabilities, respectively, in the Company's condensed consolidated statements of financial condition.

(3) Excludes deposits without contractually defined maturities for all periods presented.

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Derivatives and Hedging Activities (Tables)

3 Months Ended

Mar. 31, 2018

Derivative Instruments and Hedging Activities Disclosure [Abstract]

Schedule of Fair Value and Outstanding Notional Amounts of Derivative Instruments and Related Collateral Balances

The following table summarizes the fair value (including accrued interest) and outstanding notional amounts of derivative instruments and related collateral balances (dollars in millions):
	March 31, 2018									December 31, 2017
	Notional Amount		Number of Outstanding Derivative Contracts	Derivative Assets			Derivative Liabilities			Notional Amount		Derivative Assets			Derivative Liabilities
Derivatives designated as hedges
Interest rate swaps—cash flow hedge	$	3,000	6	$	7		$	1		$	3,800	$	2		$	3
Interest rate swaps—fair value hedge	$	7,230	9	3			—			$	7,333	4			—
Derivatives not designated as hedges
Foreign exchange forward contracts(1)	$	23	7	—			—			$	23	—			—
Total gross derivative assets/liabilities(2)				10			1					6			3
Less: Collateral held/posted(3)				(8		)	(1		)			(1		)	(3		)
Total net derivative assets/liabilities				$	2		$	—				$	5		$	—

(1) The foreign exchange forward contracts have notional amounts of EUR 6 million, GBP 5 million, SGD 1 million and INR 464 million as of March 31, 2018 and notional amounts of EUR 7 million, GBP 5 million, SGD 1 million and INR 464 million as of December 31, 2017.

(2) In addition to the derivatives disclosed in the table, the Company enters into forward contracts to purchase when-issued mortgage-backed securities as part of its community reinvestment initiatives. At March 31, 2018, the Company had one outstanding contract with a notional amount of $47 million and immaterial fair value. At December 31, 2017, the Company had one outstanding contract with a notional amount of $54 million and immaterial fair value.

(3) Collateral amounts, which consist of both cash and investment securities, are limited to the related derivative asset/liability balance and do not include excess collateral received/pledged.

Schedule of Hedged Items in Fair Value Hedging Relationship

The following amounts were recorded on the statements of financial condition related to cumulative basis adjustment for fair value hedges (dollars in millions):
	March 31, 2018
	Carrying Amount of the Hedged Assets (Liabilities)		Cumulative Amount of Fair Value Hedging Adjustment Included in the Carrying Amount of the Hedged Assets (Liabilities)
Long-term borrowings	$	7,027	$	157

Schedule of Impact of the Derivative Instruments on Income and Other Comprehensive Income

The following table summarizes the impact of the derivative instruments on income and indicates where within the condensed consolidated financial statements such impact is reported (dollars in millions):
	Location and Amount of (Loss) Gain Recognized in Income
	Interest (Expense)
	Deposits			Long-Term Borrowings			Other Income
For the Three Months Ended March 31, 2018
Total amounts of income and expense line items presented in the statements of income in which the effects of fair value or cash flow hedges are recorded	$	(262	)	$	(207	)	$	29
The effects of cash flow and fair value hedging:
Loss on cash flow hedging relationship
Amounts reclassified from OCI into earnings	$	(1	)	$	—		$	—
Gain (loss) on fair value hedging relationship
Gain on hedged items	$	—		$	48		$	—
Loss on interest rate swaps	—			(52		)	—
Total loss on fair value hedges	$	—		$	(4	)	$	—
The effects of derivatives not designated in hedging relationships:
Loss on derivatives not designated as hedges	$	—		$	—		$	(1	)
For the Three Months Ended March 31, 2017
Total amounts of income and expense line items presented in the statements of income in which the effects of fair value or cash flow hedges are recorded	$	(191	)	$	(195	)	$	28
The effects of cash flow and fair value hedging:
Loss on cash flow hedging relationship
Amounts reclassified from OCI into earnings	$	(2	)	$	(3	)	$	—
Gain (loss) on fair value hedging relationship
Gain on hedged items	$	1		$	15		$	—
Loss on interest rate swaps	(1		)	(9		)	—
Total gain on fair value hedges	$	—		$	6		$	—

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Segment Disclosures (Tables)

3 Months Ended

Mar. 31, 2018

Segment Reporting [Abstract]

Schedule of Segment Disclosures

The following table presents segment data (dollars in millions):
	Direct Banking		Payment Services			Total
For the Three Months Ended March 31, 2018
Interest income
Credit card loans	$	2,090	$	—		$	2,090
Private student loans	147		—			147
PCI student loans	37		—			37
Personal loans	226		—			226
Other	69		—			69
Total interest income	2,569		—			2,569
Interest expense	469		—			469
Net interest income	2,100		—			2,100
Provision for loan losses	751		—			751
Other income	394		81			475
Other expense	932		36			968
Income before income tax expense	$	811	$	45		$	856
For the Three Months Ended March 31, 2017
Interest income
Credit card loans	$	1,876	$	—		$	1,876
Private student loans	124		—			124
PCI student loans	41		—			41
Personal loans	198		—			198
Other	39		—			39
Total interest income	2,278		—			2,278
Interest expense	386		—			386
Net interest income	1,892		—			1,892
Provision for loan losses	594		(8		)	586
Other income	375		72			447
Other expense	849		36			885
Income before income tax expense	$	824	$	44		$	868

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Revenue from Contracts with Customers (Tables)

3 Months Ended

Mar. 31, 2018

Revenue from Contract with Customer [Abstract]

Disaggregation of Revenue [Table Text Block]

The following table presents revenue from contracts with customers disaggregated by business segment and reconciles revenue from contracts with customers to total other income (dollars in millions):
	Direct Banking		Payment Services		Total
For the Three Months Ended March 31, 2018
Other income subject to ASC 606
Discount and interchange revenue, net(1)	$	242	$	12	$	254
Protection products	53		—		53
Transaction processing revenue	—		43		43
Other income	3		26		29
Total other income subject to ASC 606(2)	298		81		379
Other income not subject to ASC 606
Loan Fee Income	96		—		96
Total other income not subject to ASC 606	96		—		96
Total other income by operating segment	$	394	$	81	$	475
For the Three Months Ended March 31, 2017
Other income subject to ASC 606
Discount and interchange revenue, net(1)	$	223	$	10	$	233
Protection products	58		—		58
Transaction processing revenue	—		39		39
Other income	5		23		28
Total other income subject to ASC 606(2)	286		72		358
Other income not subject to ASC 606
Loan Fee Income	89		—		89
Total other income not subject to ASC 606	89		—		89
Total other income by operating segment	$	375	$	72	$	447

(1) Net of rewards, including Cashback Bonus rewards, of $392 million and $363 million for the three months ended March 31, 2018 and 2017, respectively.

(2) Excludes $1 million of deposit product fees that are reported within net interest income for the three months ended March 31, 2018. Deposit product fees were immaterial for the three months ended March 31, 2017.

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Background and Basis of Presentation Background and Basis of Presentation (Narrative) (Details)	3 Months Ended
	Mar. 31, 2018 segment
Organization, Consolidation and Presentation of Financial Statements [Abstract]
Number of reportable segments (in number of segments)	2

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Investments Investments (Narrative) (Details) - USD ($) $ in Millions	3 Months Ended
	Mar. 31, 2018	Mar. 31, 2017	Dec. 31, 2017
Investment Holdings [Line Items]
Other than Temporary Impairment Losses, Investments, Portion Recognized in Earnings, Net	$ 0	$ 0
Proceeds from Sale of Available-for-sale Securities, Debt	0	0
Available-for-sale Securities, Gross Realized Gain (Loss)	0	$ 0
Amortization Method Qualified Affordable Housing Project Investments	279		$ 288
Qualified Affordable Housing Project Investments, Commitment	66		66
Other Assets [Member] | Community Reinvestment Act [Member]
Investment Holdings [Line Items]
Equity Method Investments	286		297
Other Liabilities [Member] | Community Reinvestment Act [Member]
Investment Holdings [Line Items]
Loss Contingency Accrual	$ 66		$ 66

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Investments (Schedule of Investment Securities) (Details) - USD ($) $ in Millions		Mar. 31, 2018	Dec. 31, 2017
Investment Holdings [Line Items]
Investment securities		$ 1,543	$ 1,568
U.S. Treasury Securities [Member]
Investment Holdings [Line Items]
Investment securities	[1]	672	672
Derivative collateral		38	48
States and Political Subdivisions of States [Member]
Investment Holdings [Line Items]
Investment securities		0	1
Residential Mortgage-Backed Securities - Agency [Member]
Investment Holdings [Line Items]
Investment securities	[2]	$ 871	$ 895

[1] Includes $38 million and $48 million of U.S. Treasury securities pledged as swap collateral as of March 31, 2018 and December 31, 2017, respectively.

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

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Investments (Schedule of Amortized Cost, Gross Unrealized Gains, Gross Unrealized Losses and Fair Value) (Details) - USD ($) $ in Millions		Mar. 31, 2018		Dec. 31, 2017
Investment Holdings [Line Items]
Available-for-sale investment securities, amortized cost	[1]	$ 1,358		$ 1,403
Available-for-sale investment securities, gross unrealized gains	[1]	0		1
Available-for-sale investment securities, gross unrealized losses	[1]	(18)		(9)
Available-for-sale investment securities, fair value	[1]	1,340		1,395
Held-to-maturity investment securities, amortized cost	[2]	203		173
Held-to-maturity investment securities, gross unrealized gains	[2]	1		1
Held-to-maturity investment securities, gross unrealized losses	[2]	(4)		(1)
Held-to-maturity investment securities, fair value	[2]	200		173
U.S. Treasury Securities [Member]
Investment Holdings [Line Items]
Available-for-sale investment securities, amortized cost	[1]	675		675
Available-for-sale investment securities, gross unrealized gains	[1]	0		0
Available-for-sale investment securities, gross unrealized losses	[1]	(3)		(3)
Available-for-sale investment securities, fair value	[1]	672		672
Residential Mortgage-Backed Securities - Agency [Member]
Investment Holdings [Line Items]
Available-for-sale investment securities, amortized cost	[1]	683	[3]	728
Available-for-sale investment securities, gross unrealized gains	[1]	0		1
Available-for-sale investment securities, gross unrealized losses	[1]	(15)		(6)
Available-for-sale investment securities, fair value	[1]	668	[3]	723
Held-to-maturity investment securities, amortized cost	[2],[4]	203	[3]	172
Held-to-maturity investment securities, gross unrealized gains	[2],[4]	1		1
Held-to-maturity investment securities, gross unrealized losses	[2],[4]	(4)		(1)
Held-to-maturity investment securities, fair value	[2],[4]	$ 200	[3]	172
States and Political Subdivisions of States [Member]
Investment Holdings [Line Items]
Held-to-maturity investment securities, amortized cost	[2]			1
Held-to-maturity investment securities, gross unrealized gains	[2]			0
Held-to-maturity investment securities, gross unrealized losses	[2]			0
Held-to-maturity investment securities, fair value	[2]			$ 1

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

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

[3] Maturities of residential mortgage-backed securities are reflective of the contractual maturities of the investment.

[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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Investments (Schedule of Fair Value of Securities in a Continuous Unrealized Loss Position for Less Than 12 Months and More Than 12 Months) (Details) $ in Millions	Mar. 31, 2018 USD ($) securities	Dec. 31, 2017 USD ($) securities
U.S. Treasury Securities [Member]
Investment Holdings [Line Items]
Available-for-sale investment securities, number of securities in a loss position (in securities) | securities	1	1
Available-for-sale investment securities, continuous unrealized loss position, less than 12 months, fair value	$ 0	$ 0
Available-for-sale investment securities, continuous unrealized loss position, less than 12 months, unrealized losses	0	0
Available-for-sale Securities, Continuous Unrealized Loss Position, Twelve Months or Longer, Fair Value	672	672
Available-for-sale Securities, Continuous Unrealized Loss Position, 12 Months or Longer, Accumulated Loss	$ (3)	$ (3)
Residential Mortgage-Backed Securities - Agency [Member]
Investment Holdings [Line Items]
Available-for-sale investment securities, number of securities in a loss position (in securities) | securities	31	27
Available-for-sale investment securities, continuous unrealized loss position, less than 12 months, fair value	$ 546	$ 457
Available-for-sale investment securities, continuous unrealized loss position, less than 12 months, unrealized losses	(10)	(3)
Available-for-sale Securities, Continuous Unrealized Loss Position, Twelve Months or Longer, Fair Value	122	132
Available-for-sale Securities, Continuous Unrealized Loss Position, 12 Months or Longer, Accumulated Loss	$ (5)	$ (3)
Held-to-maturity, Securities in Unrealized Loss Positions, Qualitative Disclosure, Number of Positions | securities	80	45
Held-to-maturity Securities, Continuous Unrealized Loss Position, Less than Twelve Months, Fair Value	$ 125	$ 56
Held-to-maturity Securities, Continuous Unrealized Loss Position, Less than 12 Months, Accumulated Loss	(2)	0
Held-to-maturity Securities, Continuous Unrealized Loss Position, Twelve Months or Longer, Fair Value	40	38
Held-to-maturity Securities, Continuous Unrealized Loss Position, 12 Months or Longer, Accumulated Loss	$ (2)	$ (1)

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Investments (Schedule of Maturities of Available-for-Sale Debt Securities and Held-to-Maturity Debt Securities) (Details) - USD ($) $ in Millions		Mar. 31, 2018		Dec. 31, 2017
Investment Holdings [Line Items]
Available-for-sale investment securities, debt maturities, one year or less, amortized cost		$ 675
Available-for-sale investment securities, debt maturities, after one year through five years, amortized cost		78
Available-for-sale investment securities, debt maturities, after five years through ten years, amortized cost		506
Available-for-sale investment securities, debt maturities, after ten years, amortized cost		99
Available-for-sale investment securities, amortized cost	[1]	1,358		$ 1,403
Held-to-maturity investment securities, debt maturities, one year or less, amortized cost		0
Held-to-maturity investment securities, debt maturities, after one year through five years, amortized cost		0
Held-to-maturity investment securities, debt maturities, after five years through ten years, amortized cost		0
Held-to-maturity investment securities, debt maturities, after ten years, amortized cost		203
Held-to-maturity investment securities, amortized cost	[2]	203		173
Available-for-sale investment securities, debt maturities, one year or less, fair value		672
Available-for-sale investment securities, debt maturities, after one year through five years, fair value		77
Available-for-sale investment securities, debt maturities, after five years through ten years, fair value		493
Available-for-sale investment securities, debt maturities, after ten years, fair value		98
Available-for-sale investment securities, fair value	[1]	1,340		1,395
Held-to-maturity investment securities, debt maturities, one year or less, fair value		0
Held-to-maturity investment securities, debt maturities, after one year through five years, fair value		0
Held-to-maturity investment securities, debt maturities, after five years through ten years, fair value		0
Held-to-maturity investment securities, debt maturities, after ten years, fair value		200
Held-to-maturity investment securities, fair value	[2]	200		173
U.S. Treasury Securities [Member]
Investment Holdings [Line Items]
Available-for-sale investment securities, debt maturities, one year or less, amortized cost		675
Available-for-sale investment securities, debt maturities, after one year through five years, amortized cost		0
Available-for-sale investment securities, debt maturities, after five years through ten years, amortized cost		0
Available-for-sale investment securities, debt maturities, after ten years, amortized cost		0
Available-for-sale investment securities, amortized cost	[1]	675		675
Available-for-sale investment securities, debt maturities, one year or less, fair value		672
Available-for-sale investment securities, debt maturities, after one year through five years, fair value		0
Available-for-sale investment securities, debt maturities, after five years through ten years, fair value		0
Available-for-sale investment securities, debt maturities, after ten years, fair value		0
Available-for-sale investment securities, fair value	[1]	672		672
Residential Mortgage-Backed Securities - Agency [Member]
Investment Holdings [Line Items]
Available-for-sale investment securities, debt maturities, one year or less, amortized cost	[3]	0
Available-for-sale investment securities, debt maturities, after one year through five years, amortized cost	[3]	78
Available-for-sale investment securities, debt maturities, after five years through ten years, amortized cost	[3]	506
Available-for-sale investment securities, debt maturities, after ten years, amortized cost	[3]	99
Available-for-sale investment securities, amortized cost	[1]	683	[3]	728
Held-to-maturity investment securities, debt maturities, one year or less, amortized cost	[3]	0
Held-to-maturity investment securities, debt maturities, after one year through five years, amortized cost	[3]	0
Held-to-maturity investment securities, debt maturities, after five years through ten years, amortized cost	[3]	0
Held-to-maturity investment securities, debt maturities, after ten years, amortized cost	[3]	203
Held-to-maturity investment securities, amortized cost	[2],[4]	203	[3]	172
Available-for-sale investment securities, debt maturities, one year or less, fair value	[3]	0
Available-for-sale investment securities, debt maturities, after one year through five years, fair value	[3]	77
Available-for-sale investment securities, debt maturities, after five years through ten years, fair value	[3]	493
Available-for-sale investment securities, debt maturities, after ten years, fair value	[3]	98
Available-for-sale investment securities, fair value	[1]	668	[3]	723
Held-to-maturity investment securities, debt maturities, one year or less, fair value	[3]	0
Held-to-maturity investment securities, debt maturities, after one year through five years, fair value	[3]	0
Held-to-maturity investment securities, debt maturities, after five years through ten years, fair value	[3]	0
Held-to-maturity investment securities, debt maturities, after ten years, fair value	[3]	200
Held-to-maturity investment securities, fair value	[2],[4]	$ 200	[3]	$ 172

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

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

[3] Maturities of residential mortgage-backed securities are reflective of the contractual maturities of the investment.

[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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Loan Receivables (Narrative) (Details) $ in Millions		3 Months Ended
		Mar. 31, 2018 USD ($) segment	Mar. 31, 2017 USD ($)	Dec. 31, 2017 USD ($)	Dec. 31, 2016 USD ($)
Accounts, Notes, Loans and Financing Receivable [Line Items]
Number of loan portfolio segments (in segments) | segment		3
Private student loan forbearance lifetime cap (in months)		12 months
Private student loans including PCI in forbearance		$ 40		$ 29
Private student loans in forbearance as a percentage of student loans in repayment and forbearance (in percent)		0.70%		0.50%
Percentage of defaulted loans that were charged off at the end of the month in which they defaulted (in percent)		37.00%	38.00%
Provision for loan losses		$ 751	$ 586
Allowance for loan losses		$ 2,736	$ 2,264	$ 2,621	$ 2,167
Net charge-off rate (in percent)	[1]	3.09%	2.60%
Personal Loans [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Maximum period of payment reduction for the temporary reduced payment program (in months)		12 months
Maximum repayment term for temporary modification programs (in years)		9 years
Maximum repayment term for permanent modification programs (in years)		9 years
Credit Card Loans [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Maximum period of payment reduction for the temporary reduced payment program (in months)		12 months
Permanent workout program maturity (in months)		60 months
Interest and fees forgiven due to credit card loan modification program		$ 12	$ 11
Provision for loan losses		645	524
Allowance for loan losses		$ 2,252	$ 1,892	2,147	$ 1,790
Net charge-off rate (in percent)	[1]	3.32%	2.84%
PCI Student Loans [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Purchased credit-impaired loans outstanding balance		$ 2,000		2,200
Purchased credit-impaired loans	[2]	1,956		2,084
Provision for loan losses		0	$ 0
Allowance for loan losses		$ 27		$ 29
Threshold charge-off period for past due accounts (in days)		120 days
Net charge-off rate (in percent)		0.99%	0.53%
PCI Student Loans [Member] | 30 or More Days Delinquent [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Delinquency rate (in percent)		2.92%		3.24%
PCI Student Loans [Member] | 90 or More Days Delinquent [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Delinquency rate (in percent)		0.83%		0.93%

[1] Net charge-off rate represents net charge-off dollars (annualized) divided by average loans for the reporting period.

[2] Amounts include $712 million and $762 million of loans pledged as collateral against the notes issued from the Student Loan Corporation ("SLC") securitization trusts at March 31, 2018 and December 31, 2017, respectively. See Note 4: Credit Card and Student Loan Securitization Activities for additional information.

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Loan Receivables (Schedule of Loan Receivables) (Details) - USD ($) $ in Millions		Mar. 31, 2018	Dec. 31, 2017	Mar. 31, 2017	Dec. 31, 2016
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loan receivables		$ 82,744	$ 84,248
Allowance for loan losses		(2,736)	(2,621)	$ (2,264)	$ (2,167)
Net loan receivables		80,008	81,627
Variable Interest Entity, Primary Beneficiary [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loan receivables		29,894	31,781
Allowance for loan losses		(1,006)	(998)
Credit Card Securitization Trusts [Member] | Variable Interest Entity, Primary Beneficiary [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Credit card loans	[1]	29,182	31,019
Allowance for loan losses	[1]	(1,006)	(998)
Sellers' interest		8,106	9,861
Student Loan Securitization Trusts [Member] | Variable Interest Entity, Primary Beneficiary [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Purchased credit-impaired loans		712	762
Credit Card Loans [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Credit card loans	[2]	65,577	67,291
Allowance for loan losses		(2,252)	(2,147)	(1,892)	(1,790)
Credit Card Loans [Member] | Credit Card Securitization Trusts [Member] | Variable Interest Entity, Primary Beneficiary [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Investors' interest		21,100	21,200
Total Other Loans [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loan receivables		15,211	14,873
Total Other Loans [Member] | Personal Loans [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loan receivables		7,307	7,374
Allowance for loan losses		(301)	(301)	(207)	(200)
Total Other Loans [Member] | Private Student Loans [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loan receivables		7,416	7,076
Total Other Loans [Member] | Other Loans [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loan receivables		488	423
Allowance for loan losses		(13)	(11)	$ (9)	$ (19)
Purchase Credit-Impaired Loans [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Purchased credit-impaired loans	[3]	1,956	2,084
Allowance for loan losses		(27)	(29)
Purchase Credit-Impaired Loans [Member] | Student Loan Securitization Trusts [Member] | Variable Interest Entity, Primary Beneficiary [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans pledged as collateral		$ 712	$ 762

[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.

[2] Amounts include $21.1 billion and $21.2 billion underlying investors’ interest in trust debt at March 31, 2018 and December 31, 2017, respectively, and $8.1 billion and $9.9 billion in seller's interest at March 31, 2018 and December 31, 2017, respectively. See Note 4: Credit Card and Student Loan Securitization Activities for additional information.

[3] Amounts include $712 million and $762 million of loans pledged as collateral against the notes issued from the Student Loan Corporation ("SLC") securitization trusts at March 31, 2018 and December 31, 2017, respectively. See Note 4: Credit Card and Student Loan Securitization Activities for additional information.

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Loan Receivables (Schedule of Delinquent and Non-Accruing Loans) (Details) - USD ($) $ in Millions		3 Months Ended
		Mar. 31, 2018	Mar. 31, 2017	Dec. 31, 2017
Financing Receivable, Recorded Investment, Past Due [Line Items]
Loan receivables, past due		$ 1,800		$ 1,806
Loan receivables, 90 or more days delinquent and accruing		793		754
Loan receivables, total non-accruing		249		233
30-89 Days Delinquent [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Loan receivables, past due		945		991
90 or More Days Delinquent [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Loan receivables, past due		855		815
Credit Card Loans [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Loan receivables, past due		1,529		1,532
Loan receivables, 90 or more days delinquent and accruing	[1]	719		693
Loan receivables, total non-accruing	[2]	209		203
Estimated gross interest income that would have been recorded based on original terms		9	$ 8
Credit Card Loans [Member] | 30-89 Days Delinquent [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Loan receivables, past due		752		781
Credit Card Loans [Member] | 90 or More Days Delinquent [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Loan receivables, past due		777		751
Total Other Loans [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Loan receivables, past due		271		274
Loan receivables, 90 or more days delinquent and accruing		74		61
Loan receivables, total non-accruing		40		30
Total Other Loans [Member] | 30-89 Days Delinquent [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Loan receivables, past due		193		210
Total Other Loans [Member] | 90 or More Days Delinquent [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Loan receivables, past due		78		64
Total Other Loans [Member] | Personal Loans [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Loan receivables, past due		101		103
Loan receivables, 90 or more days delinquent and accruing	[3]	26		28
Loan receivables, total non-accruing		11		10
Total Other Loans [Member] | Personal Loans [Member] | 30-89 Days Delinquent [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Loan receivables, past due		73		73
Total Other Loans [Member] | Personal Loans [Member] | 90 or More Days Delinquent [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Loan receivables, past due		28		30
Total Other Loans [Member] | Private Student Loans (Excluding PCI) [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Loan receivables, past due		167		167
Loan receivables, 90 or more days delinquent and accruing	[4]	48		33
Loan receivables, total non-accruing		10		2
Total Other Loans [Member] | Private Student Loans (Excluding PCI) [Member] | 30-89 Days Delinquent [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Loan receivables, past due		118		134
Total Other Loans [Member] | Private Student Loans (Excluding PCI) [Member] | 90 or More Days Delinquent [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Loan receivables, past due		49		33
Total Other Loans [Member] | Other Loans [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Loan receivables, past due		3		4
Loan receivables, 90 or more days delinquent and accruing		0		0
Loan receivables, total non-accruing		19		18
Total Other Loans [Member] | Other Loans [Member] | 30-89 Days Delinquent [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Loan receivables, past due		2		3
Total Other Loans [Member] | Other Loans [Member] | 90 or More Days Delinquent [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Loan receivables, past due		1		1
Entity Loan Modification Program [Member] | Credit Card Loans [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Loan receivables, 90 or more days delinquent and accruing		83		72
Entity Loan Modification Program [Member] | Total Other Loans [Member] | Personal Loans [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Loan receivables, 90 or more days delinquent and accruing		4		5
Entity Loan Modification Program [Member] | Total Other Loans [Member] | Private Student Loans (Excluding PCI) [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Loan receivables, 90 or more days delinquent and accruing		$ 7		$ 5

[1] Credit card loans that are 90 or more days delinquent and accruing interest include $83 million and $72 million of loans accounted for as TDRs at March 31, 2018 and December 31, 2017, respectively.

[2] The Company estimates that the gross interest income that would have been recorded in accordance with the original terms of non-accruing credit card loans was $9 million and $8 million for the three months ended March 31, 2018 and 2017, 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. This amount was estimated based on customers' current balances and most recent interest rates.

[3] Personal loans that are 90 or more days delinquent and accruing interest include $4 million and $5 million of loans accounted for as TDRs at March 31, 2018 and December 31, 2017, respectively.

[4] Private student loans that are 90 or more days delinquent and accruing interest include $7 million and $5 million of loans accounted for as TDRs at March 31, 2018 and December 31, 2017, respectively.

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Loan Receivables (Schedule of Net Charge-offs) (Details) - USD ($) $ in Millions		3 Months Ended
		Mar. 31, 2018	Mar. 31, 2017
Charge Offs [Line Items]
Net charge-offs		$ 635	$ 489
Net charge-off rate (in percent)	[1]	3.09%	2.60%
Excluding PCI Loans [Member]
Charge Offs [Line Items]
Net charge-offs		$ 635	$ 489
Net charge-off rate (in percent)	[1]	3.17%	2.69%
Credit Card Loans [Member]
Charge Offs [Line Items]
Net charge-offs		$ 540	$ 422
Net charge-off rate (in percent)	[1]	3.32%	2.84%
Total Other Loans [Member]
Charge Offs [Line Items]
Net charge-offs		$ 95	$ 67
Net charge-off rate (in percent)	[1]	2.52%	2.02%
Total Other Loans [Member] | Personal Loans [Member]
Charge Offs [Line Items]
Net charge-offs		$ 73	$ 51
Net charge-off rate (in percent)	[1]	4.03%	3.16%
Total Other Loans [Member] | Private Student Loans (Excluding PCI) [Member]
Charge Offs [Line Items]
Net charge-offs		$ 22	$ 14
Net charge-off rate (in percent)	[1]	1.17%	0.83%
Total Other Loans [Member] | Other Loans [Member]
Charge Offs [Line Items]
Net charge-offs		$ 0	$ 2
Net charge-off rate (in percent)	[1]	0.00%	3.45%

[1] Net charge-off rate represents net charge-off dollars (annualized) divided by average loans for the reporting period.

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Loan Receivables (Schedule of Credit Risk Profile by FICO Score) (Details)		Mar. 31, 2018	Dec. 31, 2017
Credit Card Loans [Member] | FICO Score, 660 and Above [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
FICO scores as a percentage of class of loan receivables		81.00%	82.00%
Credit Card Loans [Member] | FICO Score, Less Than 660 Or No Score [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
FICO scores as a percentage of class of loan receivables		19.00%	18.00%
Total Other Loans [Member] | Personal Loans [Member] | FICO Score, 660 and Above [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
FICO scores as a percentage of class of loan receivables		95.00%	95.00%
Total Other Loans [Member] | Personal Loans [Member] | FICO Score, Less Than 660 Or No Score [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
FICO scores as a percentage of class of loan receivables		5.00%	5.00%
Total Other Loans [Member] | Private Student Loans (Excluding PCI) [Member] | FICO Score, 660 and Above [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
FICO scores as a percentage of class of loan receivables	[1]	95.00%	95.00%
Total Other Loans [Member] | Private Student Loans (Excluding PCI) [Member] | FICO Score, Less Than 660 Or No Score [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
FICO scores as a percentage of class of loan receivables	[1]	5.00%	5.00%

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

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Loan Receivables (Schedule of Changes in the Allowance for Loan Losses) (Details) - USD ($) $ in Millions		3 Months Ended
		Mar. 31, 2018		Mar. 31, 2017
Allowance for Loan and Lease Losses [Roll Forward]
Balance at beginning of period		$ 2,621		$ 2,167
Provision for loan losses		751		586
Charge-offs		(769)		(611)
Recoveries		134		122
Net charge-offs		(635)		(489)
Allowance for Loan and Lease Losses, Adjustments, Other		(1)
Balance at end of period		2,736		2,264
Student Loans [Member]
Allowance for Loan and Lease Losses [Roll Forward]
Balance at beginning of period	[2]	162	[1]	158
Provision for loan losses	[2]	31		12
Charge-offs	[2]	(25)		(17)
Recoveries	[2]	3		3
Net charge-offs	[2]	(22)		(14)
Allowance for Loan and Lease Losses, Adjustments, Other	[2],[3]	(1)
Balance at end of period	[2]	170	[1]	156
Credit Card Loans [Member]
Allowance for Loan and Lease Losses [Roll Forward]
Balance at beginning of period		2,147		1,790
Provision for loan losses		645		524
Charge-offs		(663)		(535)
Recoveries		123		113
Net charge-offs		(540)		(422)
Allowance for Loan and Lease Losses, Adjustments, Other		0
Balance at end of period		2,252		1,892
Total Other Loans [Member]
Allowance for Loan and Lease Losses [Roll Forward]
Net charge-offs		(95)		(67)
Total Other Loans [Member] | Personal Loans [Member]
Allowance for Loan and Lease Losses [Roll Forward]
Balance at beginning of period		301		200
Provision for loan losses		73		58
Charge-offs		(81)		(57)
Recoveries		8		6
Net charge-offs		(73)		(51)
Allowance for Loan and Lease Losses, Adjustments, Other		0
Balance at end of period		301		207
Total Other Loans [Member] | Other Loans [Member]
Allowance for Loan and Lease Losses [Roll Forward]
Balance at beginning of period		11		19
Provision for loan losses		2		(8)
Charge-offs		0		(2)
Recoveries		0		0
Net charge-offs		0		(2)
Allowance for Loan and Lease Losses, Adjustments, Other		0
Balance at end of period		$ 13		$ 9

[1] Includes both PCI and non-PCI private student loans.

[2] Includes both PCI and non-PCI private student loans.

[3] Net change in reserves on PCI pools having no remaining non-accretable difference.

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Loan Receivables (Schedule of Net Charge-offs of Interest and Fee Revenues on Loan Receivables) (Details) - USD ($) $ in Millions	3 Months Ended
	Mar. 31, 2018	Mar. 31, 2017
Loans and Leases Receivable Disclosure [Abstract]
Interest and fees accrued subsequently charged off, net of recoveries (recorded as a reduction of interest income)	$ 109	$ 84
Fees accrued subsequently charged off, net of recoveries (recorded as a reduction to other income)	$ 27	$ 22

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Loan Receivables (Schedule of Allowance for Loan Losses and Recorded Investment in its Loan Portfolio by Impairment Methodology) (Details) - USD ($) $ in Millions		Mar. 31, 2018		Dec. 31, 2017		Mar. 31, 2017	Dec. 31, 2016
Accounts, Notes, Loans and Financing Receivable [Line Items]
Allowance for loan losses, collectively evaluated for impairment in accordance with ASC 450-20		$ 2,400		$ 2,306
Allowance for loan losses, evaluated for impairment in accordance with ASC 310-10-35	[1],[2]	309		286
Total allowance for loan losses		2,736		2,621		$ 2,264	$ 2,167
Recorded investment in loans, collectively evaluated for impairment in accordance with ASC 450-20		78,946		80,547
Recorded investment in loans, evaluated for impairment in accordance with ASC 310-10-35	[1],[2]	1,842		1,617
Loan receivables		82,744		84,248
Receivables Acquired with Deteriorated Credit Quality [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Allowance for loans losses, acquired with deteriorated credit quality, evaluated in accordance with ASC 310-30		27		29
Recorded investment in loans, acquired with deteriorated credit quality, evaluated in accordance with ASC 310-30		1,956		2,084
Student Loans [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total allowance for loan losses	[4]	170	[3]	162	[3]	156	158
Total recorded investment	[3]	9,372		9,160
Credit Card Loans [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Allowance for loan losses, collectively evaluated for impairment in accordance with ASC 450-20		2,007		1,921
Allowance for loan losses, evaluated for impairment in accordance with ASC 310-10-35	[1],[2]	245		226
Total allowance for loan losses		2,252		2,147		1,892	1,790
Recorded investment in loans, collectively evaluated for impairment in accordance with ASC 450-20		64,054		65,975
Recorded investment in loans, evaluated for impairment in accordance with ASC 310-10-35	[1],[2]	1,523		1,316
Total recorded investment		65,577		67,291
Unpaid principal balance of modified loans accounted for as troubled debt restructurings		1,300		1,100
Credit Card Loans [Member] | Receivables Acquired with Deteriorated Credit Quality [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Allowance for loans losses, acquired with deteriorated credit quality, evaluated in accordance with ASC 310-30		0		0
Recorded investment in loans, acquired with deteriorated credit quality, evaluated in accordance with ASC 310-30		0		0
Total Other Loans [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loan receivables		15,211		14,873
Total Other Loans [Member] | Personal Loans [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Allowance for loan losses, collectively evaluated for impairment in accordance with ASC 450-20		266		269
Allowance for loan losses, evaluated for impairment in accordance with ASC 310-10-35	[1],[2]	35		32
Total allowance for loan losses		301		301		207	200
Recorded investment in loans, collectively evaluated for impairment in accordance with ASC 450-20		7,186		7,263
Recorded investment in loans, evaluated for impairment in accordance with ASC 310-10-35	[1],[2]	121		111
Total recorded investment		7,307		7,374
Loan receivables		7,307		7,374
Unpaid principal balance of modified loans accounted for as troubled debt restructurings		121		109
Total Other Loans [Member] | Personal Loans [Member] | Receivables Acquired with Deteriorated Credit Quality [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Allowance for loans losses, acquired with deteriorated credit quality, evaluated in accordance with ASC 310-30		0		0
Recorded investment in loans, acquired with deteriorated credit quality, evaluated in accordance with ASC 310-30		0		0
Total Other Loans [Member] | Private Student Loans (Excluding PCI) [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Allowance for loan losses, collectively evaluated for impairment in accordance with ASC 450-20		122		112
Allowance for loan losses, evaluated for impairment in accordance with ASC 310-10-35	[1],[2]	21		21
Recorded investment in loans, collectively evaluated for impairment in accordance with ASC 450-20		7,271		6,939
Recorded investment in loans, evaluated for impairment in accordance with ASC 310-10-35	[1],[2]	145		137
Loan receivables		7,416		7,076
Unpaid principal balance of modified loans accounted for as troubled debt restructurings		145		135
Total Other Loans [Member] | Other Loans [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Allowance for loan losses, collectively evaluated for impairment in accordance with ASC 450-20		5		4
Allowance for loan losses, evaluated for impairment in accordance with ASC 310-10-35	[1],[2]	8		7
Total allowance for loan losses		13		11		$ 9	$ 19
Recorded investment in loans, collectively evaluated for impairment in accordance with ASC 450-20		435		370
Recorded investment in loans, evaluated for impairment in accordance with ASC 310-10-35	[1],[2]	53		53
Total recorded investment		488		423
Loan receivables		488		423
Total Other Loans [Member] | Other Loans [Member] | Receivables Acquired with Deteriorated Credit Quality [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Allowance for loans losses, acquired with deteriorated credit quality, evaluated in accordance with ASC 310-30		0		0
Recorded investment in loans, acquired with deteriorated credit quality, evaluated in accordance with ASC 310-30		0		0
PCI Student Loans [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total allowance for loan losses		27		29
Recorded investment in loans, acquired with deteriorated credit quality, evaluated in accordance with ASC 310-30	[5]	1,956		2,084
PCI Student Loans [Member] | Receivables Acquired with Deteriorated Credit Quality [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Allowance for loans losses, acquired with deteriorated credit quality, evaluated in accordance with ASC 310-30		27		29
Recorded investment in loans, acquired with deteriorated credit quality, evaluated in accordance with ASC 310-30		$ 1,956		$ 2,084

[1] Loan receivables evaluated for impairment in accordance with ASC 310-10-35 include credit card loans, personal loans and student loans collectively evaluated for impairment in accordance with ASC Subtopic 310-40, Receivables, which consists of modified loans accounted for as TDRs. Other loans are individually evaluated for impairment and generally do not represent TDRs.

[2] The unpaid principal balance of credit card loans was $1.3 billion and $1.1 billion at March 31, 2018 and December 31, 2017, respectively. The unpaid principal balance of personal loans was $121 million and $109 million at March 31, 2018 and December 31, 2017, respectively. The unpaid principal balance of student loans was $145 million and $135 million at March 31, 2018 and December 31, 2017, respectively. All loans accounted for as TDRs have a related allowance for loan losses.

[3] Includes both PCI and non-PCI private student loans.

[4] Includes both PCI and non-PCI private student loans.

[5] Amounts include $712 million and $762 million of loans pledged as collateral against the notes issued from the Student Loan Corporation ("SLC") securitization trusts at March 31, 2018 and December 31, 2017, respectively. See Note 4: Credit Card and Student Loan Securitization Activities for additional information.

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Loan Receivables (Schedule of Troubled Debt Restructurings) (Details) - USD ($) $ in Millions		3 Months Ended
		Mar. 31, 2018	Mar. 31, 2017
Credit Card Loans [Member]
Financing Receivable, Modifications [Line Items]
Average recorded investment in loans	[1]	$ 1,413	$ 1,108
Interest income recognized during period loans were impaired	[1],[2]	34	25
Gross interest income that would have been recorded with original terms	[1],[3]	26	20
Total Other Loans [Member] | Personal Loans [Member]
Financing Receivable, Modifications [Line Items]
Average recorded investment in loans		117	84
Interest income recognized during period loans were impaired	[2]	3	2
Gross interest income that would have been recorded with original terms	[3]	1	1
Total Other Loans [Member] | Private Student Loans [Member]
Financing Receivable, Modifications [Line Items]
Average recorded investment in loans		142	94
Interest income recognized during period loans were impaired	[2]	3	2
Gross interest income that would have been recorded with original terms	[3]	0	0
Modified credit card loans | Credit Card Loans [Member]
Financing Receivable, Modifications [Line Items]
Average recorded investment in loans		$ 399	$ 311

[1] Includes credit card loans that were modified in TDRs, but are no longer enrolled in a TDR program due to noncompliance with the terms of the modification or due to successful completion of a program after which charging privileges may be reinstated based on customer-level evaluation. The average balance of credit card loans that were no longer enrolled in a TDR program was $399 million and $311 million, respectively, for the three months ended March 31, 2018 and 2017.

[2] The Company does not separately track interest income on loans in 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 additional 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 loans and the average interest rate earned on loans in the modification programs to the average loans in the modification programs.

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Loan Receivables (Schedule of Loans That Entered a Modification Program During the Period) (Details) $ in Millions	3 Months Ended
	Mar. 31, 2018 USD ($) accounts	Mar. 31, 2017 USD ($) accounts
Credit Card Loans [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Accounts that entered a loan modification program during the period, number of accounts (in accounts) | accounts	60,055	30,893
Accounts that entered a loan modification program during the period, balances | $	$ 380	$ 181
Total Other Loans [Member] | Personal Loans [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Accounts that entered a loan modification program during the period, number of accounts (in accounts) | accounts	2,128	1,563
Accounts that entered a loan modification program during the period, balances | $	$ 29	$ 18
Total Other Loans [Member] | Private Student Loans [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Accounts that entered a loan modification program during the period, number of accounts (in accounts) | accounts	906	1,017
Accounts that entered a loan modification program during the period, balances | $	$ 16	$ 17

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Loan Receivables (Schedule of Troubled Debt Restructurings That Subsequently Defaulted) (Details) $ in Millions		3 Months Ended
		Mar. 31, 2018 USD ($) accounts missed_payments	Mar. 31, 2017 USD ($) accounts
Financing Receivable, Modifications [Line Items]
Amount of missed payments after which a customer defaults from a modification program (in payments) | missed_payments		2
Credit Card Loans [Member]
Financing Receivable, Modifications [Line Items]
Troubled debt restructurings that subsequently defaulted, number of accounts (in accounts) | accounts	[1],[2]	8,814	8,166
Troubled debt restructurings that subsequently defaulted, aggregated outstanding balances upon default | $	[1],[2]	$ 47	$ 44
Total Other Loans [Member] | Personal Loans [Member]
Financing Receivable, Modifications [Line Items]
Troubled debt restructurings that subsequently defaulted, number of accounts (in accounts) | accounts	[1]	575	307
Troubled debt restructurings that subsequently defaulted, aggregated outstanding balances upon default | $	[1]	$ 8	$ 4
Total Other Loans [Member] | Private Student Loans [Member]
Financing Receivable, Modifications [Line Items]
Troubled debt restructurings that subsequently defaulted, number of accounts (in accounts) | accounts	[3]	271	185
Troubled debt restructurings that subsequently defaulted, aggregated outstanding balances upon default | $	[3]	$ 5	$ 3
Delinquency days to default (in days)		60 days

[1] For credit card loans and personal loans, a customer defaults from a modification program after two consecutive missed payments. The outstanding balance upon default is generally 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 in most cases.

[3] For student loans, defaults have been defined as loans that are 60 or more days delinquent. The outstanding balance upon default is generally the loan balance at the end of the month prior to default.

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Loan Receivables (Schedule of Changes in Accretable Yield for the Acquired Loans) (Details) - USD ($) $ in Millions	3 Months Ended
	Mar. 31, 2018	Mar. 31, 2017
Certain Loans Acquired in Transfer Not Accounted for as Debt Securities, Accretable Yield Movement Schedule [Roll Forward]
Accretable yield, balance at beginning of period	$ 669	$ 796
Accretion into interest income	(36)	(41)
Accretable yield, balance at end of period	$ 633	$ 755

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Credit Card and Student Loan Securitization Activities (Narrative) (Details)	3 Months Ended
	Mar. 31, 2018 classes trust
Student Loan Securitization Trusts [Member]
Variable Interest Entity [Line Items]
Number of Trusts Issuing Securities | trust	2
Discover Card Execution Note Trust [Member] | Credit Card Securitization Trusts [Member]
Variable Interest Entity [Line Items]
Number of classes of securities in debt structure (in classes) | classes	4

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Credit Card and Student Loan Securitization Activities (Schedule of Restricted Credit Card Securitized Assets) (Details) - USD ($) $ in Millions		Mar. 31, 2018	Dec. 31, 2017	Mar. 31, 2017	Dec. 31, 2016
Variable Interest Entity [Line Items]
Restricted cash		$ 87	$ 81	$ 1,100
Allowance for loan losses allocated to securitized loan receivables		(2,736)	(2,621)	$ (2,264)	$ (2,167)
Other		2,053	2,262
Variable Interest Entity, Primary Beneficiary [Member]
Variable Interest Entity [Line Items]
Restricted cash		87	81
Allowance for loan losses allocated to securitized loan receivables		(1,006)	(998)
Other		6	5
Variable Interest Entity, Primary Beneficiary [Member] | Credit Card Securitization Trusts [Member]
Variable Interest Entity [Line Items]
Restricted cash		29	26
Investors’ interests held by third-party investors		15,950	16,025
Investors’ interests held by wholly-owned subsidiaries of Discover Bank		5,126	5,133
Seller’s interest		8,106	9,861
Loan receivables	[1]	29,182	31,019
Allowance for loan losses allocated to securitized loan receivables	[1]	(1,006)	(998)
Net loan receivables		28,176	30,021
Other		6	5
Carrying value of assets of consolidated variable interest entities		$ 28,211	$ 30,052

[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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Credit Card and Student Loan Securitization Activities (Schedule of Restricted Student Loan Securitized Assets) (Details) - USD ($) $ in Millions	Mar. 31, 2018	Dec. 31, 2017	Mar. 31, 2017
Variable Interest Entity [Line Items]
Restricted cash	$ 87	$ 81	$ 1,100
Variable Interest Entity, Primary Beneficiary [Member]
Variable Interest Entity [Line Items]
Restricted cash	87	81
Variable Interest Entity, Primary Beneficiary [Member] | Student Loan Securitization Trusts [Member]
Variable Interest Entity [Line Items]
Restricted cash	58	55
Purchased credit-impaired loans	712	762
Carrying value of assets of consolidated variable interest entities	$ 770	$ 817

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Deposits (Narrative) (Details)	3 Months Ended
	Mar. 31, 2018 channels
Deposits [Abstract]
Deposits source channels (in number of channels)	2

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Deposits (Schedule of Interest Bearing Deposit Accounts) (Details) - USD ($) $ in Millions		Mar. 31, 2018	Dec. 31, 2017
Deposits [Abstract]
Certificates of deposit in amounts less than $100,000		$ 24,063	$ 23,768
Certificates of deposit in amounts $100,000 or greater	[1]	6,035	5,984
Savings deposits, including money market deposit accounts		30,432	28,413
Interest-bearing deposit accounts		60,530	58,165
Certificates of deposit greater than $250,000		$ 1,400	$ 1,400

[1] Includes $1.4 billion in certificates of deposit greater than $250,000, the Federal Deposit Insurance Corporation ("FDIC") insurance limit, as of March 31, 2018 and December 31, 2017.

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Deposits (Schedule of $100,000 or More Certificates of Deposit Maturities) (Details) - USD ($) $ in Millions		Mar. 31, 2018	Dec. 31, 2017
Deposits [Abstract]
Three months or less		$ 778
Over three months through six months		830
Over six months through twelve months		1,739
Over twelve months		2,688
Total	[1]	$ 6,035	$ 5,984

[1] Includes $1.4 billion in certificates of deposit greater than $250,000, the Federal Deposit Insurance Corporation ("FDIC") insurance limit, as of March 31, 2018 and December 31, 2017.

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Deposits (Schedule of Certificates of Deposit Maturities) (Details) $ in Millions	Mar. 31, 2018 USD ($)
Deposits [Abstract]
2018	$ 10,263
2019	7,408
2020	4,370
2021	2,912
2022	2,094
Thereafter	3,051
Total	$ 30,098

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Long-Term Borrowings (Narrative) (Details) - Discover Card Master Trust I and Discover Card Execution Note Trust [Member] - Securitized Debt [Member] $ in Millions	Mar. 31, 2018 USD ($)
Debt Instrument [Line Items]
Total commitment of secured credit facilities	$ 6,000
Total used commitment of secured credit facilities	$ 500

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Long-Term Borrowings (Schedule of Long-Term Borrowings and Weighted Average Interest Rates) (Details) - USD ($) $ in Millions		3 Months Ended
		Mar. 31, 2018		Dec. 31, 2017
Debt Instrument [Line Items]
Long-term borrowings (in dollars)		$ 26,244		$ 26,326
Variable Interest Entity, Primary Beneficiary [Member]
Debt Instrument [Line Items]
Long-term borrowings (in dollars)		16,385		16,536
Securitized Debt [Member] | Discover Card Master Trust I and Discover Card Execution Note Trust [Member]
Debt Instrument [Line Items]
Long-term borrowings (in dollars)		$ 15,815		15,926
Securitized Debt [Member] | Discover Card Master Trust I and Discover Card Execution Note Trust [Member] | Fixed-Rate Asset-Backed Securities [Member]
Debt Instrument [Line Items]
Weighted-average interest rate		1.92%
Long-term borrowings (in dollars)	[1]	$ 9,478		8,888
Securitized Debt [Member] | Discover Card Master Trust I and Discover Card Execution Note Trust [Member] | Fixed-Rate Asset-Backed Securities [Member] | Minimum [Member]
Debt Instrument [Line Items]
Interest rate		1.39%
Securitized Debt [Member] | Discover Card Master Trust I and Discover Card Execution Note Trust [Member] | Fixed-Rate Asset-Backed Securities [Member] | Maximum [Member]
Debt Instrument [Line Items]
Interest rate		3.03%
Securitized Debt [Member] | Discover Card Master Trust I and Discover Card Execution Note Trust [Member] | Floating-Rate Asset-Backed Securities [Member]
Debt Instrument [Line Items]
Weighted-average interest rate		2.25%
Long-term borrowings (in dollars)	[3]	$ 6,337	[2]	7,038
Securitized Debt [Member] | Discover Card Master Trust I and Discover Card Execution Note Trust [Member] | Floating-Rate Asset-Backed Securities [Member] | Minimum [Member]
Debt Instrument [Line Items]
Interest rate		2.01%
Securitized Debt [Member] | Discover Card Master Trust I and Discover Card Execution Note Trust [Member] | Floating-Rate Asset-Backed Securities [Member] | Maximum [Member]
Debt Instrument [Line Items]
Interest rate		2.59%
Securitized Debt [Member] | Discover Card Master Trust I and Discover Card Execution Note Trust [Member] | Floating Rate Asset Backed Securities 1-Month LIBOR Plus Various Basis Points [Member]
Debt Instrument [Line Items]
Interest rate terms		1-month LIBOR + 23 to 60 basis points
Securitized Debt [Member] | Discover Card Master Trust I and Discover Card Execution Note Trust [Member] | Floating Rate Asset Backed Securities 1-Month LIBOR Plus Various Basis Points [Member] | Minimum [Member]
Debt Instrument [Line Items]
Basis spread on variable rate		0.23%
Securitized Debt [Member] | Discover Card Master Trust I and Discover Card Execution Note Trust [Member] | Floating Rate Asset Backed Securities 1-Month LIBOR Plus Various Basis Points [Member] | Maximum [Member]
Debt Instrument [Line Items]
Basis spread on variable rate		0.60%
Securitized Debt [Member] | Discover Card Master Trust I and Discover Card Execution Note Trust [Member] | Floating Rate Asset Backed Securities Commercial Paper Rate Plus 55 Basis Points [Member] [Domain]
Debt Instrument [Line Items]
Interest rate terms		Commercial paper rate + 55 basis points
Basis spread on variable rate		0.55%
Securitized Debt [Member] | SLC Private Student Loan Trust [Member]
Debt Instrument [Line Items]
Long-term borrowings (in dollars)		$ 570		610
Securitized Debt [Member] | SLC Private Student Loan Trust [Member] | Floating-Rate Asset-Backed Securities [Member]
Debt Instrument [Line Items]
Weighted-average interest rate		3.45%
Long-term borrowings (in dollars)	[5]	$ 570	[4],[6]	610
Securitized Debt [Member] | SLC Private Student Loan Trust [Member] | Floating-Rate Asset-Backed Securities [Member] | Minimum [Member]
Debt Instrument [Line Items]
Interest rate		1.89%
Securitized Debt [Member] | SLC Private Student Loan Trust [Member] | Floating-Rate Asset-Backed Securities [Member] | Maximum [Member]
Debt Instrument [Line Items]
Interest rate		5.50%
Securitized Debt [Member] | SLC Private Student Loan Trust [Member] | Floating Rate Asset Backed Securities 3-Month LIBOR Plus Various Basis Points [Member]
Debt Instrument [Line Items]
Interest rate terms		3-month LIBOR + 17 to 45 basis points
Securitized Debt [Member] | SLC Private Student Loan Trust [Member] | Floating Rate Asset Backed Securities 3-Month LIBOR Plus Various Basis Points [Member] | Minimum [Member]
Debt Instrument [Line Items]
Basis spread on variable rate		0.17%
Securitized Debt [Member] | SLC Private Student Loan Trust [Member] | Floating Rate Asset Backed Securities 3-Month LIBOR Plus Various Basis Points [Member] | Maximum [Member]
Debt Instrument [Line Items]
Basis spread on variable rate		0.45%
Securitized Debt [Member] | SLC Private Student Loan Trust [Member] | Floating Rate Asset Backed Securities Prime Rate Plus 75 to 100 Basis Points [Member]
Debt Instrument [Line Items]
Interest rate terms		Prime rate + 100 basis points
Basis spread on variable rate		1.00%
Securitized Debt [Member] | SLC Private Student Loan Trust [Member] | Senior Notes Maturing 2031 [Member]
Debt Instrument [Line Items]
Long-term borrowings (in dollars)		$ 226
Securitized Debt [Member] | SLC Private Student Loan Trust [Member] | Senior and Subordinated Notes Maturing 2036 [Member]
Debt Instrument [Line Items]
Long-term borrowings (in dollars)		$ 344
Corporate Debt Securities [Member] | Parent Company [Member] | Fixed-Rate Senior Notes [Member]
Debt Instrument [Line Items]
Weighted-average interest rate		4.25%
Long-term borrowings (in dollars)		$ 2,718		2,710
Corporate Debt Securities [Member] | Parent Company [Member] | Fixed-Rate Senior Notes [Member] | Minimum [Member]
Debt Instrument [Line Items]
Interest rate		3.75%
Corporate Debt Securities [Member] | Parent Company [Member] | Fixed-Rate Senior Notes [Member] | Maximum [Member]
Debt Instrument [Line Items]
Interest rate		10.25%
Corporate Debt Securities [Member] | Parent Company [Member] | Fixed-Rate Retail Notes [Member]
Debt Instrument [Line Items]
Weighted-average interest rate		3.71%
Long-term borrowings (in dollars)		$ 328		302
Corporate Debt Securities [Member] | Parent Company [Member] | Fixed-Rate Retail Notes [Member] | Minimum [Member]
Debt Instrument [Line Items]
Interest rate		2.85%
Corporate Debt Securities [Member] | Parent Company [Member] | Fixed-Rate Retail Notes [Member] | Maximum [Member]
Debt Instrument [Line Items]
Interest rate		4.40%
Senior Notes [Member] | Discover Bank [Member] | Fixed-Rate Senior Bank Notes [Member]
Debt Instrument [Line Items]
Weighted-average interest rate		3.37%
Long-term borrowings (in dollars)	[1]	$ 6,115		6,080
Senior Notes [Member] | Discover Bank [Member] | Fixed-Rate Senior Bank Notes [Member] | Minimum [Member]
Debt Instrument [Line Items]
Interest rate		2.60%
Senior Notes [Member] | Discover Bank [Member] | Fixed-Rate Senior Bank Notes [Member] | Maximum [Member]
Debt Instrument [Line Items]
Interest rate		4.25%
Subordinated Debt [Member] | Discover Bank [Member] | Fixed-Rate Subordinated Bank Notes [Member]
Debt Instrument [Line Items]
Weighted-average interest rate		7.49%
Long-term borrowings (in dollars)		$ 698		$ 698
Subordinated Debt [Member] | Discover Bank [Member] | Fixed-Rate Subordinated Bank Notes [Member] | Minimum [Member]
Debt Instrument [Line Items]
Interest rate		7.00%
Subordinated Debt [Member] | Discover Bank [Member] | Fixed-Rate Subordinated Bank Notes [Member] | Maximum [Member]
Debt Instrument [Line Items]
Interest rate		8.70%

[1] The Company uses interest rate swaps to hedge portions of these long-term borrowings against changes in fair value attributable to changes in London Interbank Offered Rate ("LIBOR"). Use of these interest rate swaps impacts carrying value of the debt. See Note 14: Derivatives and Hedging Activities.

[2] Discover Card Execution Note Trust floating-rate asset-backed securities include issuances with the following interest rate terms: 1-month LIBOR + 23 to 60 basis points and Commercial paper rate + 55 basis points as of March 31, 2018.

[3] The Company uses interest rate swaps to manage its exposure to changes in interest rates related to future cash flows resulting from interest payments on a portion of these long-term borrowings. There is no impact on debt carrying value from use of these interest rate swaps. See Note 14: Derivatives and Hedging Activities.

[4] Includes $226 million of senior notes maturing in 2031 and $344 million of senior and subordinated notes maturing in 2036 as of March 31, 2018.

[5] 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.

[6] SLC Private Student Loan Trusts floating-rate asset-backed securities include issuances with the following interest rate terms: 3-month LIBOR + 17 to 45 basis points and Prime rate + 100 basis points as of March 31, 2018.

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Long-Term Borrowings (Schedule of Long-Term Borrowings Maturities) (Details) - USD ($) $ in Millions	Mar. 31, 2018	Dec. 31, 2017
Debt Disclosure [Abstract]
2018	$ 3,270
2019	5,988
2020	4,694
2021	1,036
2022	2,776
Thereafter	8,480
Total	$ 26,244	$ 26,326

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Accumulated Other Comprehensive Income (Schedule of Changes in Accumulated Other Comprehensive Income (Loss)) (Details) - USD ($) $ in Millions	3 Months Ended
	Mar. 31, 2018	Mar. 31, 2017
Accumulated Other Comprehensive Income (Loss) [Line Items]
Accumulated other comprehensive income (loss), balance at beginning of period, net of tax	$ (152)	$ (161)
Net change in accumulated other comprehensive income (loss), net of tax	13	6
Accumulated other comprehensive income (loss), balance at end of period, net of tax	(139)	(155)
Unrealized Gain (Loss) on Available-for-Sale Investment Securities, Net of Tax [Member]
Accumulated Other Comprehensive Income (Loss) [Line Items]
Accumulated other comprehensive income (loss), balance at beginning of period, net of tax	(5)	(3)
Net change in accumulated other comprehensive income (loss), net of tax	(7)	1
Accumulated other comprehensive income (loss), balance at end of period, net of tax	(12)	(2)
Gain (Loss) on Cash Flow Hedges, Net of Tax [Member]
Accumulated Other Comprehensive Income (Loss) [Line Items]
Accumulated other comprehensive income (loss), balance at beginning of period, net of tax	10	(13)
Net change in accumulated other comprehensive income (loss), net of tax	19	5
Accumulated other comprehensive income (loss), balance at end of period, net of tax	29	(8)
Gain (Loss) on Pension Plan, Net of Tax [Member]
Accumulated Other Comprehensive Income (Loss) [Line Items]
Accumulated other comprehensive income (loss), balance at beginning of period, net of tax	(157)	(145)
Net change in accumulated other comprehensive income (loss), net of tax	1	0
Accumulated other comprehensive income (loss), balance at end of period, net of tax	$ (156)	$ (145)

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Accumulated Other Comprehensive Income (Schedule of Other Comprehensive Income Before Reclassifications and Amounts Reclassified from AOCI) (Details) - USD ($) $ in Millions	3 Months Ended
	Mar. 31, 2018	Mar. 31, 2017
Accumulated Other Comprehensive Income (Loss), Net of Tax [Abstract]
Available-for-sale investment securities, net unrealized holding gain (loss) arising during the period, before tax	$ (9)	$ 2
Available-for-sale investment securities, net unrealized holding gain (loss) arising during the period, tax benefit (expense)	2	(1)
Available-for-sale investment securities, net unrealized holding gain (loss) arising during the period, net of tax	(7)	1
Available-for-sale investment securities, net change, before tax	(9)	2
Available-for-sale investment securities, net change, tax benefit (expense)	2	(1)
Available-for-sale investment securities, net change, net of tax	(7)	1
Cash flow hedges, net unrealized gain (loss) arising during the period, before tax	24	6
Cash flow hedges, net unrealized gain (loss) arising during the period, tax benefit (expense)	(6)	(3)
Cash flow hedges, net unrealized gain (loss) arising during the period, net of tax	18	3
Cash flow hedges, amounts reclassified from AOCI, before tax	1	5
Cash flow hedges, amounts reclassified from AOCI, tax benefit (expense)	0	(3)
Cash flow hedges, amounts reclassified from AOCI, net of tax	1	2
Cash flow hedges, net change, before tax	25	11
Cash flow hedges, net change, tax benefit (expense)	(6)	(6)
Cash flow hedges, net change, net of tax	19	$ 5
Other Comprehensive (Income) Loss, Defined Benefit Plan, before Reclassification Adjustment and Tax	(1)
Other Comprehensive (Income) Loss, Defined Benefit Plan, before Reclassification Adjustment, Tax	0
Other Comprehensive (Income) Loss, Defined Benefit Plan, before Reclassification Adjustment, after Tax	(1)
Other Comprehensive (Income) Loss, Defined Benefit Plan, after Reclassification Adjustment, before Tax	(1)
Other Comprehensive (Income) Loss, Defined Benefit Plan, after Reclassification Adjustment, Tax	0
Other Comprehensive (Income) Loss, Defined Benefit Plan, after Reclassification Adjustment, after Tax	$ (1)

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Income Taxes (Narrative) (Details) $ in Millions	3 Months Ended
	Mar. 31, 2018 USD ($)
Income Tax Disclosure [Abstract]
Change in income tax expense	$ (114)
Change in Income Tax Expense (Benefit), Percentage	(12.80%)

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Income Taxes (Schedule of Effective Income Tax Rate Calculation) (Details) - USD ($) $ in Millions	3 Months Ended
	Mar. 31, 2018	Mar. 31, 2017
Income Tax Disclosure [Abstract]
Income before income tax expense	$ 856	$ 868
Income tax expense	$ 190	$ 304
Effective income tax rate (in percent)	22.20%	35.00%

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Earnings Per Share (Schedule of Basic and Diluted EPS ) (Details) - USD ($) $ / shares in Units, shares in Millions, $ in Millions	3 Months Ended
	Mar. 31, 2018	Mar. 31, 2017
Numerator:
Net income	$ 666	$ 564
Preferred stock dividends	(16)	(9)
Net income available to common stockholders	650	555
Income allocated to participating securities	(4)	(4)
Net income allocated to common stockholders	646	551
Income allocated to participating securities, diluted	(4)	(4)
Net income allocated to common stockholders, diluted	$ 646	$ 551
Denominator:
Weighted-average shares of common stock outstanding (in shares)	355	386
Weighted-average shares of common stock outstanding and common stock equivalents (in shares)	355	386
Basic earnings per common share (in dollars per share)	$ 1.82	$ 1.43
Diluted earnings per common share (in dollars per share)	$ 1.82	$ 1.43

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Capital Adequacy (Narrative) (Details)	Mar. 31, 2018
Regulatory Capital Requirements [Abstract]
Basel III minimum total capital ratio requirement	8.00%
Basel III minimum tier 1 capital ratio requirement	6.00%
Basel III minimum leverage ratio requirement	4.00%
Basel III minimum CET1 ratio requirement	4.50%

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Capital Adequacy (Schedule of Minimum and Well-Capitalized Requirements) (Details) - USD ($) $ in Millions		Mar. 31, 2018	Dec. 31, 2017
Compliance with Regulatory Capital Requirements [Line Items]
Total capital to risk-weighted assets, minimum capital requirements, ratio (in percent)		8.00%
Tier I capital to risk-weighted assets, minimum capital requirements, ratio (in percent)		6.00%
Tier I capital to average assets, minimum capital requirements, ratio (in percent)		4.00%
CET1 Capital to risk-weighted assets, minimum capital requirements, ratio (in percent)		4.50%
Parent Company [Member]
Compliance with Regulatory Capital Requirements [Line Items]
Total capital to risk-weighted assets, actual amount		$ 11,901	$ 11,952
Total capital to risk-weighted assets, minimum capital requirements, amount		$ 6,792	$ 6,946
Total capital to risk-weighted assets, minimum capital requirements, ratio (in percent)		8.00%	8.00%
Total capital to risk-weighted assets, capital requirements to be classified as well-capitalized, amount	[1]	$ 8,490	$ 8,683
Total capital to risk-weighted assets, capital requirements to be classified as well-capitalized, ratio (in percent)	[1]	10.00%	10.00%
Tier I capital to risk-weighted assets, actual amount		$ 10,644	$ 10,677
Tier I capital to risk-weighted assets, minimum capital requirements, amount		$ 5,094	$ 5,210
Tier I capital to risk-weighted assets, minimum capital requirements, ratio (in percent)		6.00%	6.00%
Tier I capital to risk-weighted assets, capital requirements to be classified as well-capitalized, amount	[1]	$ 5,094	$ 5,210
Tier I capital to risk-weighted assets, capital requirements to be classified as well-capitalized, ratio (in percent)	[1]	6.00%	6.00%
Tier I capital to average assets, actual amount		$ 10,644	$ 10,677
Tier I capital to average assets, minimum capital requirements, amount		$ 4,016	$ 3,949
Tier I capital to average assets, minimum capital requirements, ratio (in percent)		4.00%	4.00%
CET1 capital to risk-weighted assets, actual amount		$ 10,081	$ 10,114
CET1 Capital to risk-weighted assets, minimum capital requirements, amount		$ 3,820	$ 3,907
CET1 Capital to risk-weighted assets, minimum capital requirements, ratio (in percent)		4.50%	4.50%
Parent Company [Member] | Transition [Member]
Compliance with Regulatory Capital Requirements [Line Items]
Total capital to risk-weighted assets, actual ratio (in percent)	[2]	14.00%	13.80%
Tier I capital to risk-weighted assets, actual ratio (in percent)	[2]	12.50%	12.30%
Tier I capital to average assets, actual ratio (in percent)	[2]	10.60%	10.80%
CET1 Capital to risk-weighted assets, actual ratio (in percent)	[2]	11.90%	11.60%
Discover Bank [Member]
Compliance with Regulatory Capital Requirements [Line Items]
Total capital to risk-weighted assets, actual amount		$ 12,372	$ 12,364
Total capital to risk-weighted assets, minimum capital requirements, amount		$ 6,716	$ 6,872
Total capital to risk-weighted assets, minimum capital requirements, ratio (in percent)		8.00%	8.00%
Total capital to risk-weighted assets, capital requirements to be classified as well-capitalized, amount		$ 8,395	$ 8,589
Total capital to risk-weighted assets, capital requirements to be classified as well-capitalized, ratio (in percent)		10.00%	10.00%
Tier I capital to risk-weighted assets, actual amount		$ 10,563	$ 10,533
Tier I capital to risk-weighted assets, minimum capital requirements, amount		$ 5,037	$ 5,154
Tier I capital to risk-weighted assets, minimum capital requirements, ratio (in percent)		6.00%	6.00%
Tier I capital to risk-weighted assets, capital requirements to be classified as well-capitalized, amount		$ 6,716	$ 6,872
Tier I capital to risk-weighted assets, capital requirements to be classified as well-capitalized, ratio (in percent)		8.00%	8.00%
Tier I capital to average assets, actual amount		$ 10,563	$ 10,533
Tier I capital to average assets, minimum capital requirements, amount		$ 3,973	$ 3,912
Tier I capital to average assets, minimum capital requirements, ratio (in percent)		4.00%	4.00%
Tier I capital to average assets, capital requirements to be classified as well-capitalized, amount		$ 4,967	$ 4,890
Tier I capital to average assets, capital requirements to be classified as well-capitalized, ratio (in percent)		5.00%	5.00%
CET1 capital to risk-weighted assets, actual amount		$ 10,563	$ 10,533
CET1 Capital to risk-weighted assets, minimum capital requirements, amount		$ 3,778	$ 3,865
CET1 Capital to risk-weighted assets, minimum capital requirements, ratio (in percent)		4.50%	4.50%
CET1 Capital to risk-weighted assets, capital requirements to be classified as well-capitalized, amount		$ 5,457	$ 5,583
CET1 Capital to risk-weighted assets, capital requirements to be classified as well-capitalized, ratio (in percent)		6.50%	6.50%
Discover Bank [Member] | Transition [Member]
Compliance with Regulatory Capital Requirements [Line Items]
Total capital to risk-weighted assets, actual ratio (in percent)	[2]	14.70%	14.40%
Tier I capital to risk-weighted assets, actual ratio (in percent)	[2]	12.60%	12.30%
Tier I capital to average assets, actual ratio (in percent)	[2]	10.60%	10.80%
CET1 Capital to risk-weighted assets, actual ratio (in percent)	[2]	12.60%	12.30%

[1] The Basel III rules do not establish well-capitalized thresholds for these measures for bank holding companies. Existing well-capitalized thresholds established in the Federal Reserve's Regulation Y have been included where available.

[2] Capital ratios are calculated based on the Basel III Standardized Approach rules, subject to applicable transition provisions.

XML

Commitments, Contingencies and Guarantees (Narrative) (Details) - USD ($) $ in Millions	Mar. 31, 2018	Dec. 31, 2017
Commitments, Contingencies and Guarantees [Line Items]
Settlement Withholdings And Escrow Deposits	$ 9	$ 10
Commitments to Extend Credit [Member]
Commitments, Contingencies and Guarantees [Line Items]
Unused commitments to extend credit for loans	190,700
Network Alliance [Domain]
Commitments, Contingencies and Guarantees [Line Items]
Guarantor Obligations, Maximum Exposure, Undiscounted	33
Diners Club [Member] | Merchant Guarantee [Member]
Commitments, Contingencies and Guarantees [Line Items]
Guarantor Obligations, Maximum Exposure, Undiscounted	$ 164

XML

Commitments, Contingencies and Guarantees (Schedule of Lease Commitments) (Details) $ in Millions	Mar. 31, 2018 USD ($)
Operating Leases, Future Minimum Payments Due, Fiscal Year Maturity [Abstract]
2018	$ 10
2019	12
2020	11
2021	10
2022	7
Thereafter	41
Total minimum lease payments	$ 91

XML

Commitments, Contingencies and Guarantees (Schedule of Merchant Chargeback Guarantee) (Details) - USD ($) $ in Millions		3 Months Ended
		Mar. 31, 2018	Mar. 31, 2017
Merchant Chargeback Guarantees [Member]
Loss Contingencies [Line Items]
Aggregate sales transaction volume	[1]	$ 36,017	$ 32,654

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

XML

Litigation and Regulatory Matters (Narrative) (Details) - USD ($) $ in Millions	Jul. 22, 2015	Mar. 31, 2018
Unfavorable Regulatory Action [Member] | CFPB Consent Order [Member]
Loss Contingencies [Line Items]
Amount of civil money penalty for CFPB consent order	$ 2.5
Maximum [Member] | Pending and Threatened Litigation [Member]
Loss Contingencies [Line Items]
Aggregate range of reasonably possible losses		$ 140.0
Minimum [Member] | Unfavorable Regulatory Action [Member] | CFPB Consent Order [Member]
Loss Contingencies [Line Items]
Aggregate range of reasonably possible losses	$ 16.0

XML

Fair Value Measurements (Narrative) (Details) - USD ($) $ in Millions	3 Months Ended
	Mar. 31, 2018	Mar. 31, 2017
Residential Mortgage-Backed Securities - Agency [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Available for sale securities, par value	$ 668
Available for sale securities, weighted average coupon rate (in percent)	2.81%
Available for sale securities, weighted average remaining maturity (in years)	3 years
Fair Value, Measurements, Recurring [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Asset transfers from level 1 to level 2 within the fair value hierarchy	$ 0	$ 0
Asset transfers from level 2 to level 1 within the fair value hierarchy	0	0
Liability transfers from level 1 to level 2 within the fair value hierarchy	0	0
Liability transfers from level 2 to level 1 within the fair value hierarchy	$ 0	$ 0

XML

Fair Value Measurements (Schedule of Assets and Liabilities Measured at Fair Value on a Recurring Basis) (Details) - Fair Value, Measurements, Recurring [Member] - USD ($) $ in Millions		Mar. 31, 2018	Dec. 31, 2017
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Available-for-sale investment securities, fair value		$ 1,340	$ 1,395
U.S. Treasury Securities [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Available-for-sale investment securities, fair value		672	672
Residential Mortgage-Backed Securities - Agency [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Available-for-sale investment securities, fair value		668	723
Level 1 [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Available-for-sale investment securities, fair value		672	672
Level 1 [Member] | U.S. Treasury Securities [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Available-for-sale investment securities, fair value		672	672
Level 1 [Member] | Residential Mortgage-Backed Securities - Agency [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Available-for-sale investment securities, fair value		0	0
Level 2 [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Available-for-sale investment securities, fair value		668	723
Level 2 [Member] | U.S. Treasury Securities [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Available-for-sale investment securities, fair value		0	0
Level 2 [Member] | Residential Mortgage-Backed Securities - Agency [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Available-for-sale investment securities, fair value		668	723
Level 3 [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Available-for-sale investment securities, fair value		0	0
Level 3 [Member] | U.S. Treasury Securities [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Available-for-sale investment securities, fair value		0	0
Level 3 [Member] | Residential Mortgage-Backed Securities - Agency [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Available-for-sale investment securities, fair value		0	0
Cash Flow Hedging [Member] | Interest Rate Swaps [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Derivative financial instruments, assets, fair value	[1]	7	2
Derivative financial instruments, liabilities, fair value	[1]	1	3
Cash Flow Hedging [Member] | Interest Rate Swaps [Member] | Level 1 [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Derivative financial instruments, assets, fair value		0	0
Derivative financial instruments, liabilities, fair value		0	0
Cash Flow Hedging [Member] | Interest Rate Swaps [Member] | Level 2 [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Derivative financial instruments, assets, fair value	[1]	7	2
Derivative financial instruments, liabilities, fair value	[1]	1	3
Cash Flow Hedging [Member] | Interest Rate Swaps [Member] | Level 3 [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Derivative financial instruments, assets, fair value		0	0
Derivative financial instruments, liabilities, fair value		0	0
Fair Value Hedging [Member] | Interest Rate Swaps [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Derivative financial instruments, assets, fair value	[1]	3	4
Fair Value Hedging [Member] | Interest Rate Swaps [Member] | Level 1 [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Derivative financial instruments, assets, fair value		0	0
Fair Value Hedging [Member] | Interest Rate Swaps [Member] | Level 2 [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Derivative financial instruments, assets, fair value	[1]	3	4
Fair Value Hedging [Member] | Interest Rate Swaps [Member] | Level 3 [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Derivative financial instruments, assets, fair value		$ 0	$ 0

[1] Derivative instrument carrying values in an asset or liability position are presented as part of Other assets or Accrued expenses and other liabilities, respectively, in the Company's condensed consolidated statements of financial condition.

XML

Fair Value Measurements (Schedule of Financial Instruments Measured at Other Than Fair Value) (Details) - USD ($) $ in Millions		Mar. 31, 2018	Dec. 31, 2017
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Held-to-maturity investment securities	[1]	$ 200	$ 173
Fair Value, Measurements, Nonrecurring [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Held-to-maturity investment securities		200	173
Loans Receivable, Fair Value Disclosure		83,634	85,108
Cash and cash equivalents	[2]	17,011	13,306
Restricted cash	[2]	87	81
Accrued interest receivables	[2],[3]	830	818
Long-term borrowings		26,592	26,784
Accrued interest payables	[2],[3]	210	214
Fair Value, Measurements, Nonrecurring [Member] | Variable Interest Entity, Primary Beneficiary [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Long-term borrowings		16,444	16,491
Fair Value, Measurements, Nonrecurring [Member] | Consolidated Entity Excluding Variable Interest Entities (VIE) [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Long-term borrowings		10,148	10,293
Fair Value, Measurements, Nonrecurring [Member] | States and Political Subdivisions of States [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Held-to-maturity investment securities		0	1
Fair Value, Measurements, Nonrecurring [Member] | Residential Mortgage-Backed Securities - Agency [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Held-to-maturity investment securities		200	172
Fair Value, Measurements, Nonrecurring [Member] | Carrying Value [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Held-to-maturity investment securities		203	173
Loans Receivable, Fair Value Disclosure		80,008	81,627
Cash and cash equivalents	[2]	17,011	13,306
Restricted cash	[2]	87	81
Accrued interest receivables	[2],[3]	830	818
Long-term borrowings		26,244	26,326
Accrued interest payables	[2],[3]	210	214
Fair Value, Measurements, Nonrecurring [Member] | Carrying Value [Member] | Variable Interest Entity, Primary Beneficiary [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Long-term borrowings		16,385	16,536
Fair Value, Measurements, Nonrecurring [Member] | Carrying Value [Member] | Consolidated Entity Excluding Variable Interest Entities (VIE) [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Long-term borrowings		9,859	9,790
Fair Value, Measurements, Nonrecurring [Member] | Carrying Value [Member] | States and Political Subdivisions of States [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Held-to-maturity investment securities		0	1
Fair Value, Measurements, Nonrecurring [Member] | Carrying Value [Member] | Residential Mortgage-Backed Securities - Agency [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Held-to-maturity investment securities		203	172
Fair Value, Measurements, Nonrecurring [Member] | Level 1 [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Held-to-maturity investment securities		0	0
Loans Receivable, Fair Value Disclosure		0	0
Cash and cash equivalents	[2]	17,011	13,306
Restricted cash	[2]	87	81
Accrued interest receivables		0	0
Long-term borrowings		0	0
Accrued interest payables		0	0
Fair Value, Measurements, Nonrecurring [Member] | Level 1 [Member] | Variable Interest Entity, Primary Beneficiary [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Long-term borrowings		0	0
Fair Value, Measurements, Nonrecurring [Member] | 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	0
Fair Value, Measurements, Nonrecurring [Member] | 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	0
Fair Value, Measurements, Nonrecurring [Member] | Level 1 [Member] | Residential Mortgage-Backed Securities - Agency [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Held-to-maturity investment securities		0	0
Fair Value, Measurements, Nonrecurring [Member] | Level 2 [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Held-to-maturity investment securities		200	173
Loans Receivable, Fair Value Disclosure		0	0
Cash and cash equivalents		0	0
Restricted cash		0	0
Accrued interest receivables	[2],[3]	830	818
Long-term borrowings		25,996	26,144
Accrued interest payables	[2],[3]	210	214
Fair Value, Measurements, Nonrecurring [Member] | Level 2 [Member] | Variable Interest Entity, Primary Beneficiary [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Long-term borrowings		15,848	15,851
Fair Value, Measurements, Nonrecurring [Member] | Level 2 [Member] | Consolidated Entity Excluding Variable Interest Entities (VIE) [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Long-term borrowings		10,148	10,293
Fair Value, Measurements, Nonrecurring [Member] | 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		0	1
Fair Value, Measurements, Nonrecurring [Member] | Level 2 [Member] | Residential Mortgage-Backed Securities - Agency [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Held-to-maturity investment securities		200	172
Fair Value, Measurements, Nonrecurring [Member] | Level 3 [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Held-to-maturity investment securities		0	0
Loans Receivable, Fair Value Disclosure		83,634	85,108
Cash and cash equivalents		0	0
Restricted cash		0	0
Accrued interest receivables		0	0
Long-term borrowings		596	640
Accrued interest payables		0	0
Fair Value, Measurements, Nonrecurring [Member] | Level 3 [Member] | Variable Interest Entity, Primary Beneficiary [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Long-term borrowings		596	640
Fair Value, Measurements, Nonrecurring [Member] | Level 3 [Member] | Consolidated Entity Excluding Variable Interest Entities (VIE) [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Long-term borrowings		0	0
Fair Value, Measurements, Nonrecurring [Member] | 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	0
Fair Value, Measurements, Nonrecurring [Member] | Level 3 [Member] | Residential Mortgage-Backed Securities - Agency [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Held-to-maturity investment securities		0	0
Time Deposits [Member] | Fair Value, Measurements, Nonrecurring [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Time deposits	[4]	30,005	29,848
Time Deposits [Member] | Fair Value, Measurements, Nonrecurring [Member] | Carrying Value [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Time deposits	[4]	30,098	29,752
Time Deposits [Member] | Fair Value, Measurements, Nonrecurring [Member] | Level 1 [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Time deposits		0	0
Time Deposits [Member] | Fair Value, Measurements, Nonrecurring [Member] | Level 2 [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Time deposits	[4]	30,005	29,848
Time Deposits [Member] | Fair Value, Measurements, Nonrecurring [Member] | Level 3 [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Time deposits		$ 0	$ 0

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

[2] The carrying values of these assets and liabilities approximate fair value due to the nature of their liquidity (i.e., due or payable in less than one year).

[3] Accrued interest receivable and payable carrying values are presented as part of Other assets or Accrued expenses and other liabilities, respectively, in the Company's condensed consolidated statements of financial condition.

[4] Excludes deposits without contractually defined maturities for all periods presented.

XML

Derivatives and Hedging Activities (Narrative) (Details) $ in Millions	3 Months Ended
	Mar. 31, 2018 USD ($)
Derivative [Line Items]
Additional collateral	$ 20
Interest Expense [Member]
Derivative [Line Items]
Cash flow hedge loss to be reclassified to earnings within twelve months	$ 7
Deposits [Member]
Derivative [Line Items]
Initial maximum period for cash flow hedges (in years)	7 years
Securitized Debt [Member]
Derivative [Line Items]
Initial maximum period for cash flow hedges (in years)	7 years

XML

Derivatives and Hedging Activities (Schedule of Fair Value and Outstanding Notional Amounts of Derivative Instruments and Related Collateral Balances) (Details) € in Millions, ₨ in Millions, £ in Millions, $ in Millions, $ in Millions		Mar. 31, 2018 USD ($) transactions		Mar. 31, 2018 SGD ($) transactions	Mar. 31, 2018 EUR (€) transactions	Mar. 31, 2018 GBP (£) transactions	Mar. 31, 2018 INR (₨) transactions	Dec. 31, 2017 USD ($) transactions		Dec. 31, 2017 SGD ($) transactions	Dec. 31, 2017 EUR (€) transactions	Dec. 31, 2017 GBP (£) transactions	Dec. 31, 2017 INR (₨) transactions
Derivatives, Fair Value [Line Items]
Derivative assets	[1]	$ 10						$ 6
Collateral held, derivative assets	[2]	(8)						(1)
Total net derivative assets		2						5
Derivative liabilities	[1]	1						3
Collateral posted, derivative liabilities	[2]	(1)						(3)
Total net derivative liabilities		0						0
Designated as Hedges [Member] | Cash Flow Hedging [Member] | Interest Rate Swaps [Member]
Derivatives, Fair Value [Line Items]
Derivative, notional amount		$ 3,000						3,800
Derivative, number of outstanding derivative contracts (in transactions) | transactions		6		6	6	6	6
Derivative assets		$ 7						2
Derivative liabilities		1						3
Designated as Hedges [Member] | Fair Value Hedging [Member] | Interest Rate Swaps [Member]
Derivatives, Fair Value [Line Items]
Derivative, notional amount		$ 7,230						7,333
Derivative, number of outstanding derivative contracts (in transactions) | transactions		9		9	9	9	9
Derivative assets		$ 3						4
Derivative liabilities		0						0
Not Designated as Hedges [Member] | Foreign Exchange Forward Contracts [Member]
Derivatives, Fair Value [Line Items]
Derivative, notional amount		$ 23	[3]	$ 1	€ 6	£ 5	₨ 464	23	[3]	$ 1	€ 7	£ 5	₨ 464
Derivative, number of outstanding derivative contracts (in transactions) | transactions		7		7	7	7	7
Derivative assets		$ 0						0
Derivative liabilities		0						0
Not Designated as Hedges [Member] | When-Issued Forward Contracts [Member]
Derivatives, Fair Value [Line Items]
Derivative, notional amount		$ 47						$ 54
Derivative, number of outstanding derivative contracts (in transactions) | transactions		1		1	1	1	1	1		1	1	1	1

[1] In addition to the derivatives disclosed in the table, the Company enters into forward contracts to purchase when-issued mortgage-backed securities as part of its community reinvestment initiatives. At March 31, 2018, the Company had one outstanding contract with a notional amount of $47 million and immaterial fair value. At December 31, 2017, the Company had one outstanding contract with a notional amount of $54 million and immaterial fair value.

[2] Collateral amounts, which consist of both cash and investment securities, are limited to the related derivative asset/liability balance and do not include excess collateral received/pledged.

[3] The foreign exchange forward contracts have notional amounts of EUR 6 million, GBP 5 million, SGD 1 million and INR 464 million as of March 31, 2018 and notional amounts of EUR 7 million, GBP 5 million, SGD 1 million and INR 464 million as of December 31, 2017.

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Derivatives and Hedging Activities Derivatives and Hedging Activities (Schedule of Hedged Items in a Fair Value Hedging Relationship (Details) - Securitized Debt [Member] $ in Millions	Mar. 31, 2018 USD ($)
Schedule of Hedged Items in Fair Value Hedging Relationship [Line Items]
Derivative, Amount of Hedged Item	$ 7,027
Cumulative Amount of Fair Value Hedging Adjustment included in Carrying Value of Hedged Item	$ 157

XML

Derivatives and Hedging Activities (Schedule of Impact of the Derivative Instruments on Income and Other Comprehensive Income) (Details) - USD ($) $ in Millions	3 Months Ended
	Mar. 31, 2018	Mar. 31, 2017
Designated as Hedges [Member] | Cash Flow Hedges [Member] | Interest Rate Swaps [Member] | Other Income [Member]
Derivative Instruments, Gain (Loss) [Line Items]
Total amounts of income and expense line items presented in the statements of income in which the effects of fair value or cash flow hedges are recorded	$ 29	$ 28
Amounts reclassified from OCI into earnings	0	0
Designated as Hedges [Member] | Fair Value Hedges [Member] | Interest Rate Swaps [Member] | Other Income [Member]
Derivative Instruments, Gain (Loss) [Line Items]
Gain on hedged items	0	0
Loss on interest rate swaps	0	0
Total loss on fair value hedges	0	0
Not Designated as Hedges [Member] | Other Income [Member]
Derivative Instruments, Gain (Loss) [Line Items]
Loss on derivatives not designated as hedges	(1)
Deposits [Member] | Designated as Hedges [Member] | Cash Flow Hedges [Member] | Interest Rate Swaps [Member] | Interest Expense [Member]
Derivative Instruments, Gain (Loss) [Line Items]
Total amounts of income and expense line items presented in the statements of income in which the effects of fair value or cash flow hedges are recorded	(262)	(191)
Amounts reclassified from OCI into earnings	(1)	(2)
Deposits [Member] | Designated as Hedges [Member] | Fair Value Hedges [Member] | Interest Rate Swaps [Member] | Interest Expense [Member]
Derivative Instruments, Gain (Loss) [Line Items]
Gain on hedged items	0	1
Loss on interest rate swaps	0	(1)
Total loss on fair value hedges	0	0
Deposits [Member] | Not Designated as Hedges [Member] | Interest Expense [Member]
Derivative Instruments, Gain (Loss) [Line Items]
Loss on derivatives not designated as hedges	0
Securitized Debt [Member] | Designated as Hedges [Member] | Cash Flow Hedges [Member] | Interest Rate Swaps [Member] | Interest Expense [Member]
Derivative Instruments, Gain (Loss) [Line Items]
Total amounts of income and expense line items presented in the statements of income in which the effects of fair value or cash flow hedges are recorded	(207)	(195)
Amounts reclassified from OCI into earnings	0	(3)
Securitized Debt [Member] | Designated as Hedges [Member] | Fair Value Hedges [Member] | Interest Rate Swaps [Member] | Interest Expense [Member]
Derivative Instruments, Gain (Loss) [Line Items]
Gain on hedged items	48	15
Loss on interest rate swaps	(52)	(9)
Total loss on fair value hedges	(4)	$ 6
Securitized Debt [Member] | Not Designated as Hedges [Member] | Interest Expense [Member]
Derivative Instruments, Gain (Loss) [Line Items]
Loss on derivatives not designated as hedges	$ 0

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Segment Disclosures (Narrative) (Details)	3 Months Ended
	Mar. 31, 2018 segment
Segment Reporting [Abstract]
Number of reportable segments (in number of segments)	2

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Segment Disclosures (Schedule of Segment Disclosures) (Details) - USD ($) $ in Millions	3 Months Ended
	Mar. 31, 2018	Mar. 31, 2017
Segment Reporting Information [Line Items]
Interest income	$ 2,569	$ 2,278
Interest expense	469	386
Net interest income	2,100	1,892
Provision for loan losses	751	586
Other income	475	447
Other expense	968	885
Income before income tax expense	856	868
Other [Member]
Segment Reporting Information [Line Items]
Interest income	69	39
Credit Card Loans [Member]
Segment Reporting Information [Line Items]
Interest income	2,090	1,876
Provision for loan losses	645	524
Total Other Loans [Member] | Private Student Loans [Member]
Segment Reporting Information [Line Items]
Interest income	147	124
Total Other Loans [Member] | Personal Loans [Member]
Segment Reporting Information [Line Items]
Interest income	226	198
Provision for loan losses	73	58
PCI Student Loans [Member]
Segment Reporting Information [Line Items]
Interest income	37	41
Provision for loan losses	0	0
Operating Segments [Member] | Direct Banking [Member]
Segment Reporting Information [Line Items]
Interest income	2,569	2,278
Interest expense	469	386
Net interest income	2,100	1,892
Provision for loan losses	751	594
Other income	394	375
Other expense	932	849
Income before income tax expense	811	824
Operating Segments [Member] | Direct Banking [Member] | Other [Member]
Segment Reporting Information [Line Items]
Interest income	69	39
Operating Segments [Member] | Direct Banking [Member] | Credit Card Loans [Member]
Segment Reporting Information [Line Items]
Interest income	2,090	1,876
Operating Segments [Member] | Direct Banking [Member] | Total Other Loans [Member] | Private Student Loans [Member]
Segment Reporting Information [Line Items]
Interest income	147	124
Operating Segments [Member] | Direct Banking [Member] | Total Other Loans [Member] | Personal Loans [Member]
Segment Reporting Information [Line Items]
Interest income	226	198
Operating Segments [Member] | Direct Banking [Member] | PCI Student Loans [Member]
Segment Reporting Information [Line Items]
Interest income	37	41
Operating Segments [Member] | Payment Services [Member]
Segment Reporting Information [Line Items]
Interest income	0	0
Interest expense	0	0
Net interest income	0	0
Provision for loan losses	0	(8)
Other income	81	72
Other expense	36	36
Income before income tax expense	45	44
Operating Segments [Member] | Payment Services [Member] | Other [Member]
Segment Reporting Information [Line Items]
Interest income	0	0
Operating Segments [Member] | Payment Services [Member] | Credit Card Loans [Member]
Segment Reporting Information [Line Items]
Interest income	0	0
Operating Segments [Member] | Payment Services [Member] | Total Other Loans [Member] | Private Student Loans [Member]
Segment Reporting Information [Line Items]
Interest income	0	0
Operating Segments [Member] | Payment Services [Member] | Total Other Loans [Member] | Personal Loans [Member]
Segment Reporting Information [Line Items]
Interest income	0	0
Operating Segments [Member] | Payment Services [Member] | PCI Student Loans [Member]
Segment Reporting Information [Line Items]
Interest income	$ 0	$ 0

XML

Revenue from Contracts with Customers Revenue from Contracts with Customers (Schedule of Revenue from Contracts with Customers Disaggregated by Business Segment) (Details) - USD ($) $ in Millions		3 Months Ended
		Mar. 31, 2018	Mar. 31, 2017
Disaggregation of Revenue [Line Items]
Discount and interchange revenue, net		$ 254	$ 233
Protection products revenue		53	58
Transaction processing revenue		43	39
Other income		29	28
Loan fee income		96	89
Other Income not Subject to ASC 606		96	89
Total other income		475	447
Customer Rewards and Issuer Interchange		392	363
Interest Expense Domestic Deposit Liabilities, Withdrawal Penalties		1
Accounting Standards Update 2014-09 [Member]
Disaggregation of Revenue [Line Items]
Discount and interchange revenue, net	[1]	254	233
Protection products revenue		53	58
Transaction processing revenue		43	39
Other income		29	28
Other Income Subject to ASC 606	[2]	379	358
Operating Segments [Member] | Direct Banking [Member]
Disaggregation of Revenue [Line Items]
Loan fee income		96	89
Other Income not Subject to ASC 606		96	89
Total other income		394	375
Operating Segments [Member] | Direct Banking [Member] | Accounting Standards Update 2014-09 [Member]
Disaggregation of Revenue [Line Items]
Discount and interchange revenue, net	[1]	242	223
Protection products revenue		53	58
Transaction processing revenue		0	0
Other income		3	5
Other Income Subject to ASC 606	[2]	298	286
Operating Segments [Member] | Payment Services [Member]
Disaggregation of Revenue [Line Items]
Loan fee income		0	0
Other Income not Subject to ASC 606		0	0
Total other income		81	72
Operating Segments [Member] | Payment Services [Member] | Accounting Standards Update 2014-09 [Member]
Disaggregation of Revenue [Line Items]
Discount and interchange revenue, net	[1]	12	10
Protection products revenue		0	0
Transaction processing revenue		43	39
Other income		26	23
Other Income Subject to ASC 606	[2]	$ 81	$ 72

[1] Net of rewards, including Cashback Bonus rewards, of $392 million and $363 million for the three months ended March 31, 2018 and 2017, respectively.

[2] Excludes $1 million of deposit product fees that are reported within net interest income for the three months ended March 31, 2018. Deposit product fees were immaterial for the three months ended March 31, 2017.