Sears credit card
America has lead the world in the financial field for the greater part of the last century. The credit card is an American invention that was quickly accepted by the rest of the world. It revolutionized the finance and purchase transactions as never before. There are 1.5 billion cards in circulation in the United States and this by itself is unprecedented in financial history of the world. The Discover card is one of the credit cards issued in the United States. This card was introduced by Sears Corporation.
Presently the penetration of this brand outside the United States is minimal and only a few countries honor it. Despite this low acceptance outside the United States the card has nearly 50 million holders in the United States. The card was launched in 1985 when Sears launched the Discover card and unveiled it for the American people. Today it is operated as a subsidiary of Morgan Stanley and has its HQs at River woods, Illinois
Sears is part of the Sears Holdings Corporation, which is the publicly traded face of Kmart and Sears. It is one of the largest retail chains in the United States, having annual revenue of nearly $55 billion. The Sears Corporation runs nearly 3000 stores all over the United States and Canada. The earliest Discover Cards had an embossed symbol of the companys headquarters the Sears Tower at Chicago
The transactions through Discover cards are processed through the Discover payment network. To add to its viability as a card issuer Discover acquired Pulse in 2004. Pulse is worldwide leader in electronic component design and manufacturing and is now associated with the Discover card. Since 2006 this network also supports the Debit cards issued by Discover. Sears was the largest retailer in the United States when it decided to launch the Discover card. The aim was to add to its financial muscle. It also purchased the Dean Witter Reynolds Organization a brokerage company and Coldwell, Banker & Company dealing in real estate in 1981. These purchases led Sears to set up the Sears Financial Network.".
However, Sears failed in its attempt to set up a financial Network with the Sears stores as its epicenter. Sears perforce had to rethink on this aspect. An earlier attempt by Citi bank at creating a credit card to rival MasterCard and VISA had failed when it had decided to launch the Choice card.. City banks choice card which had flopped was reissued as visa card in 1987. However Discover Cards in contrast quickly gained a large national consumer base. The Discover card had some new innovations. Firstly it charged no annual fee, and secondly offered a higher credit limit than other cards. Both these benefits were something new at that time. Discover card holders could also earn a "Cash back Bonus," in which a percentage of the amount spent would be refunded back to them. Sometimes this was almost as high as 1%; depending on its usage and money spent.U.S. Customs Service accepted Discover as the only card for paying customs duty.
After Sears introduced the Discover card, their stores had stopped accepting Visa and Master credit cards. This decision had an adverse effect on the sales of items at Sears Stores. It also alienated a lot of customers who were holding Visa and master cards.Therfore the profitability of the company was adversely affected.
Sears difficulties increased by the late eighties. In addition strong competition from Wal-Mart and other retailers forced Sears to have a rethink. Sears thus changed its strategy. As part of its revamped strategy Sears sold its financial businesses in 1993. After that it began to honor MasterCard and Visa again. The Discover Card was bought by the Dean Witter financial services firm. This firm merged with Morgan Stanley in 1997.
Master and Visa establishments however considered Discover as a rival and tried to throttle the product. Their modus operandi was to deny permission to banks who issued their cards to simultaneously issue the Discover card.
Discover went to court and in October of 2004, the Supreme Court gave a ruling a ruling in Discover Card's favor. This ruling paved the way for Banks to issue Discover card as well. Post the Supreme Court ruling in its favor Discover Cards filed a lawsuit in federal court seeking damages from both Visa and MasterCard. At the same time GE Consumer Finance struck an agreement with Discover to issue cards under their aegis.
In 2005, Discover Card acquired PULSE, an EFT (Electronic Funds Transfer) association. This further consolidated its hold and allowed it to issue and market debit cards. In the United States presently there are over 50 million cards issued to the American public. In addition the Discover Network has nearly 4 million merchant establishments and cash access locations with ATMs. The card has wide acceptance in the United States and more than 4100 banks, credit unions and saving institutions accept the Pulse ATM network. Discovers competitors like Visa and Master are accepted all over the world, but Discover cards are presently limited mainly to the United States. The card is not issued worldwide and has little acceptance outside the United States. But there is a silver lining in the fact that the discover card can be used at ATMs all over the world to draw cash.
Discover brand cards have low acceptance in Canada as well. In Canada only locations which cater to American tourists, such as car rental agencies and hotels and major American merchants like Sears and American eagle outfitters accept this card. Some Canadian businesses do accept Discover cards but prefer Visa, MasterCard and American Express. ATM service is not currently available in Canada. But card members can draw cash at any of the Sears stores in Canada.
Despite the handicap Discover has made a foray into the Caribbean and Mexico where Discover cards have been accepted. However in Europe the Discover card is still to find acceptance. In May 2005 the Discover Network formalized an alliance with China Union Pay Network. Thus Discover has moved into the massive Chinese market. Discover however has a long way to go to catch with Visa and Master whose presence is now worldwide. Discover also needs to change its strategy and try and go global. It must also tap growing markets like India and Japan. Only then Discover will be able to compete with Master and Visa. The Discover card despite its handicaps remains an excellent card to possess as it gives customers another choice.
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