Reserves for Losses

6 Months Ended

Jun. 30, 2013

Reserves For Losses Cardmember Receivables And Loans Disclosure [Abstract]

Reserve for Losses

4.Reserves for Losses

Reserves for losses relating to cardmember loans and receivables represent management's best estimate of theprobable inherent losses in the Company's outstanding portfolio of loans and receivables, as of the balance sheet date. Management's evaluation process requires certain estimates and judgments.

Reserves for losses are primarily based upon statistical models that analyze portfolio performance and reflect management's judgment regarding the quantitative components of the reserve adequacy. The models take into account several factors, including loss migration rates and average losses and recoveries over an appropriate historical period. Management considers whether to adjust the models for specific qualitative factors such as increased risk in certain portfolios, impact of risk management initiatives on portfolio performance and concentration of credit risk based on factors such as vintage, industry or geographic regions. In addition, management may increase or decrease the reserves for losses on cardmember loans for other external environmental qualitative factors, including various indicators related to employment, spend,sentiment, housingand credit, as well as the legal and regulatory environment. Generally, due to the short-term nature of cardmember receivables, the impact of additional external qualitative factors on the probable losses inherent within the cardmember receivables portfolio is not significant. As part of this evaluation process, management also considers various reserve coverage metrics, such as reserves as a percentage of past due amounts, reserves as a percentage of cardmember receivables or loans and net write-off coverage.

Cardmemberloans and receivables balances are writtenoff when management considers amounts to be uncollectible,which is generally determined by the number of days past dueand is typically no later than 180 days past due. Cardmember loans and receivables in bankruptcy or owed by deceased individuals are generally written off upon notification andrecoveries are recognized as they are collected.

Changes in Cardmember Receivables Reserve for Losses

The following table presents changes in the cardmember receivables reserve for losses for thesix months endedJune 30:

(Millions)			2013		2012
Balance, January 1			$	428	$	438
Additions:
	Provisions(a)			314		283
	Other(b)			82		58
		Total provision		396		341
Deductions:
	Net write-offs(c)			(358)		(346)
	Other(d)			(80)		(41)
Balance, June 30			$	386	$	392

• Provisions forprincipal (resulting from authorized transactions) and fee reserve components.
• Provisions for unauthorized transactions.
• Consists of principal (resulting from authorized transactions) and fee components, less recoveries of $200 million and $193 million for the six months endedJune 30,2013 and 2012, respectively.
• Includes net write-offs resulting from unauthorized transactions of $(80) million and $(63) million for the six months endedJune 30, 2013 and 2012, respectively; foreign currency translation adjustments of $(6) million and $(2)million for the six months endedJune 30, 2013 and 2012, respectively;reclassified cardmember bankruptcy reserves of $18million for the six months endedJune 30, 2012 only (cardmember bankruptcy reserves were classified as other liabilities in periods prior to March 31, 2012); and other items of $6 million for both the six months endedJune 30, 2013 and 2012.

Cardmember Receivables Evaluated Individually and Collectively for Impairment

The following table presents cardmember receivables evaluated individually and collectively for impairment and related reserves as of June 30, 2013 and December 31, 2012:

(Millions)	2013		2012
Cardmember receivables evaluated individually for impairment(a)	$	69	$	117
Related reserves (a)	$	68	$	91
Cardmember receivables evaluated collectively for impairment	$	44,028	$	42,649
Related reserves	$	318	$	337

• Represents receivables modified in a TDR and related reserves.Refer to the Impaired CardmemberLoans and Receivables discussion in Note 3 for further information.

Changes in Cardmember Loans Reserve for Losses

The following table presents changes in the cardmember loans reserve for losses for the six months endedJune 30:

(Millions)			2013		2012
Balance, January 1			$	1,471	$	1,874
Additions:
	Provisions(a)			577		438
	Other(b)			62		51
		Total provision		639		489
Deductions:
	Net write-offs
		Principal(c)		(613)		(678)
		Interest and fees(c)		(77)		(85)
	Other(d)			(78)		(53)
Balance, June 30			$	1,342	$	1,547

• Provisions for principal (resulting from authorized transactions), interest and fee reservescomponents.
• Provisions for unauthorized transactions.
• Consists of principal write-offs (resulting from authorized transactions), less recoveries of $230million and$258millionfor the six months endedJune 30, 2013 and 2012, respectively. Recoveries of interest and fees were de minimis.
• Includes net write-offsresulting from unauthorized transactions of $(62) million and $(53) million for the six months ended June 30, 2013 and 2012, respectively; foreign currency translation adjustments of$(11)million and $(1) million for the six months ended June 30, 2013 and 2012, respectively;reclassified cardmember bankruptcy reserves of$4million for the six months ended June 30, 2012 only (cardmember bankruptcy reserves were classified as other liabilities in periods prior to March 31, 2012); and other items of $(5)million and $(3)million for the six months ended June 30, 2013 and 2012, respectively.

Cardmember Loans Evaluated Individually and Collectively for Impairment

The following table presents cardmember loans evaluated individually and collectively for impairment and related reserves as of June 30, 2013 and December 31, 2012:

(Millions)	2013		2012
Cardmember loans evaluated individually for impairment(a)	$	474	$	633
Related reserves (a)	$	119	$	153
Cardmember loans evaluated collectively for impairment(b)	$	62,600	$	64,596
Related reserves (b)	$	1,223	$	1,318

• Represents loans modified in a TDR and related reserves. Refer to the Impaired CardmemberLoans and Receivables discussion in Note 3 for further information.
• Represents current loans and loans less than 90 days past due, loans over 90 days past due and accruing interest, and non-accrual loans and related reserves. The reserves include the quantitative results of analytical models that are specific to individual pools of loans and reserves for external environmental qualitative factors that apply to loans in geographic markets that are collectively evaluated for impairment and are not specific to any individual pool of loans.