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Reserves for Losses

3 Months Ended

Mar. 31, 2012

Reserves For Losses Cardmember Receivables And Loans Disclosure [Abstract]

5. Reserves for Losses

Reserves for losses relating to cardmember loans and receivables represent management's best estimate of the losses inherent in the Company's outstanding portfolio of loans and receivables. 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 overall 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 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 factors including leading economic and market indicators such as the unemployment rate, home price indices, Gross Domestic Product, non-farm payrolls, personal consumption expenditures index, consumer confidence index, bankruptcy filings and the legal and regulatory environment. Generally, due to the short-term nature of cardmember receivables, the impact of additional external factors on the losses inherent within the cardmember receivable 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.

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

Changes in Cardmember Receivables Reserve for Losses

The following table presents changes in the cardmember receivables reserve for losses for the three months ended March 31:

(Millions)			2012		2011
Balance, January 1			$	438	$	386
Additions:
	Provisions^(a)			149		160
	Other^(b)			29		38
		Total provision		178		198
Deductions:
	Net write-offs^(c)			(182)		(132)
	Other^(d)			(10)		(31)
Balance, March 31			$	424	$	421

Provisions for principal (resulting from authorized transactions) and fee reserve components.
Primarily provisions for unauthorized transactions.
Consists of principal (resulting from authorized transactions) and fee components, less recoveries of $93 million and $84 million for the three months ended March 31, 2012 and 2011, respectively.
Includes net write-offs resulting from unauthorized transactions and foreign currency translation adjustments.

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 March 31, 2012 and December 31, 2011:

(Millions)	2012		2011
Cardmember receivables evaluated individually for impairment^(a)	$	145	$	174
Related reserves ^(a)	$	110	$	118
Cardmember receivables evaluated collectively for impairment	$	41,362	$	40,716
Related reserves	$	314	$	320

Represents receivables modified in a TDR and related reserves. Refer to the Impaired Loans and Receivables discussion in Note 4 for further information.

Changes in Cardmember Loans Reserve for Losses

The following table presents changes in the cardmember loans reserve for losses for the three months ended March 31:

(Millions)			2012		2011
Balance, January 1			$	1,874	$	3,646
Additions:
	Provisions^(a)			185		(139)
	Other^(b)			27		19
		Total provision		212		(120)
Deductions:
	Net write-offs – principal^(c)			(349)		(535)
	Net write-offs – interest and fees^(c)			(44)		(61)
	Other^(d)			(13)		(9)
Balance, March 31			$	1,680	$	2,921

Provisions for principal (resulting from authorized transactions), interest and fee reserves components.
Primarily provisions for unauthorized transactions.
Includes recoveries of $133 million and $150 million, respectively. Recoveries of interest and fees were de minimis.
Includes net write-offs for unauthorized transactions and foreign currency translation adjustments.

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 March 31, 2012 and December 31, 2011:

(Millions)	2012		2011
Cardmember loans evaluated individually for impairment^(a)	$	762	$	744
Related reserves ^(a)	$	181	$	176
Cardmember loans evaluated collectively for impairment^(b)	$	59,335	$	61,877
Related reserves ^(b)	$	1,499	$	1,698

Represents loans modified in a TDR and related reserves. Refer to the Impaired Loans and Receivables discussion in Note 4 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 results of analytical models that are specific to individual pools of loans and reserves for external environmental factors that apply broadly to all loans collectively evaluated for impairment and are not specific to any individual pool of loans.