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Reserves for Losses

9 Months Ended

Sep. 30, 2013

Reserves For Losses Card Member Receivables And Loans Disclosure [Abstract]

4. Reserves for Losses

Reserves for losses relating to Card Member loans and receivables represent management's best estimate of the probable 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. 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 Card Member loans for other external environmental qualitative factors, including various indicators related to employment, spend, sentiment, housing and credit, as well as the legal and regulatory environment. Generally, due to the short-term nature of Card Member receivables, the impact of additional external qualitative factors on the probable losses inherent within the Card Member 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 Card Member receivables or loans and net write-off coverage.

Card Member 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 past due. Card Member loans and receivables in bankruptcy or owed by deceased individuals are generally written off upon notification and recoveries are recognized as they are collected.

Changes in Card Member Receivables Reserve for Losses

The following table presents changes in the Card Member receivables reserve for losses for the nine months ended September 30:

(Millions)			2013		2012
Balance, January 1			$	428	$	438
Additions:
	Provisions^(a)			472		434
	Other^(b)			118		97
		Total provision		590		531
Deductions:
	Net write-offs^(c)			(507)		(487)
	Other^(d)			(115)		(73)
Balance, September 30			$	396	$	409

Provisions for principal (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 $304 million and $292 million for the nine months ended September 30, 2013 and 2012, respectively.
Includes net write-offs resulting from unauthorized transactions of $(117) million and $(100) million for the nine months ended September 30, 2013 and 2012, respectively; foreign currency translation adjustments of $(3) million and $4 million for the nine months ended September 30, 2013 and 2012, respectively; reclassified Card Member bankruptcy reserves of $18 million for the nine months ended September 30, 2012 only (Card Member bankruptcy reserves were classified as other liabilities in periods prior to March 31, 2012); and other items of $5 million for both the nine months ended September 30, 2013 and 2012.

Card Member Receivables Evaluated Individually and Collectively for Impairment

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

(Millions)	2013		2012
Card Member receivables evaluated individually for impairment^(a)	$	55	$	117
Related reserves ^(a)	$	39	$	91
Card Member receivables evaluated collectively for impairment	$	43,409	$	42,649
Related reserves	$	357	$	337

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

Changes in Card Member Loans Reserve for Losses

The following table presents changes in the Card Member loans reserve for losses for the nine months ended September 30:

(Millions)			2013		2012
Balance, January 1			$	1,471	$	1,874
Additions:
	Provisions^(a)			824		669
	Other^(b)			97		84
		Total provision		921		753
Deductions:
	Net write-offs
		Principal^(c)		(888)		(970)
		Interest and fees^(c)		(113)		(121)
	Other^(d)			(110)		(77)
Balance, September 30			$	1,281	$	1,459

Provisions for principal (resulting from authorized transactions), interest and fee reserves components.
Provisions for unauthorized transactions.
Consists of principal write-offs (resulting from authorized transactions), less recoveries of $343 million and $382 million for the nine months ended September 30, 2013 and 2012, respectively. Recoveries of interest and fees were de minimis.
Includes net write-offs resulting from unauthorized transactions of $(96) million and $(84) million for the nine months ended September 30, 2013 and 2012, respectively; foreign currency translation adjustments of $(8) million and $10 million for the nine months ended September 30, 2013 and 2012, respectively; reclassified Card Member bankruptcy reserves of $4 million for the nine months ended September 30, 2012 only (Card Member bankruptcy reserves were classified as other liabilities in periods prior to March 31, 2012); and other items of $(6) million and $(7) million for the nine months ended September 30, 2013 and 2012, respectively.

Card Member Loans Evaluated Individually and Collectively for Impairment

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

(Millions)	2013		2012
Card Member loans evaluated individually for impairment^(a)	$	401	$	633
Related reserves ^(a)	$	86	$	153
Card Member loans evaluated collectively for impairment^(b)	$	62,569	$	64,596
Related reserves ^(b)	$	1,195	$	1,318

Represents loans modified in a TDR and related reserves. Refer to the Impaired Card Member Loans 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.