by Alison Storm | 06/25/10

It's been a good quarter for Discover Financial Services. The company reported a 14 percent increase in second-quarter earnings, according to reports. Delinquency rates continued to drop which means more cardholders are paying their bills on time. "We anticipate that sustained improvements in credit performance will continue to contribute meaningfully to earnings and, importantly, allow us to invest for long-term growth," David Nelms, Discover's chief executive, told the Wall Street Journal in a statement.

That increased revenue equaled a $258.1 million profit for the second quarter which is an increase of 33 cents a share. A year ago the company's stock was at 43 cents a share. During the second quarter consumers racked up $22.9 billion in purchases on Discover cards. That's a 6 percent increase compared to the same time period in 2009. And fewer people are falling behind on their payments. Cardholders that were at least a month behind on their payments dropped from 4.87 percent last year to 4.52 percent this year. "We were also pleased with the performance of our payments business, driven by solid growth in key volume measures. In addition, our direct-to-consumer deposit business turned in another quarter of strong growth, and is now our single largest funding source. Looking ahead, we anticipate that sustained improvements in credit performance will continue to contribute meaningfully to earnings and, importantly, allow us to invest for long-term growth," said Nelms according to MarketWatch.

Since Discover processes credit card transactions and issues credit, they bring in revenues by collecting interest on credit card loans and by charging fees to banks and merchants for processing card payments. New legislation that limits fees and rate increases that credit card companies can charge have decreased Discover's income by $7 million compared to a year ago. New rules kick off August 22 that limit late fees to $25 or the minimum payment due, whichever is lower. Typically Discover charges $39 for late payments. Company officials estimate that this change will have an $80 to $90 million impact over the next year.