DFS Discover Financial Services

The Discover� Spending Confidence Monitorsm revealed only 34 percent of consumers expected to spend more in July than they did in June, a six point decline from last month�s inaugural survey. While consumers sustained their spending from May to June, their views on the economy remained pessimistic, as 62 percent rate the economy as fair or poor and 59 percent expect the economy to worsen. The survey by Discover� Card reveals the decline in spending confidence coincides with an increased number of consumers facing tighter budgets along with a decreased confidence in personal finances. Thirty percent of consumers felt their personal finances were improving compared to 34 percent last month. Additionally, consumer confidence in managing their budgets declined as fewer (49 percent) reported having money left over after paying all of their bills compared to last month (55 percent). Consumers Less Likely to Increase Spending in July Forty-nine percent of consumers said they expected to sustain their spending from June to July, but when it comes to spending more, fewer consumers expected to do so. Genders were fairly equal, with only 33 percent of men and 35 percent of women planning to spend more in July. Younger adults expected to spend more than older adults with 42 percent of 18-29 year-olds saying they will spend more in July. By contrast, less than a third (28 percent) of those 65 and older are planning to spend more, a nine point decline from last month�s survey. �While consumers sustained their spending from May to June, it appears that fewer are likely to increase July spending,� said Margo Georgiadis, Executive Vice President and Chief Marketing Officer for Discover Financial Services. �While nearly half expect to spend about the same, there is a 15 percent or 6 point drop from 40 percent to 34 percent of consumers expecting to spend more from last month�s survey.� Increased pressure on spending from added expenses or an income shortfall in the next 30 days do not appear to be significant drivers of fewer consumers expecting to spend more in July. A consistent 38 percent of consumers expected these events in July and June. The number expecting a shortfall in income or added expenses rises to 45 percent among adults under 40 and families with kids. Fewer Have Money Left Over After Paying Bills, Nearly a Third Vulnerable if Income is Suddenly Lost The number of consumers who had money left over after paying monthly bills fell to 49 percent in June, down from 55 percent in May. The drop was significantly worse among some groups such as younger adults (18-29), where only 39 percent said they had money left over compared to 48 percent in last month�s survey. Families with kids saw a seven- point decline to 44 percent. A healthy 78 percent of those who did have money left over expect to have the same or more money left over in July as well. �How successful consumers are in meeting their budgets with money left over is an important factor in spending confidence,� said Georgiadis. �With a six-point decline from last month�s survey in the number of people having money left over after paying their monthly bills, there is a parallel drop in the number of consumers expecting to spend more in July. Consumers are actively managing their spending as budgets tighten.� Current numbers also showed 38 percent of consumers having no money left over after paying their monthly bills, up from 34 percent from last month�s survey. The number rises to nearly half (48 percent) among younger adults (18-29). The number of families that had no money left over rose from 38 percent in May to 46 percent in June. Beyond tighter budgets, a rising number of consumers are at risk from a sudden loss in income. The Discover survey examines how long consumers could support their current lifestyle if they were faced with an unexpected loss of income. Overall, 66 percent said they could continue their current lifestyle for at least one month, but a third (30 percent) said they would be unable to do so, up from 25 percent last month. Consumers Less Confident about Personal Finances, Most Continue to Feel Economy is Getting Worse While last month�s survey showed that consumers had a more optimistic view of their personal finances than the economy, this month�s survey revealed increased consumer pessimism about their personal finances and the economy. A similar share of consumers continue to view their personal finances as fair or poor (58 percent) versus good or excellent (41 percent). However, the number of people who feel their finances are improving dropped to 30 percent in June, down from 34 percent in May. Forty-three percent feel their personal finances are getting worse, the same number as last month. Consumers� feelings about the economy were similar to June with a consistent 62 percent rating the U.S. economy as fair or poor, and 35 percent rating it good or excellent. Less than a quarter (21 percent) feel the economy is improving, while 59 percent feel the economy is getting worse. �Consumers� more robust view of their personal finances versus the economy appeared to support their expectation for sustained spending into June,� said Georgiadis. �With consumer confidence in their personal finances declining as well as concerns about the economy as a whole, consumers are more cautious about their spending in July.� About the Discover Spending Confidence Monitor The Discover Spending Confidence Monitor, being released once a month, queried nearly 12,000 adult consumers in June of 2007 on spending intentions and capacity. The survey also asked for opinions on the U.S. economy and ratings of personal finances. The survey was conducted by Rasmussen Reports, LLC, an independent survey research firm (www.rasmussenreports.com). It has a margin of error of +/- one percent. About Discover Financial Services: Discover Financial Services (NYSE: DFS) operates the Discover Card with more than 50 million cardmembers, the Discover Network with millions of merchant and cash access locations, and the Goldfish credit card business in the United Kingdom. Discover Financial Services also operates the PULSE ATM/debit network, which serves more than 4,400 financial institutions and includes nearly 260,000 ATMs, as well as POS terminals, nationwide. For more information, visit www.discoverfinancial.com.