UNITED STATES
                    SECURITIES AND EXCHANGE COMMISSION
                          WASHINGTON, D.C.  20549
                          _______________________
                                     
                                 FORM 10-Q
                                     
                                     
                                     
             QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
                  OF THE SECURITIES EXCHANGE ACT OF 1934



For The Quarter Ended                                001-12351
September 30, 1997                          Commission File Number

                        ___________________________


                           METRIS COMPANIES INC.
          (Exact name of registrant as specified in its charter)
                                     
                                     
        Delaware                                41-1849591
(State of Incorporation)            (I.R.S. Employer Identification No.)


    600 South Highway 169, Suite 1800, St. Louis Park, Minnesota  55426
                 (Address of principal executive offices)
                                     
                                     
                              (612) 525-5020
           (Registrant's telephone number, including area code)
                                     
                                     

Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15 (d) of the Securities Exchange Act
of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.

                Yes   X                 No _____

As of October 31, 1997, 19,225,000 shares of the Registrant's Common
Stock, par value $.01 per share, were outstanding.

                             METRIS COMPANIES INC.
                                       
                                   FORM 10-Q
                                       
                               TABLE OF CONTENTS




                              September 30, 1997

                                                                 Page
                                                              
PART I.   FINANCIAL INFORMATION


     Item 1.    Consolidated Financial Statements (unaudited):
                Consolidated Balance Sheets....................     3
                Consolidated Statements of Income..............     4
                Consolidated Statements of Cash Flows..........     5
                Notes to Consolidated Financial Statements.....     6

     Item 2.    Management's Discussion and Analysis of
                Financial Condition and Results of
                Operations.....................................    11


PART II.    OTHER INFORMATION


     Item 6.    Exhibits and Reports on Form 8-K...................27

                Signatures.........................................28
Item 1.

METRIS COMPANIES INC. AND SUBSIDIARIES
Consolidated Balance Sheets
(dollars in thousands, except per share data) (unaudited)

                                                   September 30,    December 31,
                                                       1997            1996
Assets                                                             
Cash and due from banks                            $   11,095      $     8,902
Federal funds sold                                     38,286           19,001
Short-term investments                                     84            4,179
  Cash and cash equivalents                            49,465           32,082
Credit card loans:                                                  
  Loans held for securitization                        14,696           14,164
  Retained interests in loans securitized             344,821          201,165
     Less: Allowance for loan losses                   23,847           12,829
  Net credit card loans                               335,670          202,500
Premises and equipment, net                            10,678            5,163
Accrued interest and fees receivable                    3,745            2,942
Prepaid expenses and deferred charges                  15,426            4,826
Deferred income taxes                                  62,797           31,528
Customer base intangible                               39,831              888
Other assets                                            8,053            6,687
  Total assets                                     $  525,665      $   286,616
Liabilities                                                         
Interest-bearing deposit from affiliate            $               $     1,000
Short-term borrowings                                 153,000           54,163
Accounts payable                                       27,067           15,583
Other payables due to credit card                                   
securitizations, net                                  107,102           36,619
Current income taxes payable to FCI                     7,180            1,460
Deferred income                                        46,930           23,183
Accrued expenses and other liabilities                 18,220           15,890
  Total liabilities                                   359,499          147,898
Stockholders' Equity                                                
Preferred stock, par value $.01 per share;                          
10,000,000 shares authorized, none issued 
or outstanding
Common stock, par value $.01; 100,000,000 shares                    
authorized, 19,225,000 shares issued and                 
outstanding                                               192              192
Paid-in capital                                       107,059          107,220
Retained earnings                                      58,915           31,306
  Total stockholders' equity                          166,166          138,718
  Total liabilities and stockholders' equity       $  525,665      $   286,616

         See accompanying Notes to Consolidated Financial Statements.

METRIS COMPANIES INC. AND SUBSIDIARIES
Consolidated Statements of Income
(in thousands, except per share data) (unaudited)

                                     Three Months Ended  Nine Months Ended
                                       September 30,       September 30,
                                       1997       1996     1997      1996
Interest Income                                                     
Credit card loans                    $ 16,490  $  7,464   $42,645    $ 19,583
Federal funds sold                        515       208     1,270         644
Other                                     210        56       568         120
 Total interest income                 17,215     7,728    44,483      20,347
Interest Expense                                                    
Deposit                                              12         7          36
Short-term borrowings                   2,398       953     5,923       2,787
 Total interest expense                 2,398       965     5,930       2,823
Net Interest Income                    14,817     6,763     38,553     17,524
Provision for loan losses              11,106     5,383    28,589      10,556
Net interest income after                                           
 provision for loan losses              3,711     1,380     9,964       6,968
Other Operating Income                                              
Net extended service plan revenues      1,628     5,174     3,249      13,789
Net securitization and credit card                                   
servicing income                       14,706    13,190    59,533      33,726
Credit card fees, interchange                                       
 and other credit card income          10,488     5,184    28,324      17,262
Fee-based product revenues             14,457     8,482    39,082      20,549
                                       41,279    32,030   130,188      85,326
Other Operating Expense                                             
Credit card account and other                                        
product solicitation and marketing      5,942     4,438    22,419      20,898
expenses
Employee compensation                   8,318     6,362    24,455      14,885
Data processing services and                                        
 communications                         3,628     3,435    12,893       8,632
Third-party servicing expenses          2,233     2,087     7,972       6,700
Warranty and debt waiver                                            
underwriting           and claims       1,689     2,781     4,077       6,842
servicing expenses
Credit card fraud losses                1,121       657     2,700       1,723
Other                                   4,925     4,216    20,117       8,718
                                       27,856    23,976    94,633      68,398
Income Before Income Taxes             17,134     9,434    45,519      23,896
Income taxes                            6,597     3,632    17,525       9,200
Net Income                           $ 10,537  $  5,802   $27,994    $ 14,696
                                                                    
Earnings per share:                                                 
Primary                              $    .52  $    .35   $  1.38    $    .89
Fully diluted                        $    .52  $    .35   $  1.38    $    .89
                                                                    
Weighted average common and common                                  
equivalent shares - fully diluted      20,308    16,514    20,323      16,514
                                       
         See accompanying Notes to Consolidated Financial Statements.

METRIS COMPANIES INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows
(dollars in thousands) (unaudited)

                                                       Nine Months Ended
                                                         September 30,
                                                      1997           1996
Operating Activities:                                           
Net Income                                       $    27,994     $    14,696
Adjustments to reconcile net income to net cash                 
  provided by operating activities:                             
  Provision for loan losses                           28,589          10,556
  Depreciation and amortization                        8,572           5,260
  Net amortization of gain on securitization                    
     of credit card loans                             (1,927)          2,803
  Changes in operating assets and liabilities:                  
     Accrued interest and fees receivable               (803)            523
     Prepaid expenses and deferred charges           (15,966)         (3,686)
     Deferred income taxes                           (31,269)        (14,886)
     Accounts payable and accrued expenses            13,813           1,615
     Other payables due to credit card                          
       securitizations, net                           71,298          53,967
     Current income taxes payable to FCI               5,720          (2,887)
     Deferred income                                  23,747           4,970
     Other                                            (5,647)         (2,531)
Net cash provided by operating activities        $   124,751     $    70,400
                                                                
Investing Activities:                                           
Proceeds from sales of loans                         923,750         674,055
Net loans originated or collected                   (755,512)       (738,764)
Credit card portfolio acquisition                   (366,587)   
Additions to premise and equipment                    (6,470)         (2,669)
Net cash used in investing activities            $  (204,819)    $   (67,378)
                                                                
Financing Activities:                                           
Decrease in interest-bearing deposit                  (1,000)   
Net increase (decrease) in short-term borrowings      98,836         (10,097)
Cash dividends paid                                     (385)   
Net cash provided by (used in) financing         $    97,451     $   (10,097)
activities
                                                                
Net increase (decrease) in cash and cash              17,383          (7,075)
equivalents
Cash and cash equivalents at beginning of period      32,082          34,743
Cash and cash equivalents at end of period       $    49,465     $    27,668



         See accompanying Notes to Consolidated Financial Statements.

METRIS COMPANIES INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(unaudited)

NOTE 1 - ORGANIZATION AND BASIS OF PRESENTATION

     The consolidated financial statements include the accounts of Metris
Companies Inc. ("MCI") and its subsidiaries (collectively, "the Company").
The Company is an information-based direct marketer of consumer credit
products, fee-based products and services, and extended service plans to
moderate-income consumers.  The Company's business is conducted through Metris
Direct, Inc., Direct Merchants Credit Card Bank, National Association ("Direct
Merchants Bank"), Metris Funding Co. ("MFC") and Metris Receivables, Inc.
("MRI"), each a wholly-owned subsidiary of MCI.

     Prior to September 1996, the Company operated as a division of Fingerhut
Companies, Inc. ("FCI").  During September 1996, FCI reorganized the business
through the formation of MCI. The stock of Metris Direct, Inc., Direct
Merchants Bank, and MRI, in addition to the assets, liabilities and equity of
certain portions of the retail extended service plan business, were
contributed to the Company from FCI and its subsidiaries.  In October 1996,
the Company completed an initial public offering of its common stock.

     The consolidated financial statements include an allocation of expenses
for data processing and information systems, audit, accounting, treasury,
legal, human resources, customer service and other administrative support
historically provided by FCI and its subsidiaries to the Company.  Such
expenses were based on the actual use of such services or were based on other
allocation methods that, in the opinion of management, are reasonable.  During
1996, FCI and the Company entered into an administrative services agreement
which covers such expense allocations and the provision of future services
using similar rates and allocation methods for various terms, the latest of
which expires at the end of 1998.  The consolidated financial statements also
reflect the retroactive effects of intercompany agreements entered into during
1996, including co-brand credit card, database access, data sharing and
extended service plan agreements with Fingerhut Corporation ("Fingerhut"), a
wholly owned subsidiary of FCI, and a tax sharing agreement with FCI.  These
agreements have terms ranging up to seven years.  In addition, the
consolidated financial statements include an allocation of interest expense
for the Company's net borrowings from FCI during 1996.

     All significant intercompany balances and transactions have been
eliminated in consolidation.

Interim Financial Statements

     The unaudited interim consolidated financial statements and related
unaudited financial information in the footnotes have been prepared in
accordance with generally accepted accounting principles and the rules and
regulations of the Securities and Exchange Commission for interim financial
statements.  Such interim financial statements reflect all adjustments,
consisting of normal recurring accruals, which in the opinion of management,
are necessary to present fairly the consolidated financial position of the
Company, and the results of its operations and its cash flows for the interim
periods.  These consolidated financial statements should be read in
conjunction with the financial statements and the notes thereto contained in
the Company's 1996 annual report to shareholders and incorporated by reference
in the Company's annual report on Form 10-K.  The nature of the Company's
business is such that the results of any interim period may not be indicative
of the results to be expected for the entire year.

Pervasiveness of Estimates

    The consolidated financial statements have been prepared in accordance
with generally accepted accounting principles, which require management to
make estimates and assumptions that affect the reported amount of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the consolidated financial statements as well as the reported amount of
revenues and expenses during the reporting periods.  Actual results could
differ from these estimates.

NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES

Consolidated Statements of Cash Flow

     Cash paid for interest during the nine months ended September 30, 1997
and 1996, was $5.8 million and $2.8 million, respectively.  Cash paid for
income taxes for the same periods was $43.1 million and $31.0 million,
respectively.

Earnings Per Share

     Earnings per share is computed using net income applicable to common
stock and the weighted average number of common and common equivalent shares
outstanding, after giving retroactive effect to the shares outstanding as if
the Company's reorganization (See Note 1) had occurred at the beginning of the
first period shown.  The common equivalent shares outstanding were calculated
using the treasury stock method, using the initial public offering price for
the period prior to the initial public offering.  In addition, common
equivalent shares outstanding were calculated assuming that certain options
were converted into shares of the Company's common stock at the beginning of
the first period shown.

     In February 1997, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 128 ("FAS 128"), "Earnings Per
Share."  This Statement is effective for financial statements issued for
periods ending after December 15, 1997 and supersedes APB Opinion No. 15,
"Earnings Per Share."  The Statement replaces the presentation of primary EPS
with a presentation of basic EPS.  It also requires dual presentation of basic
and diluted EPS on the face of the income statement and requires companies to
restate prior-period EPS for all periods in which an income statement is
presented. Under FAS 128, basic and diluted earnings per share for the three
and nine months ended September 30 were:

                             Three Months Ended          Nine Months Ended
                                September 30,              September 30,
                              1997         1996         1997          1996
(in thousands)                                                    
Income available to                                               
 common stockholders      $   10,537    $    5,802   $    27,994  $   14,696
Weighted average common                                           
 shares outstanding           19,225        15,967        19,225      15,967
Adjustments for dilutive                                          
 securities:
Assumed exercise of                                               
 outstanding stock             1,074           541           999         519
options
Diluted common shares         20,299        16,508        20,224      16,486
                                                                  
Earnings per share:                                               
     Basic                $     0.55    $     0.36   $      1.46  $     0.92
     Diluted              $     0.52    $     0.35   $     1.38   $     0.89



Extended Service Plans

     The Company coordinates the marketing activities for Fingerhut's sales of
extended service plans and reimburses Fingerhut for the cost of its marketing
media and other services utilized in the sales of extended service plans,
based on contracts sold and on media utilization costs as agreed to by the
Company and Fingerhut.

     The Company began performing administrative services on January 1, 1997,
and retained the claims risk for all extended service plans sold on or after
January 1, 1997.  As a result, extended service plan revenues and the related
expenses have been deferred and will be recognized over the life of the
related extended service plan contracts.  Prior to January 1, 1997 the Company
contracted with a third-party underwriter and claims administrator to service
and absorb the risk of loss for most claims. These claims servicing contract
costs were expensed as the service contracts were sold, net of the related
cost of anticipated service contract returns.  In addition, the revenues
related to these contract sales were recognized immediately.

Customer Base Intangible

     The customer base intangible represents the excess of amounts paid for
portfolio acquisitions over the related credit card loan balances net of
reserves and discounts.  The intangible assets are amortized over the
estimated periods of benefit, generally 5 to 7 years, in proportion to the
expected benefits to be recognized.

Interest Rate Risk Management Contracts

     The Company enters into interest rate cap and swap agreements to hedge
its economic exposure to fluctuating interest rates associated with both the
floating rate and fixed rate certificates issued by the Metris Master Trust.
If a derivative financial instrument or the instrument it is hedging is sold
or terminated, the Company will recognize a gain or loss resulting from the
transaction in the period the derivative is sold or terminated.  The Company
has not sold or terminated any derivative financial instruments.

NOTE 3 - CREDIT CARD SECURITIZATIONS

     The Company securitizes and sells a portion of its credit card loans to
both public and private investors through the Metris Master Trust (the
"Trust")and a third party multi-seller conduit (the "Conduit").  The Company
retains participating interests in the credit card loans (under "Retained
interests in loans securitized" on the consolidated balance sheets. Although
the Company continues to service the underlying credit card accounts and
maintains the customer relationships, these transactions are treated as sales
for financial reporting purposes and the associated loans are not reflected on
the consolidated balance sheets.  The Company has receivables from and
payables to the Trust and Conduit as a result of securitizations, including
amounts deposited in an investor reserve account held by the trustee for the
benefit of the Trust's certificateholders, the excess servicing asset, which
represents the net gain recorded at any point in time for loans sold under the
asset securitizations, net of recourse reserves for securitized loans and
normal and excess servicing fee receivables.


     In May 1997, the Metris Master Trust issued Series 1997-1 certificates to
third parties with a principal amount of $794.8 million, generating proceeds
of $792.2 million of which $667.7 million was used to reduce the Class A
Variable Funding Certificates issued under Series 1995-1.  The Series 1997-1
certificates are scheduled to begin accumulating principal collections in
March 2001, however the accumulation period could potentially begin at a later
date.  The expected final payment date of these certificates is in April 2002.

NOTE 4 - ALLOWANCE FOR LOAN LOSSES

     The activity in the allowance for loan losses is as follows:

                                 Three Months Ended      Nine Months Ended
                                   September 30,           September 30,
                                  1997        1996        1997        1996
(in thousands)                                                     
Balance at beginning of        $ 18,191    $  5,303    $ 12,829    $  3,679
period
Allowance related to assets                                        
  acquired, net                   2,009                   2,815
Provision for loan losses        11,106       5,383      28,589      10,556
Loans charged-off                 7,629       2,188      20,834       5,816
Recoveries                          170          42        448          121
Net loans charged-off             7,459       2,146     20,386        5,695
Balance at end of period       $ 23,847    $  8,540    $23,847     $  8,540


NOTE 5 - SHORT TERM BORROWINGS

     The Company borrows under a $300 million, five-year Revolving Credit
Facility for the Company (the "Revolving Credit Facility"), guaranteed by FCI
to fund on-balance sheet loans and for other general business purposes.  At
September 30, 1997 and December 31, 1996, the Company had outstanding
borrowings of $153 million and $50 million, respectively, under the Revolving
Credit Facility.  The interest rates on the Revolving Credit Facility
borrowings at September 30, 1997 and December 31, 1996 were 8.5% and 5.9%,
respectively. The Company had outstanding borrowings from FCI of $4.2 million
at a weighted average interest rate of 7.1% at December 31, 1996.


NOTE 6 - PORTFOLIO ACQUISITIONS

     In September 1997, the Company acquired a $317 million credit card
portfolio from Key Bank USA, National Association.  These credit card
receivables were securitized and sold to investors through a third party multi-
seller conduit.  The Company retains an interest in the receivables which is
financed by borrowings under the Revolving Credit Facility.

     In October 1997, the Company acquired a $405 million credit card
portfolio from Mercantile Bank National Association.  This portfolio was also
securitized and sold through the same third party multi-seller conduit.  The
Company retains an interest in the receivables which is financed by borrowings
under the Revolving Credit Facility.

NOTE 7 - SUBSEQUENT EVENTS

     On October 29, 1997, the Company declared a cash dividend in the amount
of $.01 per share, aggregating approximately $.2 million, payable on November
26, 1997, to shareholders of record as of the close of business on November
12, 1997.

     On November 7, 1997, the Company privately issued and sold $100 million
of its 10% Senior Notes due 2004 pursuant to an exemption under the Securities
Act of 1933, as amended.  The net proceeds of $97 million were used to pay
down borrowings under the Revolving Credit Facility.

     ITEM 2.
                                       
                    METRIS COMPANIES INC. AND SUBSIDIARIES
                    MANAGEMENT'S DISCUSSION AND ANALYSIS OF
                 FINANCIAL CONDITION AND RESULTS OF OPERATIONS



    The following discussion and analysis provides information that management
believes to be relevant to understanding the financial condition and results
of operations of Metris Companies Inc. and its subsidiaries (the "Company").
This discussion should be read in conjunction with the consolidated financial
statements and the related notes thereto.

General

     The Company is an information-based direct marketer and provider of
consumer credit products, fee-based products and services and extended service
plans to moderate-income consumers.

    Consumer Credit Products

     The Company's consumer credit products are primarily unsecured credit
cards, including the Fingerhut co-branded MasterCard(R), the Bally Total
Fitness co-branded MasterCard, and the Direct Merchants Bank MasterCard and
Visa(R). The primary factors affecting the profitability of consumer credit
products are credit card account and loan growth, interest spreads on loans,
credit card usage, credit quality (delinquencies and charge-offs), the level
of solicitation and marketing expenses, fraud losses, servicing and other
administrative costs. The Company generates interest and other income through
finance charges assessed on outstanding credit card loans, credit card fees
(including annual membership, cash advance, overlimit, past-due, and other
credit card fee income) and interchange income. The Company's primary related
expenses are the costs of funding its loans, provisions for loan losses and
operating expenses including employee compensation, account solicitation and
marketing expenses, and data processing and servicing expenses.

    Fee-Based Products and Services

     The Company markets its fee-based products and services, including debt
waiver programs, card registration, third party insurance, and third party
membership clubs, to its credit card customers, third party partners and
Fingerhut Corporation ("Fingerhut") customers. Profitability for fee-based
products and services is affected by the response rates to product
solicitation efforts, the targeted solicitation plans, the commission rates
received from or paid to the Company's product partners, claims rates and
claims servicing costs for certain programs, and other operating expenses.

    Extended Service Plans

     The Company provides extended service plans that extend warranty service
coverage beyond the manufacturer's warranty on selected products sold by
Fingerhut. Extended service plan profitability is directly affected by the
response rates to product solicitation efforts, returns or cancel rates for
the underlying product, the retail sales price of the product on which an
extended service plan is sold, the cost of underwriting and claims servicing,
and other operating costs.

Results of Operations

     Net income for the three months ended September 30, 1997, was $10.5
million, or $.52 per share, up 82% from $5.8 million, or $.35 per share for
the third quarter of 1996.  The increase in net income is the result of an
increase in net interest income and other operating income partially offset by
increases in the provision for loan losses and other operating expenses.
These increases are largely attributable to the growth in average managed
loans to $2.3 billion for the third quarter 1997 from $1.2 billion for the
third quarter 1996, an increase of 92%.

     Net income for the nine months ended September 30, 1997, was $28.0
million, or $1.38 per share, up 90% from $14.7 million, or $.89 per share for
the first nine months of 1996.  The increase in net income is the result of an
increase in net interest income and other operating income partially offset by
increases in the provision for loan losses and other operating expenses.
These increases are largely attributable to the growth in average managed
loans to $2.0 billion for the nine months ended September 30, 1997 from $890
million for the same period in 1996, an increase of 122%.


Managed Loan Portfolio and the Impact of Credit Card Securitizations

    Securitization

     Securitizations of credit card loans have been and are expected to be a
major source of funding for the Company. The effect of securitization on the
Company's consolidated financial statements is to remove credit card loans
sold with limited recourse from the consolidated balance sheet and record a
gain on sale for the difference between the carrying value of the loans sold
and the sales proceeds.

     The securitization and sale of credit card loans changes the Company's
interest in such loans from lender to servicer, with a corresponding change in
how revenues and expenses are reported in the income statement. For
securitized and sold credit card loans, amounts that otherwise would have been
recorded as net interest income, fee income and provision for loan losses are
instead reported in other operating income as net securitization and credit
card servicing income.

     During the first quarter of 1997, the Company implemented Statement of
Financial Accounting Standards No. 125 ("FAS 125") "Accounting for Transfers
and Servicing of Financial Assets and Extinguishments of Liabilities".  FAS
125 did not have a material effect on the Company's consolidated financial
statements.
   

     Managed Loan Portfolio

     The Company analyzes its financial performance on a managed loan
portfolio basis. To do so, the income statement and balance sheet are adjusted
to reverse the effects of securitization. The Company's discussion of
revenues, where applicable, and provision for loan losses includes comparisons
to amounts reported in the Company's consolidated statements of income ("owned
basis" or "on-balance sheet") as well as on a managed basis.

     The Company's managed loan portfolio is comprised of credit card loans
held for securitization, retained interests in loans securitized and the
investors' interests in securitized credit card loans. The investors'
interests in securitized credit card loans is not an asset of the Company,
and, therefore, is not shown on the Company's consolidated balance sheets. The
following tables summarize the Company's managed loan portfolio:

                                                    September 30,
                                                  1997         1996
Dollars in thousands                                        
Period-end balances                                         
Credit card loans:                                          
 Loans held for securitization                 $   14,696  $     4,193
 Retained interests in loans securitized          344,821      149,884
 Investors' interests in securitized loans      2,324,360    1,122,610
Total managed loan portfolio                   $2,683,877  $ 1,276,687

<TABLE>
                                       Three Months Ended    Nine Months Ended
                                         September 30,         September 30,
Dollars in thousands                    1997        1996       1997       1996
Average balances                                                            
Credit card loans:                                                      
 <S>                                  <C>  <C>      <C> <C>    <C> <C>     <C>
 Loans held for securitization        $    92,206   $   17,613 $   78,282  $ 28,137
   Retained interests in loans                                           
    securitized                           248,676      132,092    227,935   105,276        
 Investors' interests in securitized                                    
   loans                                1,934,034    1,034,907  1,673,740   756,654
Total managed loan portfolio          $ 2,274,916   $1,184,612 $1,979,957  $890,067
</TABLE>


    Impact of Credit Card Securitizations. The following table provides a
summary of the effects of credit card securitizations on selected line items
of the Company's income statements for each of the periods presented, as well
as selected financial information on both an owned and a managed loan
portfolio basis:

                                    Three Months Ended        Nine Months Ended
                                       September 30,            September 30,
                                     1997         1996        1997        1996
Dollars in thousands                                                   
Statements of Income (owned                                            
basis)
 Net interest income             $ 14,817       $  6,763   $ 38,553    $17,524
 Provision for loan losses          11,106         5,383     28,589     10,556
 Other operating income             41,279        32,030    130,188     85,326
 Other operating expense            27,856        23,976     94,633     68,398
 Income before income taxes      $  17,134      $  9,434   $ 45,519   $ 23,896
Adjustments for Securitizations                                        
 Net interest income             $  63,989      $ 36,826   $166,285   $ 78,416
 Provision for loan losses          76,891        37,957    182,330     75,258
 Other operating income             12,902         1,131     16,045     (3,158)
 Other operating expense                                               
 Income before income taxes      $             $          $          $
Statements of Income (managed                                          
basis)
 Net interest income             $  78,806     $  43,589  $ 204,838   $ 95,940
 Provision for loan losses          87,997        43,340    210,919     85,814
 Other operating income             54,181        33,161    146,233     82,168
 Other operating expense            27,856        23,976     94,633     68,398
 Income before income taxes      $  17,134     $   9,434  $  45,519   $ 23,896
                                                                       
Other Data:                                                            
Owned Basis                                                            
 Average interest-earning assets $ 394,395     $ 169,817  $ 352,068   $152,760
 Return on average assets              8.6%         11.5%       8.9%      10.3%
 Return on average equity              25.8%        27.1%      24.5%      25.0%
 Net interest margin (1)               14.9%        15.8%      14.6%      15.3%
Managed Basis                                                          
 Average interest-earning assets $2,328,429    $1,204,723  $2,025,808 $909,414
 Return on average assets               1.8%          1.9%        1.8%     2.1%
 Return on average equity             25.8%          27.1%       24.5%    25.0%
 Net interest margin (1)              13.4%          14.4%       13.5%    14.1%
 
(1)  Net interest margin is equal to annualized net interest income divided by
average interest-earning assets.

    Net Interest Income

    Net interest income consists primarily of interest earned on the Company's
credit card loans less interest expense on borrowings to fund the loans.
Managed net interest income for the three months ended September 30, 1997, was
$78.8 million compared to $43.6 million for the same period in 1996.  This
increase was primarily due to a $1.1 billion increase in average loans over
the comparable period in 1996.

     Managed net interest income was $204.8 million for the nine months ended
September 30, 1997, compared to $95.9 million for the same period in 1996.
This increase was primarily due to a $1.1 billion increase in average loans
over the comparable period in 1996.

     The following tables provide an analysis of interest income and expense,
net interest spread, net interest margin and average balance sheet data for
the three and nine month periods ended September 30, 1997 and 1996:

Analysis of Average Balances, Interest and Average Yields and Rates
<TABLE>
                                             Three Months Ended September 30,
                                         1997                             1996
                            Average                  Yield/     Average                Yield/
                            Balance      Interest     Rate      Balance    Interest    Rate
Dollars in thousands

Owned Basis
Assets:
Interest-earning assets:
<S>                       <C> <C>       <C>  <C>      <C>      <C> <C>    <C>  <C>       <C>
Federal funds sold        $   37,191    $    515      5.5%     $   15,720 $    208       5.3%
Short-term investments        16,322         210      5.1%          4,392       56       5.1%
Credit card loans            340,882      16,490     19.2%        149,705    7,464      19.8%
Total interest-earning
  assets                  $  394,395    $ 17,215     17.3%     $  169,817 $  7,728      18.1%

Cash and due from banks       16,255                                8,632
Accrued interest and fees      4,126                                1,905
Other amounts due from
  securitizations                                                     580
Other assets                  97,185                               27,047
Allowance for loan losses    (23,656)                              (7,478)
  Total assets            $  488,305                           $  200,503
Liabilities and Equity:
Interest-bearing
  liabilities:
Interest-bearing deposit  $             $                      $    1,000 $     12       4.8%
Short-term borrowings        125,087       2,398      7.6%         53,175      953       7.1%
  Total                      125,087       2,398      7.6%         54,175      965       7.1%
Other liabilities            200,934                               61,242
Total liabilities            326,021                              115,417
Stockholders' equity         162,284                               85,086
Total liabilities and
  equity                  $  488,305                           $  200,503
Net interest income and
  interest margin (1)                   $ 14,817     14.9%                 $ 6,763      15.8%
Net interest rate
  spread (2)                                          9.7%                              11.0%

Managed Basis
Credit card loans         $2,274,916    $110,039     19.2%     $1,184,612  $58,986      19.8%
Total interest-earning
  assets                   2,328,429     110,764     18.9%      1,204,724   59,250      19.6%
Total interest-bearing
  liabilities              2,059,121      31,958     6.2%       1,092,240   15,661       5.7%
Net interest income and
  interest margin (1)                     78,806    13.4%                   43,589      14.4%
Net interest rate
  spread (2)                                         12.7%                              13.9%
</TABLE>
(1)  Net interest margin is computed by dividing annualized net interest
income by average total interest-earning assets.
(2)  The net interest rate spread is the annualized yield on average interest-
earning assets minus the funding rate on average interest-bearing liabilities.
<TABLE>
                                           Nine Months Ended September 30,
                                         1997                              1996
                             Average                 Yield/      Average              Yield/
                             Balance     Interest     Rate       Balance  Interest    Rate
Dollars in thousands

Owned Basis
Assets:
Interest-earning assets:
<S>                           <C>     <C>  <C>      <C>        <C> <C>    <C>          <C>
Federal funds sold         $  31,287     $ 1,270      5.4%     $   16,178 $    644     5.3%
Short-term investments        14,564         568      5.2%          3,169      120     5.1%
Credit card loans            306,217      42,645     18.6%        133,413   19,583    19.6%
Total interest-earning
  assets                   $ 352,068     $44,483     16.9%     $  152,760 $ 20,347    17.8%

Cash and due from banks       12,750                                5,009
Accrued interest and fees      3,720                                2,285
Other amounts due from
  securitizations                                                  11,187
Other assets                  74,399                               24,408
Allowance for loan losses    (20,636)                              (5,878)
  Total assets             $ 422,301                           $  189,771
Liabilities and Equity:
Interest-bearing
  liabilities:
Interest-bearing deposit  $      222    $      7      4.4%     $    1,000 $     36     4.8%
Short-term borrowings        110,268       5,923      7.2%         60,052    2,787     6.2%
  Total                      110,490       5,930      7.2%         61,052    2,823     6.2%
Other liabilities            159,063                               50,198
Total liabilities            269,553                              111,250
Stockholders' equity         152,748                               78,521
Total liabilities and
  equity                   $ 422,301                           $  189,771
Net interest income and
  interest margin (1)                   $ 38,553     14.6%                $ 17,524    15.3%
Net interest rate
  spread (2)                                          9.7%                           11.6%

Managed Basis
Credit card loans         $1,979,957    $284,138     19.2%     $  890,067 $130,579    19.6%
Total interest-earning
  assets                   2,025,808     285,976     18.9%        909,414  131,343    19.3%
Total interest-bearing
  liabilities              1,784,230      81,137      6.1%        818,759   35,403     5.8%
Net interest income and
  interest margin (1)                    204,839     13.5%                  95,940    14.1% 
  Net interest rate
  spread (2)                                         12.8%                            13.5%
</TABLE>
(1)  Net interest margin is computed by dividing annualized net interest
income by average total interest-earning assets.
(2)  The net interest rate spread is the annualized yield on average interest-
earning assets minus the funding rate on average interest-bearing liabilities.


Other Operating Income

     Other operating income contributes substantially to the Company's results
of operations, representing 71% and 75% of owned revenues for the three and
nine months ended September 30, 1997, respectively.  Fee-based product
revenues, particularly from debt waiver products, continue to provide an
increasing percentage of other operating income.  Debt waiver products and
other fee-based product revenues are expected to increase with growth in
credit card accounts and as the Company continues to offer other fee-based
products to its customer base and to customers of other third-party credit
card issuers.  The following table presents other operating income on an owned
basis:

<TABLE>
                                          Three Months Ended      Nine Months Ended
                                            September 30,          September 30,
                                           1997       1996         1997       1996

Dollars in thousands

Other Operating Income:
<S>                                     <C>         <C>         <C>        <C>
Net extended service plan revenues      $ 1,628     $  5,174    $ 3,249    $ 13,789
Net securitization and credit card
  servicing income                       14,706       13,190     59,533      33,726 
  Credit card fees, interchange and
  other credit card income               10,488        5,184     28,324      17,262
Fee-based product revenues               14,457        8,482     39,082      20,549
  Total                                 $41,279     $ 32,030   $130,188    $ 85,326
</TABLE>
        The following definitions may be helpful when reading the discussion
and analysis of other operating income:

     Net extended service plan revenues - Net extended service plan revenues
include revenues received from sales of extended service plans, net of a
provision for service plan returns.  The Company began performing
administrative services on January 1, 1997, and retained the claims risk for
all extended service plans sold on or after January 1, 1997.  As a result,
extended service plan revenues are deferred and recognized over the life of
the related extended service plan contracts.  Prior to January 1, 1997 the
Company contracted with a third-party underwriter and claims administrator to
service and absorb the risk of loss for most claims and the revenues related
to these contract sales were recognized immediately.

     Net securitization and credit card servicing income - Due to the
securitization of credit card loans, activity from securitized account
balances normally reported as net interest income, fee income, and provision
for loan losses is reported in net securitization and credit card servicing
income. Net securitization income is the excess of interest and fee income
earned over the related securitization expenses, including interest payments,
provision for loan losses, servicing costs and transaction expenses related to
securitized loans. Credit card servicing income is also included in this
amount and represents fees paid to the Company from the trust for servicing
the securitized loans. Such fees generally approximate 2% of average
securitized loans on an annualized basis.


     Credit card fees, interchange and other credit card income - Credit card
fees include annual membership, cash advance, overlimit, past-due, and other
credit card fee income derived from on-balance sheet loans. Also included in
this amount is interchange income generated from total accounts, which
represents fees payable by merchants to the credit card issuer for sales
transactions. This amount presently represents approximately 1.4% of all net
credit card purchases.

     Fee-based product revenues - Fee-based product revenues presently include
revenues from sales of debt waiver protection for unemployment, disability,
and death, card registration, third party insurance, and revenues from
targeted list programs.

     Other operating income increased $9.2 million and $44.9 million for the
three and nine months ended September 30, 1997, respectively, over the
comparable periods in 1996, primarily due to income generated from the growth
in average securitized credit card loans. Additionally, fee-based product
revenues increased by $6.0 million and $18.5 million, respectively, because of
the Company's marketing efforts to cross-sell other products and services to
its customers.  Specifically, debt waiver product revenue increased by $4.9
million and $16.5 million, respectively, due to increased receivables on
accounts with debt waiver protection and the addition of new credit card
customers with debt waiver protection.  The Company added 273,000 and 587,000
new credit card accounts in the three and nine month periods ended September
30, 1997, respectively.  In addition, interchange revenue increased over the
prior-year periods due to credit card charge volume increasing to $611 million
and $1.7 billion for the three and nine months ended September 30, 1997,
compared to $403 million and $1.2 billion for the same periods in 1996,
respectively.

     Net extended service plan revenues decreased by $3.5 million and $10.5
million, respectively, for the three and nine months ended September 30, 1997
compared to the same periods of 1996.  These decreases reflect that on January
1, 1997, the Company assumed responsibility for claims processing and
underwriting on contracts sold on or after that date.  As a result, all
extended service plan revenues and the related expenses have been deferred and
will be recognized over the life of the related extended service plan
contracts.  The extended service plan revenues before accounting deferrals for
the third quarter 1997 were down 4% compared to the third quarter of 1996 due
to an 11% decrease in contracts sold.

Other Operating Expense

     Total other operating expenses for the three and nine months ended
September 30, 1997, increased $3.9 million and $26.2 million, respectively,
over the comparable periods in 1996, primarily due to increases in employee
compensation, data processing services and communications, and other expenses.
Employee compensation increased due to staffing needs to support the increase
in credit card accounts, fee based products sold and internalization of
warranty operations.  The increase in data processing services and
communications expense was largely due to the increased number of credit card
accounts, transaction volumes and loan balances.  The increase in other
expenses is primarily due to general growth in all three business lines and
the costs associated with building an infrastructure to support the growth.
The following table presents other operating expense:
<TABLE>
                                       Three Months Ended       Nine Months Ended
                                          September 30,            September 30,
Dollars in thousands                       1997        1996          1997      1996
Other Operating Expense:
Credit card account and other product
  <S>              <C>       <S>        <C>         <C>          <C>        <C>
  solicitation and marketing expenses   $ 5,942     $  4,438     $ 22,419   $ 20,898
Employee compensation                     8,318        6,362       24,455     14,885
Data processing services and
  communications                          3,628        3,435       12,893      8,632
Third party servicing expenses            2,233        2,087        7,972      6,700
Warranty and debt waiver underwriting
  and claims servicing expenses           1,689        2,781        4,077      6,842
Credit card fraud losses                  1,121          657        2,700      1,723
Other                                     4,925        4,216       20,117      8,718
  Total                                 $27,856     $ 23,976     $ 94,633   $ 68,398
</TABLE>

     Total other operating expenses include direct and allocated expenses from
Fingerhut Companies, Inc. ("FCI") for administrative services provided to the
Company under the Administrative Services Agreement.  Additionally, total
other operating expenses reflect the retroactive effects of additional
intercompany agreements and contracts between the Company and FCI or its
subsidiaries (See Note 1 to the Consolidated Financial Statements).

Income Taxes

     The Company's provision for income taxes includes both federal and state
income taxes. The Company's effective tax rate was 38.5% for the three and
nine months ended September 30, 1997 and 1996, respectively.

Asset Quality

     The Company's delinquency and net loan charge-off rates at any point in
time reflect, among other factors, the credit risk of loans, the average age
of the Company's various credit card account portfolios, the effects of the
Company's collection and recovery efforts, and general economic conditions.
The average age of the Company's credit card portfolio affects the stability
of delinquency and loss rates of the portfolio. The Company continues to focus
its resources on refining its credit underwriting standards for new accounts,
and on collections and post charge-off recovery efforts to minimize net
losses.  At September 30, 1997, 43.3% of managed accounts and 34.5% of managed
loans were less than 12 months old, excluding the KeyCorp acquisition.
Accordingly, the Company believes that its loan portfolio will experience
increasing or fluctuating levels of delinquency and loan losses as the average
age of the Company's accounts increases.

     This trend is reflected in the change in the Company's net charge-off
ratio.  For the quarter ended September 30, 1997, the Company's net charge-off
ratio stood at an annualized rate of 8.7%, compared to 9.0% for the quarter
ended June 30, 1997 and 5.7% for the quarter ended September 30, 1996. For the
nine months ended September 30, 1997, the Company's net charge-off ratio stood
at an annualized rate of 8.7% compared to 5.6% for the nine months ended
September 30, 1996.  Although the net charge-off ratio declined from the prior
quarter, the Company believes, consistent with its statistical models and
other credit analyses, that this rate will continue to fluctuate but generally
rise over the next year.

     The Company's strategy for managing loan losses to maximize profitability
consists of credit line management and risk-based pricing so that an
acceptable profit margin is maintained based on the perceived risk of each
credit card account. Under this strategy, interest rates are established for
each credit card account based on its perceived risk profile. Loan losses are
further managed through the offering of credit lines which are generally lower
than is currently standard in the industry. Individual accounts and their
related credit lines are also continually managed using various marketing,
credit and other management processes in order to continue to maximize the
profitability of accounts.

     Delinquencies

     Delinquencies not only have the potential to impact earnings in the form
of net loan losses, but are also costly in terms of the personnel and
resources dedicated to resolving them. Delinquency levels are monitored on a
managed basis, since delinquency on either an owned or managed basis subjects
the Company to credit loss exposure. A credit card account is contractually
delinquent if the minimum payment is not received by the specified date on the
cardholder's statement. It is the Company's policy to continue to accrue
interest and fee income on all credit card accounts, except in limited
circumstances, until the account and all related loans, interest and other
fees are charged-off. The following table presents the delinquency trends of
the Company's credit card loan portfolio on a managed portfolio basis:

                                 Managed Loan Delinquency
                                             
                       September 30,     % of      September 30,    % of
                          1997          Total         1996          Total
Dollars in thousands
Managed loan portfolio  $2,683,877        100%      $1,276,687       100%
Loans delinquent            
  30 to 59 days             59,334        2.2%          26,800       2.1%
  60 to 89 days             38,419        1.5%          15,782       1.3%
  90 or more days           72,807        2.7%          23,195       1.8%
    Total               $  170,560        6.4%      $   65,777       5.2%

The above numbers reflect continued seasoning of the Company's managed
loan portfolio. The Company continues to focus its resources on its collection
efforts to minimize the negative impact to net loan losses that results from
increased delinquency levels.  In addition, the acquisition of KeyCorp credit
card loans reduced the September 30, 1997 delinquency rate by 0.5%.

    Net charge-offs

     Net charge-offs include the principal amount of losses from cardholders
unwilling or unable to pay their loan balance, as well as bankrupt and
deceased cardholders, less current period recoveries. Net charge-offs exclude
accrued finance charges and fees, which are charged against the related income
at the time of charge-off. The following table presents the Company's net
charge-offs for the periods indicated as reported in the consolidated
financial statements and on a managed portfolio basis:

                                 Three Months Ended       Nine Months Ended
                                   September 30,            September 30,
                                  1997          1996      1997         1996
Dollars in thousands                                                
On-balance sheet portfolio:                                         
 Average loans outstanding    $ 340,882    $  149,705  $  306,217   $  133,413
 Net charge-offs                  7,459         2,146      20,386        5,695
 Net charge-offs as a                                               
  percentage of loans             
  outstanding (1)                   8.7%          5.7%        8.9%         5.7%
                                                                    
Managed loan portfolio:                                             
 Average loans outstanding    $2,274,916   $1,184,612  $1,979,957   $  891,067
 Net charge-offs                  49,751       17,010     129,323       37,398
 Net charge-offs as a                                               
percentage of loans                   
outstanding (1)                      8.7%         5.7%        8.7          5.6%
                                                                    
(1) Annualized                                                      


     Provision and allowance for loan losses

     The allowance for loan losses is maintained for on-balance sheet loans.
For securitized loans, anticipated losses and related recourse reserves are
reflected in the calculations of net securitization and credit card servicing
income. Provisions for loan losses are made in amounts necessary to maintain
the allowance at a level estimated to be sufficient to absorb probable future
losses of principal and earned interest, net of recoveries, inherent in the
existing on-balance sheet loan portfolio.

     The provision for loan losses on an owned basis for the three and nine
months ended September 30, 1997, totaled $11.1 million and $28.6 million,
respectively. This compares to provisions of $5.4 million and $10.6 million
for the three and nine months ended September 30, 1996, respectively.  The
amount and level of the provision for loan losses on an owned basis may vary
from period to period, depending on the amount of credit card loans sold and
securitized in a particular period. However, the increases for the three and
nine month periods ended September 30, 1997, as compared to the three and nine
month periods ended September 30, 1996, are primarily reflective of the
overall maturation of the portfolio, the increase in on-balance sheet loans
outstanding and the timing of credit card securitizations.  The following
table presents the change in the Company's allowance for loan losses and other
ratios on both an owned and a managed portfolio basis for the periods
presented:

<TABLE>
                                       
                     Analysis of Allowance for Loan Losses
                                       
                                 Three Months Ended      Nine Months Ended
                                   September 30,           September 30,
Dollars in thousands              1997          1996      1997        1996
(Owned basis)                                                      
<S>                            <C>           <C>       <C>           <C>
Balance at beginning of        $ 18,191      $  5,303  $  12,829     $  3,679
period
Allowance related to assets                                         
acquired, net                     2,009                    2,815
Provision for loan losses        11,106         5,383     28,589       10,556
Loans charged-off                 7,629         2,188     20,834        5,816
Recoveries                          170            42        448          121
Net loans charged-off             7,459         2,146     20,386        5,695
Balance at end of period       $ 23,847      $  8,540  $  23,847     $  8,540
                                                                     
Ending allowance as a percent                                      
of loans                            6.6%          5.5%       6.6%         5.5%
                                       
                                       
                                 Three Months Ended      Nine Months Ended              
                                   September 30,           September 30,                
Dollars in thousands              1997          1996      1997        1996
(Managed basis)                                                    
Balance at beginning of        $139,825      $ 44,305  $  95,669     $ 22,219
period
Allowance related to assets                                        
 acquired, net                   12,555                   13,361
Provision for loan losses        87,997        43,340    210,919       85,814
Loans charged-off                50,880        17,336    132,160       38,150
Recoveries                        1,129           326      2,837          752
Net loans charged-off            49,751        17,010   1 29,323       37,398
Balance at end of period       $190,626      $ 70,635  $ 190,626      $70,635
                                                                   
Ending allowance as a percent                                      
of loans                            7.1%          5.5%       7.1%         5.5%
</TABLE>
                                       
   
                            Derivatives Activities
                                       
        The Company uses derivative financial instruments for the purpose of
managing its exposure to interest rate risks and has mechanisms in place to
monitor and control both market and credit risk from these derivatives
activities. All derivatives strategies and transactions are managed under a
hedging policy approved by the Board of Directors of FCI that details the use
of such derivatives and the individuals authorized to execute such
transactions. In addition, all derivatives strategies must currently be
approved by the Company's senior management.
                                       
      Under these policies, the Company has entered into interest rate cap and
swap agreements to hedge its economic exposure to fluctuating interest rates
associated with the floating and fixed rate certificates issued by the Metris
Master Trust. In connection with the issuance of the $512.6 million Metris
Master Trust Series 1995-1 variable funding certificates in May 1995, the
Company entered into an eight-year agreement capping the certificates'
interest rate at 11.2%.  Also, in connection with the issuance of additional
Series 1995-1 certificates related to the September 1996 amendment of Series
1995-1, the Company entered into additional six and two-thirds year agreements
capping the certificates' interest rate at 11.2% with a maximum notional
amount of $512.6 million.  Additionally, FCI, on behalf of the Company,
entered into two interest rate swap agreements in April 1996 to synthetically
alter the fixed rate of the Metris Master Trust Series 1996-1 certificates to
a floating rate. Total notional amounts of these swap transactions amounted to
$605.5 million. In connection with the issuance of the Metris Master Trust
Series 1997-1 certificates the Company entered into a five year agreement to
synthetically alter the fixed rate of the certificates to a floating rate.
The total notional amount of this swap transaction amounted to $722.5 million.
The Company receives the benefits and bears the obligations of these swap
transactions, with FCI guaranteeing the Company's performance under the swap
agreements.  The obligations of the Company and the counterparties under these
swap agreements are settled on a monthly basis.  In the event that Spin Off
discussed below is consummated, FCI would no longer guarantee the Company's
swap agreements, and no assurance can be given as to the terms upon which the
Company could maintain these swap agreements on a stand-alone basis.
                                       
                                       
                                       
                   Liquidity, Funding and Capital Resources
                                       
       The Company's goal is to maintain an adequate level of liquidity, both
short-term and long-term, through active management of assets and liabilities.
Because the characteristics of the Company's assets and liabilities change,
liquidity management is a dynamic process affected by the pricing and maturity
of the Company's assets and liabilities. This process is also affected by
changes in the relationship between short-term and long-term interest rates.
Therefore, to facilitate liquidity management, the Company uses a variety of
funding sources to establish a maturity pattern with a mix of short-term and
long-term funds. These funding sources are available, or are committed to the
Company through programs established either by the Company or by FCI.
                                      
            A significant source of funding for the Company has been the
securitization of credit card loans through the Metris Master Trust and a
third party multi-seller conduit. At September 30, 1997, the Company had
received cumulative net proceeds of approximately $2.3 billion from sales of
credit card loans, of which $14.7 million was deposited in an investor reserve
account held by the trustee of the Metris Master Trust for the benefit of the
Trust's certificateholders. Cash generated from these transactions was used to
reduce short-term borrowings and to fund further credit card loan growth.
         
         On October 9, 1997, FCI announced that its board of directors had
approved the filing of an application with the Internal Revenue Service (IRS)
for a ruling on a tax free distribution of FCI's stock of the Company ("Spin
Off").  FCI filed the ruling request with the IRS on October 23, 1997.  The
proposed Spin Off of the Company would be subject to receipt of a favorable
ruling from the IRS, to approval by Fingerhut's board of directors, and to
market conditions.  If approved, the Spin Off would be expected to be
completed during 1998.  The Spin Off may impact the means by which the Company
has obtained its funding as discussed below.
                                       
      The Company's liquidity needs and funding sources may change over time.
On September 16, 1996, the Company executed agreements for the following
credit facilities: (1) a $300 million, five-year Revolving Credit Facility for
the Company (the "Revolving Credit Facility"), guaranteed by FCI; and (2)an
amendment to Series 1995-1 under the Metris Master Trust to (a) increase the
Class A Variable Funding Certificate to support a $400 million increase to
$1.2 billion (of which the Company may use up to $800 million) of the
Fingerhut Owner Trust Commercial Paper Program in which the Company
participates; and (b) issue $112.6 million of additional asset-backed
certificates (the "Certificates") to support the aforementioned increase in
the Commercial Paper Program.
                                       
        The Company borrows under the Revolving Credit Facility to fund on-
balance sheet loans and for other general business purposes.  At September 30,
1997 and December 31, 1996, the Company had outstanding borrowings of $153
million and $50 million, respectively, under the Revolving Credit Facility.
                                      
         The Revolving Credit Facility is guaranteed by FCI and is further
supported by the pledge of the stock of certain subsidiaries of the Company
and certain accounts receivable and interests held therein by the Company. The
Revolving Credit Facility contains certain financial covenants standard for
revolving credit facilities of this type, including minimum net worth, minimum
equity to managed assets ratio, maximum leverage and a limitation on
indebtedness. In addition, the FCI guarantee includes certain covenants
including interest coverage, leverage and minimum net worth for FCI.  In the
event the Spin Off is consummated the Company would be required to negotiate
with its lenders to refinance the Revolving Credit Facility.  While the
Company believes that it will be able to obtain stand-alone financing, no
assurance can be given that it will be able to do so on terms as favorable as
the Revolving Credit Facility.  Any such stand-alone financing is expected to
result in higher funding costs than currently available under the Revolving
Credit Facility.
                                       
      In November 1997, the Company privately issued and sold $100 million of
its 10% Senior Notes due 2004 pursuant to an exemption under the Securities
Act of 1933, as amended. The net proceeds were used to reduce borrowings under
the Revolving Credit Facility.
                                       
      The Federal Reserve Act imposes various legal limitations on the extent
to which banks that are members of the Federal Reserve System can finance or
otherwise supply funds to certain of their affiliates. In particular, Direct
Merchants Bank is subject to certain restrictions on any extensions of credit
to the Company or its subsidiaries. Additionally, Direct Merchants Bank is
limited in its ability to declare dividends to the Company. Therefore, Direct
Merchants Bank's investments in federal funds sold are generally not available
for the general liquidity needs of the Company or its subsidiaries. Such
restrictions were not material to the operations of the Company at September
30, 1997 and December 31, 1996.
                                       
     As the portfolio of credit card loans grows, or as the Trust certificates
amortize or are otherwise paid, the Company's funding needs will increase
accordingly. The Company believes that its asset securitization programs,
together with the Revolving Credit Facility and other sources of capital, will
provide adequate liquidity to the Company for meeting its anticipated cash
needs, although no assurance can be given to that effect.
                                       
                               Capital Adequacy
                                       
      Direct Merchants Bank is subject to certain capital adequacy guidelines
adopted by the Office of the Comptroller of Currency ("OCC") and the Federal
Reserve Board, and monitored by the Federal Deposit Insurance Corporation and
the OCC. At September 30, 1997 and December 31, 1996, Direct Merchants Bank
exceeded the minimum required capital levels and was considered a "well-
capitalized" depository institution under regulations of the OCC.
                                       
                          Newly Issued Pronouncements
                                       
        In February 1997, the Financial Accounting Standards Board ("FASB")
issued Statement of Financial Accounting Standards No. 129, "Disclosure of
Information about Capital Structure," ("FAS 129") which codifies existing
disclosure requirements regarding capital structure.  FAS 129 will be required
to be adopted at year-end 1997 and is not expected to have a material impact
on the Company's current capital structure disclosures.
                                      
        In June 1997, the FASB also issued Statement of Financial Accounting
Standards No. 131, "Disclosures about Segments of an Enterprise and Related
Information," ("FAS 131") which establishes standards for the way public
enterprises report information about operating segments in annual financial
statements and interim financial reports.  FAS 131 is effective for fiscal
years beginning after December 15, 1997.  The Company is evaluating the effect
adoption of this statement will have on the reporting of its financial
information.
                          
                          Forward-Looking Statements
                                       
                                       
         This quarterly report contains forward looking statements within the
meaning of Section 27A of the Securities Act of 1993, as amended, and Section
21E of the Securities Exchange Act of 1934, as amended.  These statements
include statements regarding intent, belief or current expectations of the
Company and its management.  Stockholders and prospective investors are
cautioned that any such forward-looking statements are not guarantees of
future performance and involve a number of risks and uncertainties that may
cause the Company's actual results to differ materially from the results
discussed in the forward-looking statements.  Among the factors that could
cause actual results to differ materially from those indicated by such forward-
looking statements are the Company's limited operating history as a stand-
alone entity; the Company's ability to obtain third parties to provide
extended service plans; the Company's limited experience with respect to
originating and servicing credit card accounts, including limited delinquency,
default and loss experience; the lack of seasoning of its credit card
portfolio, which makes the predictability of delinquency and loss levels more
difficult; risks associated with unsecured credit transactions, particularly
to moderate income consumers; interest rate risks; dependence on the
securitization of the Company's credit card loans to fund operations; general
economic conditions affecting consumer income, which may increase consumer
bankruptcies, defaults and delinquencies; state and federal laws and
regulations, including consumer and debtor protection laws; and the highly
competitive industry in which the Company operates.  Each of these factors is
more fully discussed in Exhibit 99 to the Company's Quarterly Report on Form
10-Q for the quarter ended March 31, 1997.  Reference to this Cautionary
Statement or Exhibit 99 in the context of a forward-looking statement or
statements shall be deemed to be a statement that any one or more of these
factors may cause actual results to differ materially from those anticipated
in such forward-looking statement or statements.
                                       
                                       
                                       
                                       
                                       
                          Part II.  Other Information



Item 6. Exhibits and Reports on Form 8-K


        (a)     Exhibits:

        10.a        Amendment No. 2 dated as of September
                    30, 1997 to the Pooling and Servicing Agreement
                    (incorporated by reference to Exhibit 4(d) to
                    Registration Statement No. 333-36503)

        10.b        Amendment No. 1 dated as of September 30,
                    1997 to the Receivables Purchase Agreement
                    (incorporated by reference to Exhibit 4(j) to
                    Registration Statement No. 333-36503)

        10.c        Transfer and Administration Agreement
                    dated as of October 23, 1997 among Kitty Hawk Funding
                    Corporation, Metris Funding Co., as transferor, Direct
                    Merchants Credit Card  Bank, National Association, as
                    collection agent, and NationsBank, N.A., as Agent and
                    Bank Investor.

        10.d        Transfer and Administration Agreement
                    dated as of September 30, 1997 among Kitty Hawk
                    Funding Corporation, Metris Funding Co., as
                    transferor, Direct Merchants Credit Card Bank,
                    National Association, as collection agent, and
                    NationsBank, N.A., as Agent and Bank Investor (This
                    document is being omitted from filing pursuant to
                    Instruction 2 to Item 601 of Regulation S-K).

        11.         Computation of Earnings per Share

        27.         Financial Data Schedule


        (b)     Reports on Form 8-K:

                None

                                  SIGNATURES


     Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.



                             METRIS COMPANIES INC.






Date:                              By:
                                   /s/ Robert W. Oberrender
                                   Chief Financial Officer
                                   (Principal Financial Officer)




Date:                              By:
                                   /s/ Jean C. Benson
                                   Controller
                                   (Principal Accounting Officer)