UNITED STATES
                     SECURITIES AND EXCHANGE COMMISSION
                           Washington, D.C. 20549


                                  FORM 10-Q 
                                                                         

   [X]  Quarterly Report Pursuant to Section 13 or 15(d) of the Securities
        Exchange Act of 1934
        For the quarterly period ended March 31, 1998

   [ ]  Transition Report Pursuant to Section 13 or 15(d) of the Securities
        Exchange Act of 1934


                         Commission file Number 1-10993


                          SPS TRANSACTION SERVICES, INC.
             (Exact name of Registrant as specified in its charter)

              Delaware                                         36-3798295
       (State of incorporation)                            (I.R.S. Employer
                                                          Identification No.)

    2500 Lake Cook Road, Riverwoods, IL                           60015
  (Address of principal executive offices)                     (Zip Code)

     Registrant's telephone number, including area code:   (847) 405-3400


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 April 30, 1998, the Registrant had 27,279,469 shares of common stock, 
$0.01 par value, outstanding.


                                                            Page 1 of 19 pages



















PART 1 - FINANCIAL INFORMATION

Item 1.  Financial Statements


SPS TRANSACTION SERVICES, INC.

CONSOLIDATED BALANCE SHEETS
-------------------------------------------------------------------------------
(In thousands, except share data)
[CAPTION]
<TABLE>

                                                     March 31,     December 31,
                                                       1998            1997
                                                   ------------    ------------
                                                    (Unaudited) 
<S>                                                <C>             <C> 
ASSETS:
  Cash and due from banks                            $   15,384     $   14,730
  Investments held to maturity - at amortized cost       36,896         36,617
  Credit card loans                                   1,169,727      1,295,787
  Allowance for loan losses                             (74,822)       (79,726)
                                                     ----------     ----------
    Credit card loans, net                            1,094,905      1,216,061
  Accrued interest receivable                            14,221         21,847
  Accounts receivable                                    25,666         29,349
  Due from affiliated companies                          16,561          9,921
  Amounts due from asset securitizations                 97,715         93,260
  Premises and equipment, net                            31,951         32,895
  Deferred income taxes                                  41,603         43,059
  Prepaid expenses and other assets                      14,851         14,664
                                                     ----------     ----------
TOTAL ASSETS                                         $1,389,753     $1,512,403
                                                     ==========     ==========
LIABILITIES:
  Deposits:
    Noninterest-bearing                              $    4,513    $     6,206
    Interest-bearing                                    540,195        504,088
                                                     ----------     ----------
  Total deposits                                        544,708        510,294
  Accounts payable, accrued expenses and other           78,215         80,283
  Income taxes payable                                   18,215         19,725
  Due to affiliated companies                           474,539        639,066
                                                     ----------     ----------
    Total liabilities                                 1,115,677      1,249,368
                                                     ----------     ----------
STOCKHOLDERS' EQUITY:
  Preferred stock, $1.00 par value, 100,000
    shares authorized; none issued or outstanding
  Common stock, $.01 par value, 40,000,000 and 
    40,000,000 shares authorized; 27,305,021 and    
    27,276,269 shares issued; 27,277,357 and 
    27,206,883 shares outstanding at March 31,     
    1998 and December 31, 1997, respectively                273            273
  Capital in excess of par value                         81,792         81,586
  Retained earnings                                     192,680        182,845
  Common stock held in treasury, at cost, $.01
    par value, 27,644 and 69,386 shares at March     
    31, 1998 and December 31, 1997, respectively           (611)        (1,662)
  Stock compensation related adjustments                    (58)            (7)
                                                     ----------     ----------
    Total stockholders' equity                          274,076        263,035
                                                     ----------     ----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY           $1,389,753     $1,512,403
                                                     ==========     ==========

See notes to unaudited consolidated financial statements.
                                          
</TABLE>



                                         2

SPS TRANSACTION SERVICES, INC.

CONSOLIDATED STATEMENTS OF INCOME
-------------------------------------------------------------------------------
(In thousands, except per share data)
[CAPTION]
<TABLE>
                                                           Three Months Ended
                                                                March 31,    
                                                           -------------------
                                                             1998       1997 
                                                           --------   --------
                                                               (Unaudited)
<S>                                                        <C>        <C>
Processing and service revenues                            $ 68,142   $ 75,309
Merchant discount revenue                                     2,966      3,138
                                                           --------   --------
                                                             71,108     78,447

Interest revenue                                             55,206     64,076
Interest expense                                             17,039     20,382
                                                           --------   --------
  Net interest income                                        38,167     43,694
Provision for loan losses                                    27,011     31,711
                                                           --------   --------
  Net credit income                                          11,156     11,983
                                                           --------   --------

Net operating revenues                                       82,264     90,430

Salaries and employee benefits                               28,187     29,523
Processing and service expenses                              22,391     28,327
Other expenses                                               16,026     20,541
                                                           --------   --------
  Total operating expenses                                   66,604     78,391
                                                           --------   --------

Income before income taxes                                   15,660     12,039
Income tax expense                                            5,763      4,648
                                                           --------   --------
Net income                                                 $  9,897   $  7,391
                                                           ========   ========

Basic earnings per common share                            $   0.36   $   0.27
                                                           
Diluted earnings per common share                          $   0.36   $   0.27

Basic weighted average common 
  shares outstanding                                         27,249     27,197

Diluted weighted average common
  shares outstanding                                         27,465     27,367


See notes to unaudited consolidated financial statements.

</TABLE>



                                          3
SPS TRANSACTION SERVICES, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS
-------------------------------------------------------------------------------
(In thousands)
[CAPTION]
<TABLE>
                                                          Three Months Ended
                                                               March 31,
                                                         ----------------------
                                                           1998          1997
                                                         --------     ---------
                                                              (Unaudited)
<S>                                                      <C>          <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
  Net income                                             $  9,897     $  7,391
  Adjustments to reconcile net income to
  net cash flows from operating activities:                                 
    Depreciation and amortization                           2,925        3,294
    Provision for loan losses                              27,011       31,711
    Compensation payable in common stock                      818           --
    Deferred income taxes                                   1,456          994 
  (Increase) decrease in operating assets:
    Amounts due from affiliated companies                  (6,640)       5,933 
    Accrued interest receivable and accounts receivable    11,309        8,704 
    Amounts due from asset securitizations                 (4,455)          --
    Prepaid expenses and other assets                        (526)         677 
  Increase (decrease) in operating liabilities:
    Accounts payable, accrued expenses and other           (1,157)       1,584 
    Income taxes payable                                   (1,510)      (5,579)
    Amounts due to affiliated companies                     3,778        2,743
                                                         --------     --------
    Net cash from operating activities                     42,906       57,452 
                                                         --------     --------

CASH FLOWS FROM INVESTING ACTIVITIES:
  Investments held to maturity - purchases                (37,279)     (56,084)
  Investments held to maturity - maturities                37,000       42,000
  Net principal collected on credit card loans             92,678      101,905 
  Purchases of premises and equipment, net                   (936)      (2,519)
                                                         --------     --------
    Net cash from investing activities                     91,463       85,302 
                                                         --------     --------

CASH FLOWS FROM FINANCING ACTIVITIES:
  Net decrease in noninterest-bearing deposits             (1,693)      (4,659)
  Net increase in interest-bearing deposits                36,107       19,765
  Net decrease in due to affiliated companies            (168,305)    (153,584)
  Proceeds from exercise of stock options                     176            1
  Purchase of treasury stock, at cost                          --           70
                                                         --------     --------
    Net cash from financing activities                   (133,715)    (138,407)
                                                         --------     --------

Increase in cash and due from banks                           654        4,347
Cash and due from banks, beginning of period               14,730       15,205
                                                         --------     --------
Cash and due from banks, end of period                   $ 15,384     $ 19,552
                                                         ========     ========



See notes to unaudited consolidated financial statements.

</TABLE>



                                         



                                         4

SPS TRANSACTION SERVICES, INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
THREE MONTH PERIOD ENDED MARCH 31, 1998 AND 1997
-------------------------------------------------------------------------------

A.  ORGANIZATION AND BASIS OF PRESENTATION

  The consolidated financial statements include the accounts of SPS Transaction 
Services, Inc. (the "Company") and its subsidiaries. The Company is a 73.3% 
majority owned subsidiary of NOVUS Credit Services Inc., which in turn is a 
wholly owned, direct subsidiary of Morgan Stanley Dean Witter & Co. ("MSDW").  

  The Company provides a range of technology outsourcing services including the 
processing of credit and debit card transactions, consumer private label credit 
card programs, commercial account processing services, and call center customer 
service activities in the United States.  SPS Payment Systems, Inc. ("SPS"), a 
wholly owned subsidiary of the Company, is incorporated in the State of 
Delaware.  Hurley State Bank ("HSB"), a wholly owned subsidiary of the Company, 
is chartered as a bank by the State of South Dakota and is insured by the 
Federal Deposit Insurance Corporation.

  The Consolidated Balance Sheet as of March 31, 1998, and the Consolidated 
Statements of Income for the three months ended March 31, 1998 and 1997, and 
the Consolidated Statements of Cash Flows for the three months ended March 31, 
1998 and 1997 are unaudited; however, in the opinion of management, all 
adjustments, consisting only of normal recurring accruals necessary for fair 
presentation, have been reflected.  All material intercompany balances and 
transactions have been eliminated.  Certain reclassifications have been made to 
prior year amounts to conform to current presentation.  

  The consolidated financial statements are prepared in accordance with 
generally accepted accounting principles, which require management to make 
estimates and assumptions regarding credit card loan loss levels, the potential 
outcome of litigation and other matters that affect the financial statements 
and related disclosures.  Management believes that the estimates utilized in 
the preparation of the consolidated financial statements are prudent and 
reasonable.  Actual results could differ from these estimates.

  The consolidated financial statements should be read in conjunction with the 
consolidated financial statements and notes thereto included in the Company's 
1997 Annual Report to Stockholders and Annual Report on Form 10-K.  The results 
of operations for the interim periods should not be considered indicative of 
results to be expected for the full year.

B.	 EARNINGS PER SHARE

   As of December 31, 1997 the Company adopted Statement of Financial 
Accounting Standards ("SFAS") No. 128, "Earnings per Share".  SFAS No. 128 
maintains the current earning per share ("EPS") category of net income per 
common share with "basic" EPS, which similarly reflects no dilution from common 
stock equivalents, and requires "diluted" EPS which reflects dilution from 
common stock equivalents based on the average price per share of the Company's 
common stock during the period.  The EPS amounts of prior periods have been 
restated in accordance with SFAS No. 128.  The adoption of SFAS No. 128 has not 
had a material effect on the Company's EPS calculations.




                                          5

  The calculations of basic and diluted earnings per common share are based on 
the weighted average number of common shares outstanding for basic earnings per 
share and the total weighted average number of common shares and share 
equivalents outstanding for diluted earnings per share.  The difference between 
basic and diluted earnings per share for the three months ended March 31, 1998, 
and 1997, is the result of including weighted common share equivalents totaling 
215,865 and 169,845, respectively, in the computation of diluted earnings per 
share.


C.  OTHER ACCOUNTING PRONOUNCEMENTS 

  As of January 1, 1998, the Company adopted SFAS No. 130, "Reporting 
Comprehensive Income,"  which establishes standards for the reporting and 
presentation of comprehensive income.  SFAS No. 130 did not have any effect on 
the Company's financial statements for the periods presented as net income 
represents total comprehensive income. 

  In June 1997, the Financial Accounting Standards Board issued SFAS No. 131, 
"Disclosures about Segments of an Enterprise and Related Information."  This 
statement establishes standards for the disclosure requirements related to 
segments.  SFAS No. 131 is effective for fiscal years beginning after December 
15, 1997, and interim reporting is not required until interim periods beginning 
after initial year of application.

  As of January 1, 1998, the Company adopted Statement of Position ("SOP") 98-1 
"Accounting for the Costs of Computer Software Developed or Obtained for 
Internal Use."  SOP 98-1 requires the capitalization of certain costs related 
to the development or purchase of internal-use computer software. The adoption 
of SOP 98-1 was not material to the Company's consolidated financial position 
or results of operations.


D.  ALLOWANCE FOR LOAN LOSSES 

  The changes in the allowance for loan losses were as follows:
[CAPTION]
<TABLE>
                                                            Three Months Ended
                                                                 March 31, 
                                                            ------------------
                                                              (In Thousands)
                                                              1998       1997
                                                            -------    -------
<S>                                                        <C>         <C>
Balance, beginning of period                               $ 79,726    $88,397
Additions:
  Provision for loan losses                                  27,011     31,711

Deductions:
  Charge-offs                                               (38,091)   (41,361)
  Less: recoveries                                            6,176      5,647
                                                            -------    -------
  Net charge-offs                                           (31,915)   (35,714)
                                                            -------    -------
Balance, end of period                                      $74,822    $84,394
                                                            =======    =======
</TABLE>
  At March 31, 1998, there were $61.9 million in loans past due 30 days through 
89 days, and $49.2 million in loans past due 90 days through 179 days.

  Credit card loans sold through asset securitization transactions and serviced 
by the Company totaled $580.0 million at March 31, 1998 and 1997.


                                         6

E. SUBSEQUENT EVENT

  On April 18, 1998, the Company and Associates First Capital Corporation 
("The Associates") entered into a stock purchase agreement (the "Purchase 
Agreement") pursuant to which the Company has agreed to sell and The 
Associates has agreed to acquire substantially all of the assets of the 
Company, consisting of all of the capital stock of the Company's two 
wholly-owned operating subsidiaries - SPS Payment Systems, Inc. and 
Hurley State Bank, for a price of approximately $896 million in cash, 
upon the terms and subject to the conditions of the Purchase Agreement, 
including certain regulatory approvals and approval by the Company's 
stockholders.  The Associates has also agreed to fund the repayment of 
all intercompany indebtedness of SPS Payment Systems, Inc. and Hurley 
State Bank, and their subsidiaries, owing to the Company or its 
affiliates. 

  The per share price that will be distributed to the Company's public 
stockholders, which will be approximately $32, will be greater than the 
per share price to be received by MSDW, since MSDW will assume certain 
liabilities and obligations incurred by the Company in connection with 
the sale.  The distribution of the purchase price to the Company's public 
stockholders will be effected pursuant to a merger of the Company with an 
indirect subsidiary of MSDW as soon as practical after the closing of the 
sale of assets.  The per share amount to be received by the public 
stockholders will be set forth in the Company's proxy statement that will 
be mailed to stockholders in connection with a special stockholders 
meeting to vote upon the sale and the merger.  Holders of options to 
purchase Company common stock who have not previously exercised their 
options will receive in the merger an amount of cash per share underlying 
such option equal to the amount, if any, by which the per share purchase 
price paid in the merger to public stockholders of Company stock exceeds 
the exercise price of the options.

   NOVUS Credit Services Inc., a subsidiary of MSDW that owns approximately 
73.3 percent of all the Company's outstanding stock ("NOVUS"), has entered into 
a voting agreement with The Associates pursuant to which NOVUS has agreed to 
vote all shares of the Company owned by it in favor of the transactions 
contemplated by the Purchase Agreement.  The voting agreement is terminable 
upon the earliest to occur of (i) the prior termination of the Purchase 
Agreement, (ii) the consummation of the sale transaction contemplated by the 
Purchase Agreement and (iii) January 18, 1999.  Unless the Voting Agreement is 
terminated in accordance with its terms, NOVUS's obligation to vote in favor of 
the transactions contemplated by the Purchase Agreement is unconditional and 
absolute.  The sale is expected to be completed during the third quarter of 
1998.










       




                                         7

Item 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND  
RESULTS OF OPERATIONS

RECENT DEVELOPMENTS

  On April 18, 1998, the Company and The Associates entered into the Purchase 
Agreement pursuant to which the Company has agreed to sell and The Associates 
has agreed to acquire substantially all of the assets of the Company, 
consisting of all of the capital stock of the Company's two wholly-owned 
operating subsidiaries - SPS Payment Systems, Inc. and Hurley State Bank, for a 
price of approximately $896 million in cash, upon the terms and subject to the 
conditions of the Purchase Agreement, including certain regulatory approvals 
and approval by the Company's stockholders.  The Associates has also agreed to 
fund the repayment of all intercompany indebtedness of SPS Payment Systems, 
Inc. and Hurley State Bank, and their subsidiaries, owing to the Company or its 
affiliates.

RESULTS OF OPERATIONS  

  The Company's net operating revenues consist of processing and service 
revenues, merchant discount revenue and net credit income, which are derived as 
a result of its four principal business services: TeleServices, Network 
Transaction Services, Commercial Accounts Processing and Consumer Credit Card 
Services.

  Processing and service revenues consist of four components (as described 
below): Transaction processing services, Managed programs, HSB programs and 
Servicing fees on securitized loans.

  Transaction processing services include revenues received as a result of 
TeleServices call center processing and Network Transaction Services such as 
electronic transaction processing, the sale and servicing of point-of-sale 
terminals, and a System Access Agreement with NOVUS Services, Inc., an 
affiliated company. Revenues from TeleServices typically are based upon the 
length of service minutes and type of customer contacts processed through 
activities such as technical help-desk inquiries, customer billing inquiries 
and catalog order processing.  Revenues from electronic transaction processing 
typically are based on the number of electronic point-of-sale transactions 
processed rather than the dollar transaction amount.

  Managed programs includes revenues received as a result of Commercial 
Accounts Processing and those Consumer Credit Card Services which the Company 
administers, but for which it does not act as the card issuer or own the credit 
card loans. Managed program revenues are derived from fees based on the volume 
of the services provided and on services provided in the administration of 
credit life insurance programs.

  HSB programs primarily consist of late fee revenue assessed on those Consumer 
Credit Card Services accounts for which the Company issues the credit card on 
behalf of the client and owns the credit card loans that are generated through 
the use of the card. 

  Servicing fees on securitized loans are revenues derived from credit card 
loans that have been sold to investors through asset securitizations. Such 
revenues are the result of the fees earned for servicing the underlying credit 
card accounts. Loan securitizations have the effect of converting portions of 
net credit income, merchant discount revenue and credit card fees to a 
component of processing and service revenues for the credit card accounts that 
are securitized.
                                          8
  Merchant discount revenue is derived from the Company's owned Consumer Credit 
Card Services, portions of which are deferred and accreted to interest revenue. 
Generally, credit card sales are subject to a discount charged to the merchant 
based upon contractual percentages.  This percentage varies by portfolio and by 
the type of credit plan offered.  

  Interest revenue represents finance charges derived from owned Consumer 
Credit Card Services, investment interest and the accretion of certain deferred 
merchant discount revenue. Net credit income is calculated by subtracting 
interest expense and the provision for loan losses from interest revenue.

  The following table presents, for the periods indicated, the percentage 
relationship that certain statement of income items bear to net operating 
revenues and the period-to-period percentage dollar increase or decrease in 
each item.
[CAPTION]
<TABLE>                       
                                                          Three Months Ended
                                                                March 31,   
                                                            Period-to-Period
                                                          --------------------
                                                           1998   1997  Change
                                                          ------ ------ ------
<S>                                                       <C>    <C>    <C>
NET OPERATING REVENUES:
  Processing and service revenues                          82.8%  83.3%  (9.5)%
  Merchant discount revenue                                 3.6    3.4   (5.5)
  Net credit income                                        13.6   13.3   (6.9)
                                                          -----  -----  -----
                                                          100.0  100.0   (9.0) 
OPERATING EXPENSES:
  Salaries and employee benefits                           34.3   32.7   (4.5)
  Processing and service expenses                          27.2   31.3  (21.0)
  Other expenses                                           19.5   22.7  (22.0)
                                                          -----  -----  -----
                                                           81.0   86.7  (15.0)
  Income before income taxes                               19.0   13.3   30.1 
  Income tax expense                                        7.0    5.1   24.0 
                                                          -----  -----  -----

  Net income                                               12.0%   8.2%  33.9 %
                                                          =====  =====  =====
</TABLE>

  Net income for the three months ended March 31, 1998 was $9.9 million, an 
increase of $2.5 million, or 33.9%, over the same period a year ago. Both basic 
and diluted earnings per common share were $0.36 for the three month period, 
compared to $0.27 in the prior year's first quarter.  

  Net operating revenues for the first quarter of 1998 declined to $82.3 
million, a decrease of 9% over the same period last year. The decrease in net 
operating revenues resulted primarily from a decrease in processing and service 
revenues and net interest income and was partially offset by a decrease in 
provision for loan losses expense.







                                          9

  Processing and service revenues decreased 9.5% to $68.1 million for the three 
months ended March 31, 1998, as compared to $75.3 million for the same period 
last year.  Processing and service revenues, representing 82.8% and 83.3% of 
net operating revenues for the three months ended March 31, 1998 and 1997, 
respectively, consisted of the following:
[CAPTION]
<TABLE>
                                                             Three Months Ended
                                                                  March 31,
                                                             ------------------
                                                                (In Thousands)
                                                               1998       1997 
                                                             -------    ------- 
                                                                 (Unaudited)
  <S>                                                        <C>        <C>
  Transaction processing services                            $22,254    $24,462
  Managed programs                                            22,765     23,395
  HSB programs                                                11,109     14,019
  Servicing fees on securitized loans                         12,014     13,433
                                                             -------    -------
                                                             $68,142    $75,309
                                                             =======    =======
</TABLE>
SUPPLEMENTAL INFORMATION
Components of servicing fees on securitized loans:
[CAPTION]
<TABLE>
                                                            Three Months Ended
                                                                 March 31,
                                                            -------------------
                                                               (In Thousands)
                                                               1998       1997 
                                                            --------   --------
                                                                 (Unaudited)
  <S>                                                       <C>        <C>
  Processing and service revenues                           $ 3,455    $ 4,529
  Merchant discount revenue                                   1,103      1,121
  Interest revenue                                           27,692     28,071
  Interest expense                                           (8,316)    (8,154)
  Provision for loan losses                                 (11,920)   (12,134)
                                                            -------    -------
  Servicing fees on securitized 
    loans                                                   $12,014    $13,433
                                                            =======    =======
</TABLE>
  The decrease in revenues from transaction processing services resulted 
primarily from a lower volume of TeleServices minutes processed and decreased 
revenues from the sale and servicing of point-of-sale terminals, partially 
offset by increased revenues associated with the higher volume of Network 
Transaction Services point-of-sale transactions processed.  The number of 
TeleServices service minutes processed totaled 12.4 million, down 27% from 17.0 
million.  For the three months ended March 31, 1998, the number of point-of-
sale transactions processed totaled 113.7 million, up 12% from 101.9 million in 
the same period in 1997.  

  The decrease in revenues from Managed programs resulted primarily from a 
decrease in credit life insurance program revenues attributable to the decline 
in credit card loans outstanding and a lower number of cardholders enrolled in 
the program, partially offset by an increase in the volume of Commercial 
Account Processing.
  

                                         10
  The decrease in revenues from HSB programs was due to a decrease in late fee 
revenue resulting from a lower number of delinquent accounts.  The decrease in 
delinquent accounts was attributable to the paydown of certain portfolios and 
the Company's portfolio improvement programs, designed to limit the Company's 
exposure to higher risk accounts.  The Company had 2.9 million active consumer 
private label accounts, both owned and managed, at March 31, 1998, compared 
with 3.2 million accounts at March 31, 1997.  Active commercial accounts grew 
5.5% to 1,003,000 at March 31, 1998, compared to 951,000 at March 31, 1997.
                                     
   The decrease in servicing fees on securitized loans was due primarily to 
lower late fee revenue on securitized loans.

  Merchant discount revenue decreased 5.5% to $3.0 million for the three months 
ended March 31, 1998, as compared to $3.1 million for the same period last 
year. The decrease in merchant discount revenue resulted from decreased sales 
activity related to the decline in credit card loans.  As of March 31, 1998, 
$3.5 million of merchant discount revenue has been deferred which will be 
amortized and recognized as interest income over the life of the promotional 
payment plans.  Merchant discount revenue was 3.6% and 3.4% of net operating 
revenues for the three months ended March 31, 1998 and 1997, respectively.

  For the three months ended March 31, 1998, net credit income decreased 6.9% 
from the same period a year ago to $11.2 million as a result of lower net 
interest income partially offset by a decrease in the provision for loan 
losses. The decrease in interest revenue resulted primarily from the decrease 
in credit card receivables and the accretion of $3.3 million of deferred 
merchant discount revenue into interest income during the first quarter of 1998 
related to interest-deferred promotional payment plans as compared to $5.7 
million in the first quarter of 1997.  The decrease in interest revenue was 
partially offset by a higher yield on credit card loans.  The decrease in 
interest expense was due to a decrease in average borrowings associated with 
the decline in credit card loans, partially offset by a 41 basis point increase 
in average interest rates on borrowings. The decrease in the provision for loan 
losses is primarily attributable to a decrease in the amount of net charge-offs 
due in part to a decline in the amount of credit card loans outstanding.  

  The decline in credit card loans outstanding is related to certain portfolios 
that are in paydown, such as the Incredible Universe and McDuff portfolios, 
which were affected by Tandy Corporation's decision to close its Incredible 
Universe and McDuff stores beginning in the first quarter of 1997, and to the 
Company's portfolio improvement programs designed to limit the Company's 
exposure to higher risk accounts.  Net charge-offs as a percentage of average 
credit card loans on an owned basis increased to 10.33% in the first quarter of 
1998 from 9.09% in the first quarter of 1997, however, the Company did 
experience a decline in delinquency rates from December 31, 1997 to March 31, 
1998. The Company expects to experience a higher net charge-off rate for 1998 
as compared to 1997.  In addition, the Company's lower average credit card 
loans outstanding in the first quarter of 1998 compared to the same period in 
1997 also contributed to the increased charge-off percentage.  In 1997, the 
Company intensified its measures to reduce future charge-offs and continues to 
implement measures designed to improve the credit quality of both new and 
existing credit card accounts.  The Company's expectations about future charge-
off rates and credit quality are subject to uncertainties that could cause 
actual results to differ materially from what has been described above.
 





                                          11

Factors that influence the level and direction of credit card loan 
delinquencies and charge-offs include changes in consumer spending and payment 
behaviors,  bankruptcy trends, the seasoning of the Company's loan portfolio, 
interest rate movements and their impact on consumer behavior, and the rate and 
magnitude of changes in the Company's credit card loan portfolio, including the 
overall mix of accounts, products and loan balances within the portfolio.  

  For the three months ended March 31, 1998, total operating expenses of $66.6 
million represented a decrease of 15.0% over the same period last year.  Total 
operating expenses as a percentage of net operating revenues decreased to 81.0% 
for the three months ended March 31, 1998, as compared to 86.7% for the same 
period a year ago.

  For the three months ended March 31, 1998, salaries and employee benefits 
totaled $28.2 million, a decrease of 4.5% from $29.5 million from the same 
period a year ago. The Company had approximately 638 fewer full-time equivalent 
employees at March 31, 1998 compared to March 31, 1997, reflective of reduced 
staffing levels in the Company's TeleServices and Consumer Credit Card Services 
businesses. 

  Processing and service expenses include data processing, communications and 
account processing expenses, which are influenced, in part, by changes in 
transaction volume. For the three months ended March 31, 1998, such expenses 
declined to $22.4 million, or 21.0% on a period-to-period basis. The decrease 
in processing and service expenses resulted from decreased credit life 
insurance expense and expenses associated with a lower volume of TeleServices 
and Consumer Credit Card Services.  Processing and service expenses as a 
percentage of net operating revenues decreased to 27.2% for the three months 
ended March 31, 1998, as compared to 31.3% for the comparable prior year 
period.

  Other expenses include expenses relating to business development, merchant 
marketing, occupancy, advertising and promotion, cost of terminals sold, credit 
card fraud and other miscellaneous employee and administrative expenses.  For 
the three months ended March 31, 1998 and 1997, other expenses totaled $16.0 
million and $20.5 million, respectively.  The decrease in other expenses of 
22.0% resulted from decreased fraud losses, collection agency fees and merchant 
marketing incentives, partially offset by increased credit marketing expense.  
Other expenses were 19.5% and 22.7% of net operating revenues for the three 
months ended March 31, 1998 and 1997, respectively.




                                         





  









                                         12

The table below presents certain information regarding the Company's credit 
card loan net charge-offs, allowance for loan losses, and delinquency 
information with supplemental total loan information regarding the Company's 
credit card loan portfolio as of and for the year-to-date periods.
[CAPTION]
<TABLE>

                                March 31, 1998         March 31, 1997           December 31, 1997
                            ----------------------------------------------------------------------
                                             Total                  Total                    Total
                                 Owned       Loans*     Owned       Loans*      Owned        Loans*
                                 -----       -----      -----       -----       -----        -----
(Dollars in Thousands)               (Unaudited)           (Unaudited)

<S>                         <C>         <C>         <C>         <C>         <C>         <C>      
Average credit card loans   $1,252,475  $1,832,475  $1,593,771  $2,173,771  $1,390,998  $1,970,998
Period-end credit card 
loans                       $1,169,727  $1,749,727  $1,498,421  $2,078,421  $1,295,787  $1,875,787

Net charge-offs as a % of 
average credit card loans        10.33%       9.70%       9.09%       8.93%       9.42%      9.16%

Allowance for loan losses as a 
% of period-end credit card
loans                             6.40%       5.57%       5.63%       5.15%       6.15%      5.46%

Accruing loans contractually 
past due as to principal and 
interest payments              $61,865     $86,678     $74,948     $97,939     $74,085   $100,413
  30-89 days                      5.29%       4.95%       4.95%       4.71%       5.72%      5.35%
                               $49,157     $67,464     $56,778     $74,190     $60,360   $ 79,433
  90-179 days                     4.20%       3.86%       3.79%       3.61%       4.66%      4.23%

* Total loans represents both owned and securitized credit card loans.

</TABLE>
LIQUIDITY AND CAPITAL RESOURCES

  Funding and Capital Policies:

  Through its liquidity policies, the Company seeks to ensure access to cost 
effective funding in all business environments.  This objective is accomplished 
through diversification of funding sources, extension of funding terms and 
staggering of liability maturities.

  The Company's capital policies seek to maintain a strong balance sheet 
consistent with the Company's business risks as well as regulatory 
requirements.  The Company's subsidiary bank, HSB, targets the maintenance of 
capital levels considered for regulatory purposes to be "well-capitalized" as 
defined by the FDIC Improvement Act of 1991.

  The Company's interest rate risk policies are designed to reduce the 
potential volatility of earnings that arises from changes in interest rates.  
This is accomplished primarily through matched financing, where possible, which 
entails matching the repricing schedules of credit card loans and the related 
financing.

  Principal Sources of Funding:

  The Company finances its operations from three principal sources:  deposit- 
taking activities utilizing certificates of deposit ("CDs")in denominations of 
$100,000 or more; securitizations of credit card loans; and borrowings from 
MSDW.

  HSB administers a CD program through which CDs are issued to investors under 
two programs - an institutional CD program and a retail CD program.  CDs under 
the institutional CD program are issued directly by HSB to the investor and 
generally have a maturity of one to 12 months.  CDs under the retail CD program 
are issued to investors through Dean Witter Reynolds Inc., a subsidiary of 
                                         13

MSDW, and generally have a maturity of two to 10 years.  As of March 31, 1998, 
CDs outstanding were $540.2 million, of which institutional CDs represented 
$265.3 million and retail CDs represented $274.9 million.

  HSB maintains a loan securitization program with Barton Capital Corporation 
("BCC"), and at March 31, 1998, outstanding loans under such program were 
$300.0 million.  HSB also maintains a loan securitization program with 
Receivables Capital Corporation ("RCC"), and at March 31, 1998, outstanding 
loans under such program were $280.0 million.  At March 31, 1998, $580.0 
million or 33.1% of the HSB program loans had been sold through loan 
securitizations.
                                          
  The BCC loan securitization program, which had been scheduled to expire in 
April 1998, has been amended; it now is scheduled to expire on April 15, 1999. 
The RCC loan securitization program is scheduled to expire in October 1998.  
The amended and restated agreements with BCC and RCC include the elimination of 
the MSDW guarantee (which provided credit support in the transaction) and its 
replacement with a funded cash collateral account recorded on the consolidated 
balance sheets as "amounts due from asset securitizations."  The Company 
expects to renew or replace these facilities on or prior to their expiration 
dates.  If these programs are not extended on or prior to their expiration 
dates, collections allocable to BCC and RCC under the programs will be paid to 
BCC or to RCC, as applicable, and the interests of BCC and of RCC in the 
applicable securitization pool will gradually decline to zero.  Any receivables 
originated after a program's expiration date would remain on the Company's 
consolidated balance sheet. 

  The Company has an Amended and Restated Borrowing Agreement (as amended, the 
"Borrowing Agreement") and a facility fee letter agreement (as amended, the 
"Facility Fee Agreement")(collectively, the "Financing Agreements"), with MSDW, 
pursuant to which MSDW has agreed to provide financing to the Company.  MSDW 
and the Company have extended the term of the Borrowing Agreement to November 
20, 1998 and have reduced the maximum amount available under the Borrowing 
Agreement to $1.1 billion from $1.2 billion.  At April 30, 1998, the Company 
had $399.2 million outstanding under the Borrowing Agreement.  Under the 
Facility Fee Agreement, the Company pays certain monthly facility fees in 
connection with its financing arrangements with MSDW.

  The Company expects to renew or replace the Financing Agreements prior to the 
expiration dates of such Financing Agreements.  The Company is continuing to 
evaluate alternative sources of financing to replace all or a portion of its 
financing arrangements with MSDW.  If the Company were unable to reach a 
satisfactory agreement with MSDW for the renewal or the replacement of the 
Financing Agreements, the Company believes it would be able to meet its 
financial requirements over the next twelve months from other sources.

  The Company currently has no material commitments requiring capital 
expenditures.  The Company has not paid any dividends on its Common Stock and 
anticipates retaining  future operating cash flows for the foreseeable future 
to finance growth and business expansion rather than to pay dividends to its 
stockholders.  Any future determination as to the payment of dividends will 
depend upon results of operations, capital requirements, financial condition of 
the Company and such other factors as the Board of Directors of the Company at 
its discretion shall determine.  Periodically, SPS and HSB have paid dividends 
to the Company.  The amount of dividends that can be paid to the Company by HSB 
is restricted by applicable banking regulations.




                                         14

  Cash flows from operating activities resulted in net proceeds of cash of 
$42.9 million and $57.5 million for the three months ended March 31, 1998 and 
1997, respectively. 

  Cash flows from investing activities primarily consist of the growth/decline 
in credit card programs, the acquisition of new private label credit card 
portfolios, the sale of credit card loans through securitizations and short-
term investments.  Such investing activities resulted in net proceeds of cash 
of $91.5 million and $85.3 million for the three months ended March 31, 1998 
and 1997, respectively.  The net principal collected on credit card loans, 
representing the difference between payments received from cardholders and 
sales made using the cards, provided cash of $92.7 million and $101.9 million 
for the three months ended March 31, 1998 and 1997, respectively.

  Cash flows from financing activities primarily consist of borrowings and 
deposits.  Such financing activities resulted in net uses of cash of $133.7 
million and $138.4 million for the three months ended March 31, 1998 and 1997, 
respectively.  Amounts due to affiliated companies resulted in net uses of cash 
of $168.3 million and $153.6 million for the three months ended March 31, 1998 
and 1997, respectively, partially offset by interest-bearing deposits which 
resulted in net proceeds of cash of $36.1 million and $19.8 million for the 
three months ended March 31, 1998 and 1997, respectively.  At March 31, 1998 
and 1997, the Company had cash equivalents of $15.4 million and $19.6 million, 
respectively.

INTEREST RATE RISK

  The Company's matched financing strategy targets the funding of variable rate 
credit card loans that are primarily indexed to the prime rate with floating 
rate financing that is primarily indexed to commercial paper rates and the 
federal funds rate.  The Company generally retains basis risk between the prime 
rate and commercial paper/federal funds rates on variable rate credit card 
loans. Fixed rate credit card loans are generally funded with fixed rate 
financing (financing with an initial term of one year or greater).

  The Company also funds fixed rate credit card loans with floating rate 
financing by utilizing interest rate swaps, cost of funds agreements and 
interest rate caps to adjust the repricing characteristics of its financing to 
fixed rate financing.  Under interest rate swaps and cost of funds agreements, 
the Company effectively exchanges the interest payments on its financing with 
those of a counterparty. Interest rate cap agreements effectively establish a 
maximum interest rate on certain of the Company's floating rate borrowings. 
Interest rate swap agreements are entered into with an affiliate. Interest rate 
cap agreements are entered into with institutions that are established dealers 
in these instruments and that maintain certain minimum credit criteria 
established by the Company. Costs of funds agreements are entered into as part 
of agreements pursuant to which the Company both owns the credit card loan 
portfolio and provides private label credit card processing services to certain 
of its credit card merchant clients.

  To reduce the volatility of interest expense from changes in interest rates, 
the Company had outstanding interest rate swaps and cost of funds agreements 
with notional amounts of $426.7 million and $460.8 million at March 31, 1998 
and 1997, respectively.

  At March 31, 1998, the Company had no interest rate cap agreements.  At March 
31, 1997, the Company had outstanding interest rate cap agreements with 
notional amounts of $10.0 million.


                                         15
  At March 31, 1998 and 1997, the Company's interest rate swap agreements had 
maturities ranging from July 1998 to December 2000, and from October 1997 to 
December 2000, respectively.

YEAR 2000 COMPLIANCE

  Many of the world's computer systems and applications currently record years 
in a two-digit format with the century assumed to be 1900.  Consequently, they 
will be unable to properly interpret dates beyond the year 1999, which could 
lead to business disruptions (the "Year 2000" issue).

  The Company has established a Year 2000 Project Team to develop and manage a 
company-wide compliance process.  Based upon current information, the Company 
estimates that company-wide Year 2000 expenditures for 1998 through 1999 will 
be approximately $12 million.  Costs relating to this project are being 
expensed by the Company during the period in which they are incurred.  The 
Company's expectations about future costs associated with the Year 2000 issue 
are subject to uncertainties that could cause actual results to differ 
materially from what has been discussed above(see "Management's Discussion and 
Analysis of Financial Condition and Results of Operations" included in the 
Company's Annual Report on Form 10-K for the year ended December 31, 1997).







































                                          16

PART II - OTHER INFORMATION

Item 1.  Legal Proceedings.

  In the normal course of business, the Company is involved in routine 
litigation incidental to the business.  The consequences of these matters are 
not presently determinable; however, in the opinion of management after 
consultation with counsel, the ultimate liability, if any, will not have a 
material adverse effect on the consolidated financial position or results of 
operations of the Company.

Item 2.  Changes in Securities.- None.

Item 3.  Defaults Upon Senior Securities.- None

Item 4.  Submission of Matters to a Vote of Security Holders.- None.

Item 5.  Other Information.- None.

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

(a) Exhibits.

     2.1 Stock Purchase Agreement dated April 18, 1998, between SPS 
         Transaction Services, Inc. and Associates First Capital Corporation.

    10.1 Fifth Amendment to the Amended and Restated Borrowing Agreement dated 
         as of April 2, 1998 between the Company and MSDW.

    10.2 Amendment to the Facility Fee Letter Agreement dated as of April 2, 
         1998, between the Company and MSDW.

    10.3 First Amendment to the Amended and Restated Credit Card Receivables 
         Purchase Agreement dated as of April 15, 1998, among HSB, the Company, 
         SPS, MSDW, BCC and Societe Generale.

    11.0 Computation of Earnings per Common Share.

    27.0 Financial Data Schedule

    27.1 Restated Financial Data Schedule for year ended December 31, 1997.

    27.2 Restated Financial Data Schedule for year ended December 31, 1996.


(b) Reports on Form 8-K.

      A Current Report on form 8-K, dated April 21, 1998, was filed with the 
Securities and Exchange Commission reporting Item 7 relating to the 
Company's first quarter earnings release.

      A Current Report on form 8-K, dated April 18, 1998, was filed with the 
Securities and Exchange Commission reporting Items 5 and 7 relating to the 
Company's agreement with Associates First Capital Corporation to sell 
substantially all of the assets of the Company to Associates First Capital 
Corporation.


                                         17

      A Current Report on form 8-K, dated January 27, 1998, was filed with the 
Securities and Exchange Commission reporting Item 7 relating to the 
Company's fourth quarter earnings release.

      A Current Report on form 8-K, dated November 12, 1997, was filed with the 
Securities and Exchange Commission reporting Item 7 relating to the 
Company's 1997 Third Quarter Report to Stockholders.




















































                                        18

                               SIGNATURE

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.



                                    SPS TRANSACTION SERVICES, INC.
                                    ------------------------------
                                            (Registrant)




Date:  May 14, 1998                 By:/s/ Russell J. Bonaguidi
       -----------------            -----------------------------------
                                    Russell J. Bonaguidi
                                    Vice President and Controller (Duly
                                    Authorized Officer and Principal
                                    Accounting Officer)















































                                        19

EDGAR
Exhibit    Description of Exhibits
-------    -----------------------

   2.1     Stock Purchase Agreement dated April 18, 1998, between SPS 
           Transaction Services, Inc. and Associates First Capital Corporation.

  10.1     Fifth Amendment to the Amended and Restated Borrowing Agreement    
           dated as of April 2, 1998 between the Company and MSDW.

  10.2     Amendment to the Facility Fee Letter Agreement dated as of April 2, 
           1998, between the Company and MSDW.

  10.3     First Amendment to the Amended and Restated Credit Card Receivables 
           Purchase Agreement dated as of April 15, 1998, among HSB, the  
           Company, SPS, MSDW, BCC and Societe Generale.

  11.0     Computation of Earnings per Common Share.

  27.0     Financial Data Schedule

  27.1     Restated Financial Data Schedule for year ended December 31, 1997.

  27.2     Restated Financial Data Schedule for year ended December 31, 1996.

20