SECURITIES AND EXCHANGE COMMISSION
                              Washington, D.C. 20549

                                      FORM 10-K

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

                        For the fiscal year ended December 31, 1997

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

                              Commission file number 1-10993

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

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

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

           Registrant's telephone number, including area code: 847/405-3700

             Securities registered pursuant to Section 12(b) of the Act:

                                                     Name of each exchange on
         Title of each class                             which registered
         -------------------                         ------------------------
      Common Stock, $0.01 Par Value                   New York Stock Exchange

          Securities registered pursuant to Section 12(g) of the Act:  None

   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 ____

   Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein and will not be contained, to the
best of the Registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K.  [  ]

   As of January 31, 1998, the Registrant had 27,250,358 shares of Common Stock
outstanding. The aggregate market value of voting stock held by non-affiliates
of the Registrant as of January 31, 1998 was approximately $161,720,000.

                         Documents Incorporated by Reference

   Portions of the Registrant's Annual Report to Stockholders to be mailed to
stockholders on or about March 31, 1998 for the year ended December 31, 1997
are incorporated by reference in Parts I, II and IV.  Portions of the
Registrant's Definitive Proxy Statement to be mailed to stockholders on or
about April 27, 1998 for the Annual Meeting to be held on June 9, 1998, are
incorporated by reference in Part III.
PART I

Item 1.  BUSINESS

General

   SPS Transaction Services, Inc. (the "Company") is a third party provider of
technology-based outsourcing services concentrated in four primary businesses:
the electronic processing of non-cash point-of-sale transactions (predominantly
credit card transactions), consumer private label credit card program
administration, commercial accounts receivable processing and call center based
customer service and technical help-desk applications.  As used herein,
"Company" shall mean SPS Transaction Services, Inc. and its subsidiaries,
unless the context otherwise indicates.

   Except for the historical information contained in this Form 10-K, certain
items herein, including (without limitation) certain matters discussed under
"Management's Discussion and Analysis of Financial Condition and Results of
Operations"("MD&A") incorporated by reference in Part II, Item 7 of this
Report; and "Quantitative and Qualitative Disclosure about Market Risk"
incorporated by reference in Part II, Item 7A of this Report; are forward-
looking statements.  Actual results could differ materially from those
projected in the forward-looking statements.  The matters referred to in such
statements could be affected by the risks and uncertainties involved in the
Company's businesses, including (without limitation) the effect of economic and
market conditions, the level and volatility of interest rates, the actions
undertaken by both current and potential new competitors, the impact of
current, pending or future legislation and regulation and other risks and
uncertainties detailed in the MD&A.

   The Company conducts the majority of its business through two wholly owned
subsidiaries: SPS Payment Systems, Inc. ("SPS") which is incorporated in the
State of Delaware and Hurley State Bank ("HSB") which is a State of South
Dakota chartered bank and is a member of the Federal Deposit Insurance
Corporation.

   The Company is a 73.5% majority owned subsidiary of NOVUS Credit Services
Inc. ("NCSI"), which in turn is a wholly owned, direct subsidiary of Morgan
Stanley, Dean Witter, Discover & Co.

   On May 31, 1997, Morgan Stanley Group Inc. was merged with and into Dean
Witter, Discover & Co. ("DWD")(the "Merger").  At that time DWD changed its
corporate name to Morgan Stanley, Dean Witter, Discover & Co. ("MSDWD").  On
March 24, 1998 the shareholders of MSDWD approved the change of its corporate
name to Morgan Stanley Dean Witter & Co. ("MSDW").

   In the Company's payment transaction processing business, referred to as
Network Transaction Services, the Company provides a wide variety of clients
with point-of-sale processing.  This includes authorization, data capture, and
reporting and routing for settlement of check, credit card and debit card
transactions.  The Company also manages private label credit card programs for
merchants and other service providers through its Consumer Credit Card Services
business.  For these programs, the Company either administers the program for
its merchant client or acts as an issuer and owns the credit card loans
outstanding.  In addition, the Company offers billing and accounts receivable
management systems for clients with businesses as their customers through its
Commercial Accounts Processing business. The Company's call center TeleServices
business includes on-line technical help-desk support, catalog order entry and
handling of customer service inquiries.

                                          -2-
Network Transaction Services

   The Company provides electronic network transaction processing services
primarily to national and regional merchants. The Company captures transaction
information electronically at the point-of-sale; transmits the information
utilizing the facilities of unaffiliated communication services providers to
the credit card issuer, debit card issuer, or other appropriate on-line
processor for authorization or verification; communicates the response to the
merchant electronically; stores the information for reporting purposes; and
submits processed data to the appropriate settlement entity. The authorization
process is typically completed within seven seconds after the transaction data
leaves the merchant's premises.

The Company typically markets these services directly to large regional and
national merchants and competes with other large networks and merchant
acquirers for this business.

   The major components of the Company's Network Transaction Services business
are described below:

- Electronic Authorization/Data Capture - Transaction approval requests are
processed through point-of-sale equipment using primarily "950" system dial-up
telephone access, ISDN line access, leased line access, or satellite access to
the communications network. The cardholder account number is checked against a
computer file maintained by the issuer of the card and the purchase is approved
or declined within seconds. A similar procedure is used for debit card
processing and electronic check verification. At the time of authorization,
pertinent transaction data is recorded and stored for use in settlement and
client reporting. The Company's system provides for the redundant capture of
transaction data at both the merchant's point-of-sale terminal and at the
communications network data center. This data capture redundancy protects the
merchant and the Company's system against potential loss of data. In addition,
the Company's system provides multiple transaction routing capability from the
merchant's point-of-sale location to ensure the user a high level of access to
electronic authorizations. These features provide what the Company believes to
be superior reliability and uptime for its clients.

- Reporting and Settlement - Captured data is automatically processed within
the Company's system for complete client reporting. This data is then
transmitted for settlement to the appropriate financial institution or the
designated processor.  MasterCard(R) and Visa(R) card transaction data is
transmitted to a settlement institution selected by the Company's merchant
client. The settlement institution then enters transactions into the bankcard
interchange settlement process. For NOVUS(sm) Card transactions (which include
Discover Card, Private Issue(R) Card, BRAVO(sm) Card and affinity program
cards) and American Express(R) Card transactions, data is transmitted directly
to the card issuers of such cards.  For other card types, transaction data is
transmitted to the appropriate processor for settlement of the transactions.

   The Company maintains a 24-hour network services "help"-desk which responds
to inquiries from merchant locations and assists merchants in resolving
terminal, network, communication and system training problems. The help-desk
provides terminal application consultation and, if necessary, downloads new
applications to the merchant's point-of-sale terminals. The Company maintains a
terminal preparation facility (the "TPF") which loads, tests and ships
point-of-sale terminals to merchant locations. The TPF also provides repair
services for point-of-sale terminals. The Company also markets point-of-sale
terminal sales and maintenance, customer terminal application software


                                          -3

development and customized reporting solutions as part of its Network
Transaction Services business.

   The Company's Network Transaction Services are provided pursuant to written
contracts with merchant clients. Such contracts are generally individually
negotiated with each merchant, have terms varying from one to five years and
frequently contain provisions that automatically extend the term of the
contract unless either party takes affirmative action to terminate the
contract.

   The Company utilizes the computer and communications network (the "Network")
of IBM Global Services to process the majority of the Company's electronic
transactions. The Company has access to the Network pursuant to an agreement
between the Company and IBM Global Services. Although IBM Global Services is
responsible for maintaining the Network and data centers, the Company develops
and maintains most of the transaction processing systems and proprietary
software that it runs on the Network. Processing performed by other
communication providers is done through similar agreements.  The Company
develops merchant and industry specific software tailored to the needs of its
clients. Most data capture programs used in the Company's transaction
processing services were developed and are maintained by Company employees and
are not accessible, except as permitted by the Company, to other businesses
that use the Network.

   Through the Network, the Company maintains direct data links for NOVUS,
Visa, MasterCard and American Express Card authorizations and various other
direct data links to proprietary card issuers and financial institutions for
the purposes of authorizing and completing the Company's electronic transaction
processing services. A wide variety of stand-alone point-of-sale terminals,
electronic cash register systems and personal computers can be used by the
Company's merchant clients at their individual locations to access the
Company's system.

Consumer Credit Card Services

   The Company offers to national and regional merchants customized private
label consumer credit card programs.  The Company's wholly owned subsidiary,
HSB, issues the credit card on behalf of the client and owns the receivables
that are generated through the use of the credit card (the "HSB programs"). In
programs that are managed but not owned (the "managed programs"), the Company
administers the programs but does not act as the card issuer or own the
receivables.

   Whether the portfolio is owned or managed, the Company offers a full range
of credit card services including: new account processing featuring custom
scoring models; card design, embossing and issuance; sales authorizations;
statement processing and mailing; remittance processing; handling cardholder
inquiries; collections; and full marketing support.

   Services provided by the Company in a private label consumer credit card
program typically include the following:

- Implementation Support - The Company assists the merchant with card and
statement design, software implementation and training before the processing of
new accounts begins.

- New Account Processing - The Company's New Account Processing System ("NAPS")
enables new customer accounts to be opened in an average of four to six
minutes. Applicant information is taken at the point-of-sale and is entered via

                                          -4

either a 1-800 call to an SPS operations center representative, or through the
Company's Remote Entry Application Processing ("REAP") system where applicant
data is entered directly at the point-of-sale and transmitted to NAPS.  NAPS
maintains an on-line link to the major national credit bureaus and uses
proprietary automated point-scoring models selected by the issuer of the credit
card to approve or decline credit applications. Applications received by mail
are also handled through NAPS and are generally processed on the date of
receipt. The Company's risk management department oversees the development and
validation of new account approval models that are customized for an individual
client and monitors and adjusts such models on an ongoing basis as applicants
and economic conditions change.

- Credit Card Embossing - The Company's software automatically generates a file
of approved new account names and numbers for use in card embossing, and
embossed cards are mailed to approved applicants.

- Sales Authorizations - The Company currently authorizes all transactions
under its private label credit card programs through the Network. Merchants can
utilize the same point-of-sale terminals they use for bank cards for private
label credit card authorizations.

- Mechanized Statement Processing - The Company sends monthly account
statements directly to the cardholders. Large volumes and state-of-the-art
equipment enable the Company to process statements efficiently. Statements can
be customized to meet each merchant client's needs.

- Remittance Processing - The Company processes and deposits private label
credit card payments typically within 24 hours of their receipt.

- Cardholder Services - The Company has customer service representatives
available to answer cardholder questions and handle billing inquiries. An
automated call distribution system allows customer service representatives to
answer telephone calls using the merchant client's name. The Company's
cardholder service system enables the customer service representative to view
the cardholder's file and billing statement information on a computer screen
allowing for effective responses to cardholder inquiries.

- Collections - The Company uses a sophisticated on-line collection system to
identify and prioritize delinquent accounts. The Company contacts and attempts
to work with delinquent cardholders to reach mutually agreeable payment plans.

- Marketing Support - The Company assists its clients in developing a complete
marketing plan that targets the merchant's private label credit cardholders.
The Company also creates promotional materials to support such marketing plans.
Using customized software, the Company analyzes a merchant client's cardholder
base and develops customized reporting and analytical marketing information.

   The Company provides these services through two product offerings:

- HSB programs  - For each of the HSB programs, a merchant services agreement
between HSB and the merchant is negotiated.  The merchant services agreement
sets forth the obligation of HSB to open credit card accounts for qualified
customers of the merchant, the services to be provided by HSB and the merchant
discount revenues to be paid by the merchant to HSB. In some of the HSB
programs, the merchant services agreement provides that the merchant discount
revenues can be supplemented or adjusted in certain circumstances, as a result
of prevailing interest rates and to mitigate anticipated increased credit
losses. HSB's merchant services agreements typically have terms of five years
and frequently contain provisions that automatically extend the term unless a
party takes affirmative action to terminate the agreement.
                                          -5-
   All finance charges (including late fees) paid by private label credit
cardholders under HSB programs are paid to and retained by HSB except to the
extent that such fees are used to satisfy obligations under loan securitization
agreements (see Hurley State Bank - Loan Securitization). SPS maintains a
services agreement with HSB, pursuant to which SPS acts as the servicer for all
private label accounts owned by HSB, and HSB pays SPS a monthly intercompany
fee equal to a specified percentage of the outstanding receivables under such
accounts.

- Managed programs - For managed programs, the Company enters into a card
services agreement with the merchant setting forth the credit card program
services to be provided by the Company. The Company has traditionally charged
flat processing fees under such agreements on a per service provided basis (for
example, per collection call made, per card embossed, per statement issued). In
some instances, the Company charges an aggregate flat processing fee under such
agreements on a per cardholder account basis. Card services agreements
typically have terms varying from one to five years and frequently contain
provisions that automatically extend the term unless either party takes
affirmative action to terminate the agreement.

Commercial Accounts Processing

   The Company offers commercial accounts processing for clients whose
customers are businesses rather than consumers. The Company provides commercial
clients with two basic offerings, a commercial revolve credit product and an
invoice billing product.

   The commercial revolve credit product features monthly statements, invoice
specific detail, master/sub account capability and multiple authorized account
users.  The invoice billing product features an invoice for each transaction,
variable payment terms and an ability to match payments to invoices.  The
invoice billing product can be provided to clients in a format in which an
invoice is sent for each transaction or in a format in which invoices for a
month are batched and sent with a summary billing that requests payment in a
specified number of days.  The latter format is termed prox billing.

   SPS generates revenues for its commercial business through marketing and
servicing agreements with MountainWest Financial Corporation ("MountainWest"),
a wholly owned subsidiary of NCSI.  MountainWest is the issuer of commercial
private label credit cards and the holder of receivables associated with
transactions on those commercial accounts.  The Company provides a full range
of services to commercial clients on behalf of MountainWest including:

- Implementation Support - The Company assists the commercial client with card
and statement design as applicable, software implementation and training
before the processing of new accounts begins.

- New Account Processing - The Company's commercial new accounts processing
system has on-line links to commercial credit business and model based
decision tools to assess the creditworthiness of new account applicants.

- Credit Card Embossing - Where applicable, the Company's software generates a
file of approved new accounts, delivers the file for card embossing, and
provides for distribution of embossed cards according to client specifications.






                                         -6-

- Sales Authorizations - All card based transactions are electronically
authorized by the Company utilizing the same point-of-sale terminals the
client has in place for other card payment types, such as general purpose
bank cards.

- Statement and/or invoice processing - The Company prepares and sends
statements and/or invoices as applicable to commercial account holders.
Large volumes and state-of-the-art equipment enable the Company to process
efficiently and provide for customization to meet each commercial client's
needs.

- Remittance Processing - The Company processes and deposits commercial
account payments typically within 24 hours of their receipt.

- Account holder services - The Company's commercial customer service
representatives answer account holder questions and handle billing
inquiries.  An automated call distribution system allows customer service
representatives to answer telephone calls using the commercial client's
name.  The Company's commercial account holder service system enables the
customer service representative to view the account holder's file and billing
information on a computer screen allowing for effective responses to account
holder inquiries.

- Collections - The Company uses a sophisticated on-line collection system to
identify and prioritize delinquent accounts.  The Company has specifically
trained commercial account collection representatives to contact delinquent
account holders in an effort to secure payments on past due accounts.

- Marketing support - The Company assists commercial clients in developing and
executing marketing plans to advance the client's business.  Account holder
reporting and analysis tools are also made available to clients to enhance
marketing effectiveness.

   Revenues from commercial accounts processing are included in managed
programs in the Company's financial reports.

TeleServices

   The Company's TeleServices business provides call center teleservicing
programs that focus on business-to-consumer applications.  These applications
are typically based on the Company's technological capabilities and
professional customer service. For such services, the Company develops or
utilizes customized software applications to respond to inbound calls from a
client's customers and to facilitate appropriate actions based on the calls.

   The Company's service offerings focus on value-added inbound services, such
as:

- Help-Desk and Technical Support - The Company provides user technical support
programs for proprietary and off-the-shelf software applications, technical
Internet user support and problem analyses.

- Inbound Teleservice - The Company provides customized customer service
applications for clients by responding to inbound inquiries from their
customers.  Specific examples of this outsourcing service are the handling of
billing inquiries, product feature inquiries, dealer locator applications,
enrollment services, handling member benefit inquiries and many others.



                                         -7-

- Catalog Order Management - The Company provides services to catalog and
direct mail merchants to process inbound orders that are received via
telephone, facsimile or Internet.  Service features include order entry, cross-
selling, authorization of credit purchases, real time interfaces with client
warehouses and fulfillment centers, resolution of customer problems and
reporting of customer and product data.

  Revenues generated from TeleServices applications are included in Transaction
processing services in the Company's financial reports.

  Prodigy Services Corporation ("Prodigy"), a TeleServices client, has notified
the Company of its intention to terminate the Member Services Agreement between
Prodigy and the Company effective as of May 31, 1998.  Prodigy and the Company
have continued to negotiate to replace or renew the agreement, but there is no
assurance that the agreement will be replaced or renewed.  The Company believes
that the termination of this agreement will not have a material adverse effect
on the Company's financial condition or its results of operations.

Competition

   The Company's services are sold primarily to national and regional
merchants. The Company competes on the basis of service quality, response time,
customer support, customized system applications, reliability and price. The
Company believes that it is among the industry leaders with respect to each of
these factors.

   According to the Faulkner & Gray Credit Card Industry Directory (1998
Edition), based on the volume of outstanding receivables administered, GE
Capital Retailer Financial Services has approximately 45% of the third party
private label credit card marketplace.  Also according to Faulkner & Gray,
Household Retail Services, Beneficial National Bank, SPS Transaction Services
and Bank One Private Label Credit Services are the next largest of the third
party private label credit card providers identified, although the Company
believes that no competitors other than GE Capital Retailer Financial Services
are dominant in such marketplace. The principal competitors of the Company in
the electronic network transaction processing marketplace include First Data
Card Services, National City Processing Company, Alliance Card Services, First
USA Paymentech, and BuyPass Corporation, although the Company believes that no
competitors other than First Data Card Services are dominant in such
marketplace. The primary third party competitor for the Company's commercial
accounts processing business is GE Capital Retailer Financial Services.  The
Company's TeleServices business is client specific, and as such the Company
does not compete with a defined set of competitors with respect to these
services. Existing and potential competitors of the Company may have equal or
greater financial, technological and/or marketing resources than the Company,
and there can be no assurance that the Company will continue to be able to
compete successfully with them.

Significant Clients

   Tandy Corporation is the Company's largest client, accounting for 23.6% of
the Company's net operating revenues in 1997. The Company administers owned
private label credit card programs and provides electronic transaction
processing services for Tandy Corporation. The Goodyear Tire & Rubber Company
("Goodyear") is the Company's next largest client, accounting for 10.1% of the
Company's net operating revenues in 1997. The Company administers owned private
label credit card programs and provides electronic transaction processing
services and TeleServices for Goodyear. None of the Company's other clients
individually accounted for more than 10% of the Company's net operating
revenues in 1997.
                                         -8-

Seasonal Factors

   The Company's results of operations are impacted by seasonal patterns of
retail purchasing, but because certain seasonal trends are typically
offsetting, their impact does not significantly affect the Company's overall
results of operations. The number of transactions processed and the level of
credit card loans outstanding typically grows during the fourth quarter
followed by a flattening or decline in the subsequent first quarter. This
seasonality results mainly from higher levels of retail sales in the fourth
quarter than in the first quarter. During the fourth quarter, merchant discount
revenue and revenues derived from transaction processing services typically
increase but generally are accompanied by increases in expenses associated with
the growth of credit card receivables. These increased expenses typically
include the provision for loan losses, financing expenses, salaries and
employee benefits expenses, processing and service expenses, and various other
expenses. Correspondingly, in the first quarter, merchant discount revenue,
revenues derived from transaction processing services and provision for loan
loss expense typically decrease but generally are accompanied by increased
finance charge revenue related to the preceding quarter's credit card loan
growth.

Hurley State Bank

   HSB is the credit card issuer and the receivables funding facility for the
HSB programs, all of which are administered by the Company. HSB is not a member
of the Federal Reserve System. HSB is engaged only in consumer credit card
operations and is not permitted to engage in commercial lending (which may
include consumer credit card programs where the merchant is a recourse party).
The terms and conditions of the credit card accounts owned by HSB are set forth
in cardholder agreements entered into with each merchant's customers.

   Funding of Receivables

   The HSB programs involve making loans to private label credit cardholders
which create receivables from the cardholders. As such, the business is capital
intensive. The Company's ability to add to or expand the HSB programs is
limited by the amount of its available capital and by applicable regulatory
ratios of capital to assets. The Company currently funds the capital needs of
its operations by 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 in
denominations of $100,000 or more. Such 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
MSDW, and generally have a maturity of two to 10 years. As of December 31,
1997, CDs outstanding were $504.1 million, of which institutional CDs
represented $227.8 million and retail CDs represented $276.3 million.

   The Company engages in credit card loan securitization transactions through
the sale by HSB of credit card loans. When the Company securitizes its credit
card loans, it retains the right to service the underlying credit card
accounts, for which it receives fees. Loan securitizations have the effect of
converting net credit income and credit card fees into loan servicing fees. See
"Business - Hurley State Bank - Loan Securitization."


                                          -9-

   Certain borrowings to support the HSB programs are currently provided
pursuant to 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. The
maximum amount available under the Borrowing Agreement, which expires on April
11, 1998, is $1.2 billion.  The interest rate to be paid by the Company
reflects MSDW's borrowing costs. At January 31, 1998, the Company had $570.0
million outstanding under the Borrowing Agreement.  Under the Facility Fee
Agreement, the Company has agreed to pay 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 12 months from other sources.

   Loan Securitization

   Selling loans through securitizations results in net credit income and fee
income from credit card loans under HSB programs effectively being converted
into loan servicing fees.  A securitization transaction involves the sale by
HSB of the credit card loans generated by a pool of HSB program credit card
accounts to a separate legal entity created for loan securitizations. The
securitizations result in removal of the credit card loans from the Company's
balance sheet for both financial and regulatory accounting purposes. The
private label credit cardholder is generally not aware that the credit card
loans from his or her account have been included in a pool of securitized loans
because the Company services on-balance-sheet and securitized loans in the same
manner. Under the securitization agreements, the existence of certain
conditions could cause early amortization of the affected pool of securitized
loans and thereby increase the Company's need for alternative forms of
financing. Such conditions include an increase in the amount of charge-offs
over a specified rate.

   Payments by HSB program cardholders of finance charges and other amounts
relating to the credit card loans are used to pay a rate of return to the
holders of ownership interests in the receivables pools. Such payments are also
used to pay a fee to the agent, to SPS, to a subsidiary of the Company as cash
collateral depositor (net of investment income earned on the cash collateral
deposit) and to reimburse the purchaser for cardholder accounts that are
charged off. Any remaining amounts are effectively paid to HSB. In the event
that such payments are insufficient to cover charge-offs, and to pay the rate-
of-return agent fee and cash collateral fee, a cash collateral account has been
established to make up any shortfall, up to the program's maximum cash
collateral obligations. In addition, HSB is obligated to pay a monthly
commitment fee to the purchaser of the credit card loans if any portion of the
facility is unused. MSDW is the limited guarantor of performance.

   HSB maintains a loan securitization program with Barton Capital Corporation
("BCC"), and at December 31, 1997, outstanding loans under such program were
$300.0 million.  HSB also maintains a loan securitization program with
Receivables Capital Corporation ("RCC"), and at December 31, 1997, outstanding
loans under such program were $280.0 million.  At December 31, 1997, $580.0
million or 30.9% of the HSB program loans had been sold through loan
securitizations.


                                         -10-
   The BCC and RCC loan securitization programs are scheduled to expire in
April 1998 and October 1998, respectively.  The Company expects to renew or
replace these facilities on or prior to the 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 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.

Interest Rate Risk

   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.  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 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.  Cost 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 $429.1 million and $465.6 million at December 31, 1997
and 1996, respectively.

   At December 31, 1997, the Company had no interest rate cap agreements.  At
December 31, 1996, the Company had outstanding interest rate cap agreements
with notional amounts of $40.0 million.

   The Company's credit card portfolios consist of both variable interest rate
credit card programs and fixed interest rate credit card programs. At December
31, 1997 and 1996, approximately 67% and 69% of the Company's credit card loans
including securitized loans were variable interest rate loans.

   For a further discussion of the Company's interest rate risk and management
policies, see "Risk Management" incorporated by reference in Part II, Item 7A
of this report and see "Notes to Consolidated Financial Statements, Note 10
Financial Instruments" incorporated by reference in Part II, Item 8 of this
report.


                                         -11-

Executive Officers of the Registrant

   The following sets forth certain information concerning executive officers
of the Company:

       Name                   Age                     Present Position
---------------------        ------    --------------------------------------
Thomas C. Schneider            60      Chairman of the Board, Chief Financial
                                         Officer and Director
Robert L. Wieseneck            60	      President, Chief Executive Officer and
                                         Director
Christine A. Edwards           45      General Counsel and Director
Robert W. Archer               59      Senior Vice President -- Sales/
                                                                Operations
Richard F. Atkinson            61      Senior Vice President -- Private Label
                                                                Consumer
David J. Peterson              40      Senior Vice President -- Commercial
                                                                Technology
                                                                Services
Russell J. Bonaguidi           46      Vice President and Controller
Robert J. Ferkenhoff           55      Vice President and Chief Information
                                         Officer
Larry H. Myatt                 54      Vice President -- Marketing and
                                                         Administration
Ruth M. O'Brien                44      Vice President -- TeleServices
Serge J. Uccetta               52      Vice President -- Private Label
                                                         Commercial
Mary Ann Warniment             48      Vice President -- Electronic Marketing

   Mr. Schneider has served as Chief Financial Officer and a Director of the
Company since its formation and as Chairman of the Board since 1997. He has
served as Executive Vice President, Chief Strategic and Administrative Officer
and Director of MSDW since the Merger. Mr. Schneider served as Executive Vice
President and Chief Financial Officer of DWD from 1987 until the Merger. He has
also served as Executive Vice President and Chief Financial Officer of NCSI
since 1987 and as a Director of NCSI since 1986.

   Mr. Wieseneck has served as President, Chief Executive Officer and a
Director of the Company since its formation. He has served as President of SPS
since 1987 and as a Director of SPS since 1988. Mr. Wieseneck has also served
as President and Director of HSB since 1989. He has served as a
Director of NCSI since 1991 and as an Executive Vice President of NCSI from
December 1986 to April 1987 and since April 1988.

   Mrs. Edwards has served as a Director of the Company since 1997, and as its
General Counsel since 1993.  She served as Secretary of the Company from its
formation until 1997. She has also served as Executive Vice President, Chief
Legal Officer and Secretary of MSDW since the Merger. She served as Executive
Vice President, General Counsel and Secretary of DWD from 1991 until the
Merger. She has been General Counsel of NCSI since 1988, a Director of NCSI
since 1990 and Executive Vice President and Secretary of NCSI since 1991.

   Mr. Archer has served as Senior Vice President - Sales/Operations of the
Company since 1997.  Prior thereto he served as Senior Vice President -- Sales
of the Company and as a Senior Vice President of SPS from 1994 to 1997.  Mr.
Archer served as Vice President -- Sales of the Company from 1992 until 1994
and as a Vice President of SPS from 1988 until 1994.



                                       -12-

   Mr. Atkinson has served as Senior Vice President -- Private Label Consumer
of the Company since 1997.  Prior thereto he served as Senior Vice President --
Operations of the Company and as a Senior Vice President of SPS from 1994 until
1997. Mr. Atkinson served as Vice President -- Operations of the Company from
1992 until 1994 and as a Vice President of SPS from 1986 until 1994. Mr.
Atkinson has served as a Senior Vice President of HSB since 1991.

   Mr. Peterson has served as Senior Vice President -- Commercial Technology
Services of the Company since 1997.  Prior thereto he was Vice President --
Network Services and Corporate Development of the Company from 1995 to 1997 and
Vice President -- Corporate Development of the Company from 1994 until 1995.
Mr. Peterson was an investment banker for DWR from 1987 until 1993.

   Mr. Bonaguidi has served as Vice President and Controller of the Company,
HSB and SPS since 1994.  Prior thereto he was National Manager of Credit Card
Banking for Sears, Roebuck and Co. from 1992 until 1994 and Vice President --
Controller of Prime Option Services, Inc. (an affiliate of the Company) from
1990 until 1992.

   Mr. Ferkenhoff has served as Vice President and Chief Information Officer of
the Company since 1994 and of SPS since 1993.  Prior thereto he was Vice
President -- Information Technology of the Company from 1993 until 1994 and
Vice President -- Information Services for Sears Merchandise Group from 1989
until 1993.

   Mr. Myatt has served as Vice President -- Marketing and Administration of
the Company since 1996.  Prior thereto he was Vice President -- Marketing and
Product Development of the Company from 1992 until 1996 and a Vice President of
SPS since 1986.

   Ms. O'Brien has served as Vice President -- TeleServices of the Company
since 1996.  Prior thereto she was Director of Operational Outsourcing for SPS
and Director of Client Services for SPS from 1994 until 1996, and from 1990
until 1994, respectively.

   Mr. Uccetta has served as Vice President -- Private Label Commercial of the
Company since 1997.  Prior thereto he was Vice President -- Card Services of
the Company from 1995 to 1996 and Vice President -- Card Services of SPS since
1993.  Mr. Uccetta served as Director of Commercial Accounts for the Company
from 1993 until 1995.  Prior to joining SPS, Mr. Uccetta was Director --
Strategic Programs of Citibank from 1991 until 1993.

   Ms. Warniment has served as Vice President -- Electronic Marketing of the
Company since 1997.  Prior thereto she served as Vice President -- Electronic
Information Services of the Company from 1993 to 1997 and as a Vice President
of SPS since 1990.  She was Vice President -- Information Technology of the
Company from 1992 until 1993.

   There are no family relationships between any of the foregoing persons.

Employees

   As of December 31, 1997, the Company had 3,740 full-time equivalent
employees, of which 609 were salaried and 3,131 were hourly. Of the hourly
employees, approximately 30% were part-time. Approximately 3,280 of the
Company's full-time equivalent employees were located in field operations
centers providing customer service and support. Of the approximately 385 full-
time equivalent employees located at the Company's headquarters, 223 were


                                        -13-
engaged in supporting the Company's various businesses and administration and
162 were engaged in systems development and maintenance.  None of the employees
of the Company are covered by a collective bargaining agreement. The Company
has not experienced any work stoppages and considers its relations with its
employees to be good.

Regulatory Matters

   Restrictions on Activities of HSB

   HSB, a federally insured, South Dakota state chartered bank, operates as a
limited purpose credit card bank under federal law. The federal Competitive
Equality Banking Act of 1987 ("CEBA") established several categories of
financial institutions that do not fall within the meaning of "bank" for
purposes of the Bank Holding Company Act ("BHCA"). Among those exempted are
credit card banks. As a credit card bank, HSB may engage only in credit card
operations and may not engage in the business of making commercial loans.
Additionally, HSB may not accept savings or time deposits of less than $100,000
and may not accept demand deposits or other transaction accounts of any amount.
Finally, HSB may maintain only one office at which it can accept deposits. HSB
is subject to deposit insurance assessments payable to the Bank Insurance Fund
of the Federal Deposit Insurance Corporation ("FDIC"). The rates for these
assessments may vary based upon HSB's capital levels, risk categories, and a
rate structure established by the FDIC. The bank is subject to comprehensive
regulations and periodic examinations by the South Dakota Division of Banking
and by the FDIC.

   CEBA Limitations

   CEBA provides that if HSB fails to comply with the statutory restrictions
affecting its status as a credit card bank, any entity controlling HSB may,
among other things, be required to divest control of HSB. HSB believes,
however, that in light of the programs it has in place, the limitations of CEBA
will not have a material impact on HSB's ability to service or to maintain the
cardholder programs. Future federal or state legislation, regulation or
interpretation of federal or state legislation or regulation could, however,
adversely affect the business of HSB or the relationship of any such
controlling entity with HSB.

   Exportation of Interest Rates

   The terms and conditions of the credit card accounts owned by HSB are
governed by the laws of South Dakota, where HSB is chartered, and by applicable
federal law. Under federal law, HSB may charge interest at the rate allowed by
the laws of South Dakota, which do not limit the amount of interest that may be
charged on credit card loans offered by HSB. As a result, HSB is permitted to
export interest rates pursuant to federal law.

   Dividends and Transfers of Funds

   There are various legal limitations on the extent to which HSB can finance
or otherwise supply funds, through dividends, loans or otherwise, to the
Company and its affiliates. The FDIC is authorized to prohibit HSB from
engaging in any unsafe and unsound practice in conducting its business, and it
is possible that under some circumstances the FDIC could claim that payment of
a dividend was an unsafe and unsound practice. In addition, under federal law,
a bank cannot pay a dividend that will cause such bank to be
"undercapitalized". HSB's state regulator also has the authority to prohibit
unsafe and unsound practices. The payment of dividends by HSB may also be
affected by other factors, such as the need to maintain adequate capital or to
meet loan demands.                     -14

   HSB is also subject to certain restrictions which limit the transfer of
funds to the Company, and certain other affiliates in the form of loans,
extensions of credit, investments or purchases of assets or services and which
require that HSB's transactions with its affiliates be on terms no less
favorable to HSB than comparable transactions with unrelated third parties.

   Consumer Protection Laws and Debtor Relief Laws

   The relationships among cardholders, credit card issuers and sellers of
merchandise in transactions financed by the extension of credit under credit
accounts are extensively regulated by federal and state consumer protection
laws and regulations. Such laws and regulations include the federal
Truth-in-Lending Act (and the Federal Reserve Board's Regulation Z issued
thereunder), Equal Credit Opportunity Act (and the Federal Reserve Board's
Regulation B issued thereunder), Soldiers' and Sailors' Civil Relief Act, Fair
Credit Billing Act, Fair Credit Reporting Act and Fair Debt Collection
Practices Act. These statutes and regulations require credit disclosures on
credit card applications and solicitations, on an initial disclosure statement
required to be provided when a credit card account is first opened, and with
each monthly billing statement. They also prohibit certain discriminatory
practices in extending credit, impose certain limitations on the charges and
fees that may be imposed and regulate practices utilized in collections. In
addition, cardholders are entitled, under such laws and regulations, to have
payments and credits promptly applied on credit accounts and to require billing
errors to be promptly resolved. A cardholder may be entitled to assert
violations of certain of such consumer protection laws by way of set-off
against the cardholder's obligation to pay amounts owing on the cardholder's
account or, in certain cases, by claims against the lender or seller. For
example, under the federal Truth-in-Lending Act, a credit card issuer is
subject to all claims (other than tort claims) and defenses arising out of
transactions in which a credit card is used to purchase merchandise, if certain
conditions are met. These conditions include requirements that the cardholder
make a good faith attempt to obtain satisfactory resolution of the dispute from
the person honoring the credit card and meet certain jurisdictional
requirements. Where the seller of the goods or services is the same party as
the card issuer, or controls or is controlled by the card issuer directly or
indirectly, these jurisdictional requirements are not applicable. These
statutes further provide that in certain cases a cardholder's liability may not
exceed $50 with respect to charges to the credit card account which resulted
from unauthorized use of the credit card. The application of federal and state
bankruptcy and debtor relief laws affect HSB to the extent such laws result in
any credit card accounts being charged off as uncollectible.

   FDICIA

   Under the Federal Deposit Insurance Corporation Improvement Act of 1991
("FDICIA"), the federal bank regulatory agencies are required to take "prompt
corrective action" with respect to banks that do not meet minimum capital
requirements, and FDICIA imposes certain restrictions upon banks which meet
certain capital requirements but are not "well capitalized" for purposes of
FDICIA. FDICIA establishes five categories: well capitalized, adequately
capitalized, undercapitalized, significantly undercapitalized and critically
undercapitalized.  A bank may be downgraded to, or be deemed to be in, a
capitalization category that is lower than is indicated by its actual capital
position if it is determined to be in an unsafe or unsound condition, or
receives an unsatisfactory examination rating.  The FDIC has issued regulations
to implement the prompt corrective action provisions of FDICIA. Under FDICIA
and implementing regulations adopted by the FDIC, a bank that is not well


                                         -15-

capitalized is generally prohibited from accepting brokered deposits and
offering interest rates on any deposits significantly higher than the
prevailing rate in its normal market area or nationally (depending upon where
the deposits are solicited). HSB currently solicits deposits through brokers.

If HSB were unable to use brokered deposits as a funding source, the funding
costs for HSB would be likely to increase.

   FIRREA Cross-Guarantee Provisions

   Pursuant to certain provisions of the Financial Institutions Reform,
Recovery, and Enforcement Act of 1989 ("FIRREA"), an insured depository
institution which is commonly controlled with another insured depository
institution is liable to the FDIC for any loss incurred, or reasonably
anticipated to be incurred, by the FDIC in connection with the default of such
commonly controlled institution, or any assistance provided by the FDIC to such
commonly controlled institution which is in danger of default. The term
"default" is defined to mean the appointment of a conservator or receiver for
such institution.  Under this provision, HSB could be required to reimburse the
FDIC for such losses resulting from the default of any other insured depository
institution which is under common control with HSB (for example, Greenwood
Trust Company, a Delaware state bank, and MountainWest, both of which are owned
by MSDW, the ultimate majority stockholder of HSB) and such reimbursement could
be required even if it would cause the bank providing the reimbursement also to
go into default. Such liability is subordinated in right of payment to deposit
liabilities, secured creditors, other than obligations owed to any affiliate of
the depository institution (with certain exceptions) and any obligations and
any other general or senior liability, and any obligation subordinated to
depositors or other general obligations to stockholders in such capacity.

Item 2.  PROPERTIES

   The Company's headquarters are located in Riverwoods, Illinois, where it
leases approximately 97,400 square feet of office space from NCSI for a term
expiring in January 2000. The Company also conducts significantly all of its
operations out of owned facilities located in Gray, Tennessee and Sioux Falls,
South Dakota, and out of leased facilities located in Layton, Utah and
Asheville, North Carolina.  The Gray, Tennessee facility contains approximately
131,000 square feet that, as of December 31, 1997, housed approximately 1,585
full-time equivalent Company employees involved in processing accounts for
certain managed and HSB programs, administering TeleServices and providing
certain data communications functions related to the Company's Network
Transaction Services.  The Sioux Falls, South Dakota facility contains
approximately 65,000 square feet that, as of December 31, 1997, housed
approximately 725 full-time equivalent Company employees involved in processing
accounts for HSB programs and providing TeleServices.  HSB operates out of the
Sioux Falls facility.  The Layton, Utah facility contains approximately 81,000
square feet that, as of December 31, 1997, housed approximately 880 full-time
equivalent Company employees involved in processing accounts for certain
managed and HSB programs and providing TeleServices. The Layton, Utah facility
is leased for a term expiring in June 2001.  The Asheville, North Carolina
facility was opened in 1997 and contains approximately 39,900 square feet that,
as of December 31, 1997, housed approximately 90 full-time equivalent Company
employees involved in providing TeleServices.  The Asheville, North Carolina
facility is leased for a term expiring in December 2007.

The Company believes that its properties are adequate and suitable for its
business as presently conducted.


                                       -16-

Item 3.  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 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

   No matters were submitted to a vote of security holders during the fourth
quarter of the year ended December 31, 1997.


                                        PART II

Item 5.  MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

   The section entitled "Quarterly Information" appearing on page 43 of the
Company's Annual Report to Stockholders to be mailed to stockholders on or
about March 31, 1997 for the year ended December 31, 1997 (the "Annual Report")
is incorporated herein by reference in response to information required by Item
5.

   The fair market value of a share of Common Stock at the close of business on
January 31, 1998, as reported in The Wall Street Journal, was $24.1875.

   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, the financial condition of the
Company and such other factors as the Board of Directors of the Company in 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.

Item 6.  SELECTED FINANCIAL DATA

   The section entitled "5-Year Selected Financial Data" appearing on page 43
of the Annual Report is incorporated herein by reference in response to
information required by Item 6.

Item 7.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
         RESULTS OF OPERATIONS

   The section entitled "Management's Discussion and Analysis of Financial
Condition and Results of Operations" appearing on pages 16 through 25 of the
Annual Report is incorporated herein by reference in response to information
required by Item 7.

Item 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

   The section entitled "Risk Management" appearing on pages 23 through 25 of
the Annual Report is incorporated herein by reference in response to
information required by Item 7A.



                                         -17-

Item 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

   The sections entitled "Consolidated Balance Sheets" appearing on page 26 of
the Annual Report, "Consolidated Statements of Income" appearing on page 27 of
the Annual Report, "Consolidated Statements of Cash Flows" appearing on page 28
of the Annual Report, "Consolidated Statements of Changes in Stockholders'
Equity" appearing on page 29 of the Annual Report, "Notes to Consolidated
Financial Statements" appearing on pages 30 through 39 of the Annual Report,
"Independent Auditors' Report" appearing on page 42 of the Annual Report and
"Quarterly Information" appearing on page 43 of the Annual Report are
incorporated herein by reference in response to information required by Item 8.

Item 9.  CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
         FINANCIAL DISCLOSURE

   None.

                                 PART III

Item 10.  DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

   The section entitled "Nominees for Election as Directors" in the Company's
proxy statement to be mailed to stockholders on or about April 27, 1998 for the
June 9, 1998 Annual Meeting of Stockholders (the "Proxy Statement") is
incorporated herein by reference in response to information concerning
directors required by Item 10.

   The information concerning executive officers required by Item 10 is set
forth in Part I, Item 1 of this Annual Report on Form 10-K.

Item 11.  EXECUTIVE COMPENSATION

   The section entitled "Executive Compensation" and the section entitled
"Stock Performance Graph" in the Proxy Statement are incorporated herein by
reference in response to information required by Item 11.

Item 12.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

   The section entitled "Security Ownership of Directors and Officers" in the
Proxy Statement is incorporated herein by reference in response to information
required by Item 12.

Item 13.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

   The section entitled "Certain Relationships" in the Proxy Statement is
incorporated herein by reference in response to information required by Item
13.













                                       -18-

                                    PART IV

Item 14.  EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K

(a)  Documents filed as part of this report:

1.   Financial Statements.  The following Consolidated Financial Statements
     of SPS Transaction Services, Inc. are incorporated herein by reference
     from the Annual Report:

                                                                Annual Report
                                                                     Page
                                                                -------------
     Consolidated Balance Sheets                                        26
     Consolidated Statements of Income                                  27
     Consolidated Statements of Cash Flows                              28
     Consolidated Statements of Changes in Stockholders' Equity         29
     Notes to Consolidated Financial Statements                         30
     Independent Auditors' Report                                       42

2.   Financial Statement Schedules.  The following Financial Statement
     Schedules are incorporated herein by reference from the Annual Report:

     Quarterly Financial Information                                    43*

     Schedule I - Condensed Financial Statements of SPS Transaction
     Services, Inc. (Parent Company Only)                              S-1**

     Independent Auditors' Report                                      S-5**


     * Refers to page number in Annual Report.
     ** Refers to page number in this Form 10-K.

     All other Financial Statement Schedules have been omitted since the
     information is not applicable, is not required or is included in the
     Consolidated Financial Statement or Notes to Consolidated Financial
     Statement listed under section (a)1 above.

3.   Listing of Exhibits.  The following exhibits are incorporated by
     reference or filed herewith:

3.1  Certificate of Incorporation of the Company (incorporated by reference
     from Exhibit 3.1 of the Company's Registration Statement No. 33-44937
     (the "1992 Registration Statement")).

3.2  By-laws of the Company (incorporated by reference from Exhibit 3.2 of
     the 1992 Registration Statement).

4.1  Form of certificate representing shares of Common Stock of the Company
     (incorporated by reference from Exhibit 4.1 of the 1992 Registration
     Statement).








                                       -19-

10.1  Services Agreement for Systems Operations Services dated September 17,
      1993, between SPS and Advantis (portions of which have been granted
      confidential treatment pursuant to an order of the Securities and
      Exchange Commission, which will remain in effect until December 31, 1998)
      (incorporated by reference from Exhibit 10.1 of the Company's Annual
      Report on Form 10-K for the fiscal year ended December 31, 1993 (the
      "1993 Form 10-K")).

10.2  Service Agreement dated as of February 1, 1994, and Amendment to the
      Service Agreement dated as of January 31, 1995, each between SPS and
      MountainWest (incorporated by reference from Exhibit 10.2 of the
      Company's Annual Report on Form 10-K for the fiscal year ended December
      31, 1994 (the "1994 Form 10-K")).

10.3  POS Debit Card Program Letter Agreement dated as of August 30, 1994,
      between SPS and Discover Card Services, Inc. ("Discover Card")
      (incorporated by reference from Exhibit 10.3 of the 1994 Form 10-K).

10.4  Management Services Agreement dated as of January 1, 1992, between the
      Company and NCSI (incorporated by reference from Exhibit 10.2 of the 1992
      Registration Statement).

10.5  Amendment to the Advantis/SPS Payment Systems, Inc. Master Agreement for
      Systems Operations Services effective March 13, 1997, between Advantis
      and SPS (incorporated by reference from Exhibit 10.5 of the Company's
      Annual Report on Form 10-K for the fiscal year ended December 31, 1996
      (the "1996 Form 10-K")).

10.6  Third Amendment to Service Agreement made effective as of January 1,
      1996, between SPS and MountainWest (incorporated by reference from
      Exhibit 10.1 of the Company's Quarterly Report on Form 10-Q for the
      quarterly period ended September 30, 1996 (the "1996 Third Quarter Form
      10-Q")).

10.7  Third-Party Processing and Cooperative Network Service Agreement made as
      of September 28, 1992, between SPS and Discover Card (incorporated by
      reference from Exhibit 10.7 of the Company's Annual Report on Form 10-K
      for the fiscal year ended December 31, 1992 (the "1992 Form 10-K")).

10.8  Terminal Service Agreement made as of January 1, 1992, between SPS and
      Discover Card (incorporated by reference from Exhibit 10.6 of the 1992
      Registration Statement).

10.9  Letter Agreement dated November 5, 1992, between SPS and Discover Card,
      amending the Terminal Service Agreement made as of January 1, 1992
      (incorporated by reference from Exhibit 10.9 of the 1992 Form 10-K).

10.10 Amended and Restated Marketing Services Agreement dated as of January 1,
      1996, between SPS and NCSI (incorporated by reference from Exhibit 10.2
      of the 1996 Third Quarter Form 10-Q).

10.11 System Access Agreement entered into August 1, 1992, between SPS and
      Discover Card (incorporated by reference from Exhibit 10.11 of the 1992
      Form 10-K).

10.12 Lease Agreement made February 1, 1993, between SPS and NCSI (incorporated
      by reference from Exhibit 10.12 of the 1993 Form 10-K).



                                        -20-

10.13 Assignment and Assumption of Lease dated as of December 31, 1993, between
      SPS and NCSI, and Office Lease Agreement made and entered into October 1,
      1990, between NCSI and Price Development Company (incorporated by
      reference from Exhibit 10.13 of the 1993 Form 10-K).

10.14 Service Agreement dated as of January 1, 1988, between SPS and HSB
      (incorporated by reference from Exhibit 10.12 of the 1992 Registration
      Statement).

10.15 Service Agreement dated as of November 1, 1990, between SPS and
      MountainWest (incorporated by reference from Exhibit 10.13 of the 1992
      Registration Statement).

10.16 Registration Agreement made as of February 25, 1992, between the Company
      and NCSI (incorporated by reference from Exhibit 10.16 of the 1993 Form
      10-K).

10.17 Letter Agreement dated as of September 1, 1995, between SPS and NOVUS
      Services, Inc. (successor in interest to Discover Card)("NSI"), amending
      the System Access Agreement entered into August 1, 1992, the Terminal
      Service Agreement made as of January 1, 1992, as amended, and the Third
      Party Processing and Cooperative Network Service Agreement made as of
      September 28, 1992 (incorporated by reference from Exhibit 10.17 of the
      Company's Annual Report on Form 10-K for the fiscal year ended December
      31, 1995 (the "1995 Form 10-K")).

10.18 Third Amended and Restated Master Receivables Purchase Agreement dated as
      of July 19, 1995, and First Amendment to the Third Amended and Restated
      Master Receivables Purchase Agreement dated as of December 15, 1995, each
      among HSB, SPS, DWD, RCC and Bank of America National Trust and Savings
      Association (incorporated by reference from Exhibit 10.18 of the 1995
      Form 10-K).

10.19 Assignment and Assumption Agreement dated as of July 19, 1995, among HSB,
      SPS, DWD, RPC, RCC and Bank of America National Trust and Savings
      Association (incorporated by reference from Exhibit 10.19 of the 1995
      Form 10-K).

10.20 Amended and Restated Credit Card Receivables Purchase Agreement dated as
      of April 15, 1997 among HSB, the Company, SPS, DWD, BCC and Societe
      Generale (incorporated by reference from Exhibit 10.2 of the Company's
      Quarterly Report on Form 10-Q for the quarterly period ended March 31,
      1997 (the "1997 First Quarter Form 10-Q")).

10.21*Fourth Amended and Restated Receivables Purchase Agreement dated
      as of October 31, 1997, among HSB, SPS, MSDWD, RCC and Bank of America
      National Trust and Savings Association.

10.22 Merchant Services Agreement made as of February 19, 1987, between HSB and
      Goodyear (incorporated by reference from Exhibit 10.17 of the 1992
      Registration Statement).

10.23 Amendment to the Terminal Service Agreement dated as of July 1, 1993,
      between SPS and Discover Card (incorporated by reference from Exhibit
      10.25 of the 1993 Form 10-K).

10.24 Form of Interest Rate and Currency Exchange Agreement between the Company
      and DWD or NCSI (incorporated by reference from Exhibit 10.26 of the
      1993 Form 10-K).

                                         -21-

10.25*Agreement of Sublease made as of December 31, 1997 between SPS and
      MountainWest.

10.26 First Amendment to Service Agreement made as of January 1, 1993, between
      SPS and MountainWest (incorporated by reference from Exhibit 10.28 of the
      1992 Form 10-K).

10.27 Form of Cardholder Agreement (incorporated by reference from Exhibit
      10.29 of the 1993 Form 10-K).

10.28 Amendment to the Merchant Services Agreement dated as of April 27, 1993,
      between HSB and Goodyear (portions of which have been granted
      confidential treatment pursuant to an order of the Securities and
      Exchange Commission which will remain in effect until June 14, 1999)
      (incorporated by reference from Exhibit 10.31 of the 1993 Form 10-K).

10.29#Omnibus Equity Incentive Plan (incorporated by reference from Exhibit 4.1
      of the MSDWD Registration Statement No. 33-63024 on Form S-8).

10.30#1994 Omnibus Equity Plan (incorporated by reference from Exhibit
      10.52 of the MSDWD Annual Report on Form 10-K for the fiscal year ended
      December 31, 1993).

10.31#Employees Replacement Stock Plan (incorporated by reference from Exhibit
      4.2 of the MSDWD Registration Statement No. 33-63024 on Form S-8).

10.32#Amendment to the Employees Replacement Stock Plan (adopted June 18,
      1993)(incorporated by reference from Exhibit 10.1 of the MSDWD Current
      Report on Form 8-K dated November 18, 1993).

10.33 Form of Amended and Restated Borrowing Agreement between the Company and
      DWD (incorporated by reference from Exhibit 10.1 of the Company's
      Quarterly Report on Form 10-Q for the quarterly period ended September
      30, 1995 (the "1995 Third Quarter Form 10-Q")).

10.34 Amendment to the Facility Fee Letter Agreement dated as of May 3, 1996,
      between the Company and DWD (incorporated by reference from Exhibit
      10.2 of the Company's Quarterly Report on Form 10-Q for the quarterly
      period ended March 31, 1996 (the "1996 First Quarter Form 10-Q")).

10.35 Facility Fee Letter Agreement dated September 1, 1995 between the Company
      and DWD (incorporated by reference from Exhibit 10.3 of the 1995 Third
      Quarter Form 10-Q).

10.36#SPS Transaction Services, Inc. Employee Stock Purchase Plan (amended and
      restated as of January 1, 1996) (incorporated by reference from Exhibit
      10.36 of the 1995 Form 10-K).

10.37#SPS Transaction Services, Inc. Amended and Restated Formula Plan for Non-
      Affiliate Directors (incorporated by reference from Exhibit 10.38 of the
      1992 Form 10-K).

10.38#SPS Transaction Services, Inc. Amended and Restated 1992 Employees Stock
      Plan (incorporated by reference from Exhibit 10.39 of the 1992 Form 10-
      K).





                                       -22-

10.39#SPS Transaction Services, Inc. 1995 Omnibus Equity Plan (incorporated by
      reference from Exhibit 10.40 of the 1994 Form 10-K).

10.40#SPS Transaction Services, Inc. Amended and Restated Tax Deferred Equity
      Participation Plan (incorporated by reference from Exhibit 4.3 of the
      Company's Registration Statement No. 333-412 on Form S-8).

10.41#NOVUS Credit Services Inc. Supplemental Retirement Income Plan, formerly
      known as the Sears Consumer Financial Corporation Supplemental Retirement
      Income Plan, effective as of January 1, 1989 (incorporated by reference
      from Exhibit 10.36 of the MSDWD Registration Statement No. 33-56104 on
      Form S-1).

10.42#Tax Deferred Equity Participation Plan (amended and restated October 21,
      1994) (incorporated by reference from Exhibit 4.1 of the Post-
      Effective Amendment No. 1 to the MSDWD Registration Statement No. 33-
      82240 on Form S-8).

10.43 Sales Lead Letter Agreement dated January 26, 1995, between SPS and
      Discover Card (incorporated by reference from Exhibit 10.47 of the 1994
      Form 10-K).

10.44 Amended and Restated Merchant Services Agreement made as of December 29,
      1994, between HSB and Tandy (incorporated by reference from Exhibit 10.48
      of the 1994 Form 10-K).

10.45 Purchase Agreement made as of December 30, 1994, among Tandy National
      Bank, Tandy Credit Corporation and HSB (incorporated by reference from
      Exhibit 2.1 of the Company's Current Report on Form 8-K dated December
      30, 1994).

10.46 Acquisition Agreement dated as of January 18, 1995, as amended, among
      HSB, Tandy National Bank and Tandy Credit Corporation (incorporated by
      reference from Exhibit 2.1 of the Company's Current Report on Form 8-K
      dated March 30, 1995).

10.47 Agreement and Plan of Merger dated as of March 30, 1995, among HSB,
      Hurley Receivables Corporation, Tandy and Tandy Credit Corporation
      (incorporated by reference from Exhibit 2.2 of the Company's Current
      Report on Form 8-K dated March 30, 1995).

10.48 Assignment and Assumption Agreement dated as of March 30, 1995, between
      SPS Newco, Inc. and Tandy Receivables Corporation (incorporated by
      reference from Exhibit 2.3 of the Company's Current Report on Form 8-K
      dated March 30, 1995).

10.49 Letter Amendment to Third Amended and Restated Master Receivables
      Purchase Agreement dated as of December 6, 1996 among HSB, SPS, DWD,
      RCC and Bank of America National Trust and Savings Association
      (incorporated by reference from Exhibit 10.49 of the 1996 Form 10-K).

10.50 Addendum to the Merchant Services Agreement dated as of April 1, 1994,
      between HSB and Goodyear (incorporated by reference from Exhibit 10.52 of
      the 1994 Form 10-K).

10.51 First Amendment to the Amended and Restated Borrowing Agreement dated as
      of May 3, 1996, between the Company and DWD (incorporated by reference
      from Exhibit 10.1 of the 1996 First Quarter Form 10-Q).


                                         -23-

10.52 Second Amendment to the Amended and Restated Borrowing Agreement dated as
      of September 30, 1996, between the Company and DWD (incorporated by
      reference from Exhibit 10.6 of the 1996 Third Quarter Form 10-Q).

10.53 Service Agreement dated as of September 1, 1996, between SPS and NSI
      (incorporated by reference from Exhibit 10.3 of the 1996 Third Quarter
      Form 10-Q).

10.54 First Amendment to the Lease Agreement made on March 20, 1997, between
      NCSI and SPS (incorporated by reference from Exhibit 10.54 of the 1996
      Form 10-K).

10.55 Lease Agreement made as of January 1, 1997, between NCSI and SPS
      (incorporated by reference from Exhibit 10.55 of the 1996 Form 10-K).

10.56#First Amendment to the NOVUS Credit Services Inc. Supplemental Retirement
      Income Plan (adopted December 8, 1992) (incorporated by reference from
      Exhibit 10.41 of the MSDWD Annual Report on Form 10-K for the fiscal year
      ended December 31, 1993).

10.57#Second Amendment to the NOVUS Credit Services Inc. Supplemental
      Retirement Income Plan (adopted June 15, 1993) (incorporated by reference
      from Exhibit 10.42 of the MSDWD Annual Report on Form 10-K for the fiscal
      year ended December 31, 1993).

10.58#Third Amendment to the NOVUS Credit Services Inc. Supplemental Retirement
      Income Plan (adopted February 13, 1995) (incorporated by reference from
      Exhibit 10.27 of the MSDWD Annual Report on Form 10-K for the fiscal year
      ended December 31, 1994).

10.59*#Amendment to the SPS Transaction Services, Inc. Amended and Restated Tax
       Deferred Equity Participation Plan (adopted April 29, 1997).

10.60 Third Amendment to the Amended and Restated Borrowing Agreement dated as
      of January 31, 1997, between the Company and DWD (incorporated by
      reference from Exhibit 10.1 of the 1997 First Quarter Form 10-Q).

10.61 Fourth Amendment to the Amended and Restated Borrowing Agreement dated as
      of April 13, 1997, between the Company and MSDWD (incorporated by
      reference from Exhibit 10.1 of the Company's Quarterly Report on Form 10-
      Q for the quarterly period ended June 30, 1997 (the "1997 Second Quarter
      Form 10-Q")).

10.62 Amendment to the Facility Fee Letter Agreement dated as of April 13, 1997
      between the Company and MSDWD (incorporated by reference from Exhibit
      10.2 of the 1997 Second Quarter Form 10-Q).

10.63*First Amendment to Third Party Processing and Cooperative Network
      Service Agreement entered into January 1, 1998 between NSI and SPS.

10.64#Amendment to Tax Deferred Equity Participation Plan (adopted October
      3,1997) (incorporated by reference from Exhibit 10.17 of the MSDWD Annual
      Report on Form 10-K for the fiscal year ended November 30, 1997).

10.65*Second Amendment to the Terminal Service Agreement dated as of January 1,
      1997, between SPS and NSI.

10.66*#SPS Senior Management Retention Plan (adopted November 19, 1997).

10.67*#SPS Incentive Plan (adopted November 19, 1997).
                                        -24-
11.0* Statement Re: Computation of Earnings per Common Share.

13.1* Annual Report to Stockholders.  Except for those portions
      expressly incorporated by reference herein, the 1997 Annual Report is
      furnished for the information of the Commission and is not deemed "filed"
      as part of this Annual Report on Form 10-K.

21.1  Subsidiaries of the Company (incorporated by reference from Exhibit 22.1
      of the 1992 Form 10-K).

23.1* Independent Auditors' Consent.

24.1* Powers of Attorney.

27.0* Financial Data Schedule.

* Filed herewith.
# Management contract or compensatory plan or arrangement.

(b)  Current Reports on Form 8-K

      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.

      A Current Report on Form 8-K dated October 21, 1997 was filed with the
Securities and Exchange Commission reporting Item 7 relating to the Company's
third quarter earnings release.




























                                         -25-
                                 SIGNATURES

   Pursuant to the requirements of Section 13 or 15(d) 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 on March 30, 1998.

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

                                    By: ROBERT L. WIESENECK
                                        ------------------------------
                                        Robert L. Wieseneck, President

   Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed on March 30, 1998, by the following persons on behalf of
the Registrant and in the capacities indicated:

           Signature                               Capacity
---------------------------------       --------------------------------------
THOMAS C. SCHNEIDER*
---------------------------------
Thomas C. Schneider                     Chairman of the Board
                                        Chief Financial Officer and Director
                                        (Principal Financial Officer)
ROBERT L. WIESENECK
---------------------------------
Robert L. Wieseneck                     President, Chief Executive Officer and
                                        Director (Principal Executive Officer)
RUSSELL J. BONAGUIDI*
---------------------------------
Russell J. Bonaguidi                    Vice President and Controller
                                        (Principal Accounting Officer)
FRANK T. CARY*
---------------------------------
Frank T. Cary                           Director

CHRISTINE A. EDWARDS*
---------------------------------
Christine A. Edwards                    General Counsel and Director

MITCHELL M. MERIN*
---------------------------------
Mitchell M. Merin                       Director

CHARLES F. MORAN*
---------------------------------
Charles F. Moran                        Director

PHILIP J. PURCELL*
---------------------------------
Philip J. Purcell                       Director

DENNIE M. WELSH*
---------------------------------
Dennie M. Welsh                         Director

*ROBERT L. WIESENECK
---------------------------------
By Robert L. Wieseneck,
Attorney-in-fact                         -26-

<PAGE>
SCHEDULE I


SPS TRANSACTION SERVICES, INC.
(Parent Company Only)


CONDENSED BALANCE SHEETS
-----------------------------------------------------------------------------
(In Thousands)
<TABLE>
<CAPTION>
                                                         December 31,
                                                 ----------------------------
                                                     1997             1996
                                                 -----------      -----------
<S>                                              <C>              <C>
Assets:
   Investments in consolidated subsidiaries      $   204,424      $   191,597
   Advances to subsidiaries                          100,374           40,553
   Due from an affiliated company                        463            2,148
   Other assets                                          283              282
                                                 -----------      -----------
Total Assets                                     $   305,544      $   234,580
                                                 ===========      ===========

Liabilities and Stockholders' Equity:
   Payables to subsidiaries                      $    19,765      $     6,130
   Due to affiliated companies                        21,426            3,520
   Other liabilities                                   1,318              538
                                                 -----------      -----------
     Total liabilities                                42,509           10,188
   Total stockholders' equity                        263,035          224,392
                                                 -----------      -----------
Total Liabilities and Stockholders' Equity       $   305,544      $   234,580
                                                 ===========      ===========


See notes to condensed financial statements.

</TABLE>





















                                          S-1

<PAGE>
SCHEDULE I


SPS TRANSACTION SERVICES, INC.
(Parent Company Only)

CONDENSED STATEMENTS OF INCOME
-------------------------------------------------------------------------------
(In Thousands)
<TABLE>
<CAPTION>
                                                        December 31,
                                             ----------------------------------
                                               1997         1996         1995
                                             --------     --------     --------
<S>                                          <C>          <C>          <C>
Dividends received from subsidiaries         $ 25,000     $     --     $ 15,000
Interest on advances to subsidiaries           39,513       44,375       23,526
Other revenues                                     --        2,258          573
                                             --------     --------     --------
   Total revenues                              64,513       46,633       39,099
                                             --------     --------     --------


Interest expense                               38,158       42,661       18,169
Other expenses                                    177          180          192
                                             --------     --------     --------
   Total expenses                              38,335       42,841       18,361
                                             --------     --------     --------

Income before income taxes and equity
   in undistributed net earnings of
   subsidiaries                                26,178        3,792       20,738
Income tax expense                                504        1,416        2,258
                                             --------     --------     --------
Income before equity in undistributed
   net earnings of subsidiaries                25,674        2,376       18,480
Equity in undistributed net earnings
   of subsidiaries                             12,826       20,870       24,993
                                             --------     --------     --------
Net income                                   $ 38,500     $ 23,246     $ 43,473
                                             ========     ========     ========



See notes to condensed financial statements.


</TABLE>












                                          S-2
<PAGE>

SCHEDULE I

SPS TRANSACTION SERVICES, INC.
(Parent Company Only)

CONDENSED STATEMENTS OF CASH FLOWS
------------------------------------------------------------------------------
(In Thousands)
<TABLE>
<CAPTION>
                                                Year Ended December 31,
                                           -----------------------------------
                                              1997         1996         1995
                                           ---------    ---------    ---------
<S>                                        <C>          <C>          <C>
Cash Flows From Operating Activities:
Net income                                 $  38,500    $  23,246    $  43,473
Adjustments to reconcile net income to
  net cash flows from operating activities:
   Compensation payable in common stock           72          855          401
   Equity in undistributed net earnings
    of subsidiaries                          (12,826)     (20,870)     (24,993)
   (Increase) decrease in operating assets:
     Due from an affiliated company            1,685       (1,575)        (573)
     Other assets                                 (1)         (39)        (243)
    Increase (decrease) in operating
     liabilities:
     Due to affiliated companies              18,345        1,303        4,072
     Other liabilities                           780         (159)          50
                                           ---------    ---------    ---------
       Net cash from operating activities     46,555        2,761       22,187
                                           ---------    ---------    ---------

Cash Flows From Investing Activities:
Investments in and advances to
  subsidiaries, net                          (46,187)      (2,883)     (17,822)

Cash Flows From Financing Activities:
Due to an affiliated company                      --           --       (3,073)
Proceeds from exercise of stock options           52          622          665
Changes in treasury stock, net                  (420)        (500)      (1,957)
                                           ---------    ---------    ---------
       Net cash from financing activities       (368)         122       (4,365)
                                           ---------    ---------    ---------

Cash                                               0            0            0
Cash, Beginning of Year                           --           --           --
                                           ---------    ---------    ---------
Cash, End of Year                          $       0    $       0    $       0
                                           =========    =========    =========
Supplemental Disclosures of Cash Flow
  Information:
Cash paid for interest                     $  38,857    $  42,316    $  15,021
Cash (refunded) paid for income taxes           (344)       1,641        2,406
                                           =========    =========    =========
Supplemental Schedule of Noncash Investing
  and Financing Activities:
Employee stock benefit plan
  transactions                             $     439    $     959    $     924
                                           =========    =========    =========
See notes to condensed financial statements.

</TABLE>

                                           S-3

<PAGE>
SPS TRANSACTION SERVICES, INC.
(Parent Company Only)


NOTES TO CONDENSED FINANCIAL STATEMENTS



1. Introduction and Basis of Presentation

   The condensed financial statements, including the notes thereto, of SPS
Transaction Services, Inc. (the "Parent Company") should be read in conjunction
with the consolidated financial statements of SPS Transaction Services, Inc.
and subsidiaries (the "Company") and the notes thereto found in pages 26-39 of
the Company's 1997 Annual Report to Stockholders (the "Annual Report") which is
incorporated by reference in this Form 10-K.

   The Company is a 73.5% majority owned subsidiary of NOVUS Credit Services
Inc. ("NCSI"), which in turn is a wholly owned, direct subsidiary of Morgan
Stanley, Dean Witter, Discover & Co. ("MSDWD"). On May 31, 1997, Morgan Stanley
Group Inc. was merged with and into Dean Witter, Discover & Co.  At that time
Dean Witter, Discover & Co. changed its corporate name to Morgan Stanley, Dean
Witter, Discover & Co.  On March 24, 1998 the shareholders of MSDWD approved
the change of its corporate name to Morgan Stanley Dean Witter & Co. ("MSDW").

2. Dividends Received from Subsidiaries

   The Company received dividends from its consolidated subsidiaries totaling
$25.0 million and $15.0 million for the years ended December 31, 1997 and 1995,
respectively. No dividends were received by the Company from its consolidated
subsidiaries for the year ended December 31, 1996

3. Payment of Dividends

   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 in its
discretion shall determine.



















                                           S-4

INDEPENDENT AUDITORS' REPORT

Stockholders and Board of Directors
SPS Transaction Services, Inc.

We have audited the consolidated financial statements of SPS Transaction
Services, Inc. and subsidiaries as of December 31, 1997 and 1996, and for each
of the three years in the period ended December 31, 1997, and have issued our
report thereon dated February 18, 1998; such financial statements and report
are included in your 1997 Annual Report to Stockholders and are incorporated
herein by reference. Our audits also included Schedule I listed in Item 14.
This financial statement schedule is the responsibility of the Company's
management. Our responsibility is to express an opinion based on our audits. In
our opinion, such financial statement schedule, when considered in relation to
the basic financial statements taken as a whole, presents fairly in all
material respects the information set forth therein.




/s/ Deloitte & Touche LLP
Chicago, Illinois
February 18, 1998





































                                         S-5

Sequential
                                                                      Page
Exhibit       Description                                            Number
-------       -----------------------------------------------      ----------
3.          Listing of Exhibits.  The following exhibits are
            incorporated by reference or filed herewith:

3.1         Certificate of Incorporation of the Company
            (incorporated by reference from Exhibit 3.1 of the
            Company's Registration Statement No. 33-44937 (the
            "1992 Registration Statement")).

3.2         By-laws of the Company (incorporated by reference
            from Exhibit 3.2 of the 1992 Registration Statement).

4.1         Form of certificate representing shares of Common
            Stock of the Company (incorporated by reference from
            Exhibit 4.1 of the 1992 Registration Statement).

10.1        Services Agreement for Systems Operations Services
            dated September 17, 1993, between SPS and Advantis
            (portions of which have been granted confidential
            treatment pursuant to an order of the Securities and
            Exchange Commission, which will remain in effect
            until December 31, 1998) (incorporated by reference
            from Exhibit 10.1 of the Company's Annual Report on
            Form 10-K for the fiscal year ended December 31, 1993
            (the "1993 Form 10-K")).

10.2        Service Agreement dated as of February 1, 1994, and
            Amendment to the Service Agreement dated as of
            January 31, 1995, each between SPS and MountainWest
            (incorporated by reference from Exhibit 10.2 of the
            Company's Annual Report on Form 10-K for the fiscal
            year ended December 31, 1994 (the "1994 Form 10-K")).

10.3        POS Debit Card Program Letter Agreement dated as of
            August 30, 1994, between SPS and Discover Card
            Services, Inc. ("Discover Card") (incorporated by
            reference from Exhibit 10.3 of the 1994 Form 10-K).

10.4        Management Services Agreement dated as of January 1,
            1992, between the Company and NCSI (incorporated by
            reference from Exhibit 10.2 of the 1992 Registration
            Statement).

10.5        Amendment to the Advantis/SPS Payment Systems, Inc.
            Master Agreement for Systems Operations Services
            effective March 13, 1997, between Advantis and SPS
            (incorporated by reference from Exhibit 10.5 of the
            Company's Annual Report on Form 10-K for the fiscal
            year ended December 31, 1996 (the "1996 Form 10-K")).

10.6        Third Amendment to Service Agreement made effective
            as of January 1, 1996, between SPS and MountainWest
            (incorporated by reference from Exhibit 10.1 of the
            Company's Quarterly Report on Form 10-Q for the
            quarterly period ended September 30, 1996 (the "1996
            Third Quarter Form 10-Q")).

10.7        Third-Party Processing and Cooperative Network Service
            Agreement made as of September 28, 1992, between SPS
            and Discover Card (incorporated by reference from
            Exhibit 10.7 of the Company's Annual Report on Form
            10-K for the fiscal year ended December 31, 1992
            (the "1992 Form 10-K")).

10.8        Terminal Service Agreement made as of January 1, 1992,
            between SPS and Discover Card (incorporated by
            reference from Exhibit 10.6 of the 1992 Registration
            Statement).

10.9        Letter Agreement dated November 5, 1992, between SPS
            and Discover Card, amending the Terminal Service
            Agreement made as of January 1, 1992 (incorporated
            by reference from Exhibit 10.9 of the 1992 Form 10-K).

10.10       Amended and Restated Marketing Services Agreement
            dated as of January 1, 1996, between SPS and NCSI
            (incorporated by reference from Exhibit 10.2 of the
            1996 Third Quarter Form 10-Q).

10.11       System Access Agreement entered into August 1, 1992,
            between SPS and Discover Card (incorporated by
            reference from Exhibit 10.11 of the 1992 Form 10-K).

10.12       Lease Agreement made February 1, 1993, between SPS
            and NCSI (incorporated by reference from Exhibit
            10.12 of the 1993 Form 10-K).

10.13       Assignment and Assumption of Lease dated as of
            December 31, 1993, between SPS and NCSI, and Office
            Lease Agreement made and entered into October 1,
            1990, between NCSI and Price Development Company
            (incorporated by reference from Exhibit 10.13 of the
            1993 Form 10-K).

10.14       Service Agreement dated as of January 1, 1988,
            between SPS and HSB (incorporated by reference
            from Exhibit 10.12 of the 1992 Registration
            Statement).

10.15       Service Agreement dated as of November 1, 1990,
            between SPS and MountainWest (incorporated by
            reference from Exhibit 10.13 of the 1992
            Registration Statement).

10.16       Registration Agreement made as of February 25, 1992,
            between the Company and NCSI (incorporated by
            reference from Exhibit 10.16 of the 1993 Form 10-K).

10.17       Letter Agreement dated as of September 1, 1995,
            between SPS and NOVUS Services, Inc. (successor
            in interest to Discover Card)("NSI"), amending the
            System Access Agreement entered into August 1, 1992,
            the Terminal Service Agreement made as of January 1,
            1992, as amended, and the Third Party Processing
            and Cooperative Network Service Agreement made as of
            September 28, 1992 (incorporated by reference from
            Exhibit 10.17 of the Company's Annual Report on
            Form 10-K for the fiscal year ended December 31,
            1995 (the "1995 Form 10-K")).

10.18       Third Amended and Restated Master Receivables
            Purchase Agreement dated as of July 19, 1995,
            and First Amendment to the Third Amended and
            Restated Master Receivables Purchase Agreement
            dated as of December 15, 1995, each among HSB,
            SPS, DWD, RCC and Bank of America National Trust
            and Savings Association (incorporated by reference
            from Exhibit 10.18 of the 1995 Form 10-K).

10.19       Assignment and Assumption Agreement dated as of
            July 19, 1995, among HSB, SPS, DWD, RPC, RCC and
            Bank of America National Trust and Savings
            Association (incorporated by reference from
            Exhibit 10.19 of the 1995 Form 10-K).

10.20       Amended and Restated Credit Card Receivables
            Purchase Agreement dated as of April 15, 1997
            among HSB, the Company, SPS, DWD, BCC and Societe
            Generale (incorporated by reference from Exhibit
            10.2 of the Company's Quarterly Report on Form
            10-Q for the quarterly period ended March 31,
            1997 (the "1997 First Quarter Form 10-Q")).

10.21*      Fourth Amended and Restated Receivables Purchase
            Agreement dated as of October 31, 1997, among
            HSB, SPS, MSDWD, RCC and Bank of America National
            Trust and Savings Association.

10.22       Merchant Services Agreement made as of February
            19, 1987, between HSB and Goodyear (incorporated
            by reference from Exhibit 10.17 of the 1992
            Registration Statement).

10.23       Amendment to the Terminal Service Agreement dated
            as of July 1, 1993, between SPS and Discover Card
            (incorporated by reference from Exhibit 10.25 of
            the 1993 Form 10-K).

10.24       Form of Interest Rate and Currency Exchange
            Agreement between the Company and DWD or NCSI
            (incorporated by reference from Exhibit 10.26
            of the 1993 Form 10-K).

10.25*      Agreement of Sublease made as of December 31,
            1997 between SPS and MountainWest.

10.26       First Amendment to Service Agreement made as of
            January 1, 1993, between SPS and MountainWest
            (incorporated by reference from Exhibit 10.28
            of the 1992 Form 10-K).

10.27       Form of Cardholder Agreement (incorporated by
            reference from Exhibit 10.29 of the 1993 Form
            10-K).

10.28       Amendment to the Merchant Services Agreement dated
            as of April 27, 1993, between HSB and Goodyear
            (portions of which have been granted confidential
            treatment pursuant to an order of the Securities
            and Exchange Commission which will remain in effect
            until June 14, 1999) (incorporated by reference
            from Exhibit 10.31 of the 1993 Form 10-K).

10.29#      Omnibus Equity Incentive Plan (incorporated by
            reference from Exhibit 4.1 of the MSDWD Registration
            Statement No. 33-63024 on Form S-8).

10.30#      1994 Omnibus Equity Plan (incorporated by reference
            from Exhibit 10.52 of the MSDWD Annual Report on
            Form 10-K for the fiscal year ended December 31,
            1993).

10.31#      Employees Replacement Stock Plan (incorporated by
            reference from Exhibit 4.2 of the MSDWD Registration
            Statement No. 33-63024 on Form S-8).

10.32#      Amendment to the Employees Replacement Stock Plan
            (adopted June 18, 1993)(incorporated by reference
            from Exhibit 10.1 of the MSDWD Current Report on
            Form 8-K dated November 18, 1993).

10.33       Form of Amended and Restated Borrowing Agreement
            between the Company and DWD (incorporated by
            reference from Exhibit 10.1 of the Company's
            Quarterly Report on Form 10-Q for the quarterly
            period ended September 30, 1995 (the "1995
            Third Quarter Form 10-Q")).

10.34       Amendment to the Facility Fee Letter Agreement
            dated as of May 3, 1996, between the Company and
            DWD (incorporated by reference from Exhibit  10.2
            of the Company's Quarterly Report on Form 10-Q
            for the quarterly period ended March 31, 1996
            (the "1996 First Quarter Form 10-Q")).

10.35       Facility Fee Letter Agreement dated September 1,
            1995 between the Company and DWD (incorporated
            by reference from Exhibit 10.3 of the 1995 Third
            Quarter Form 10-Q).

10.36#      SPS Transaction Services, Inc. Employee Stock
            Purchase Plan (amended and restated as of
            January 1, 1996) (incorporated by reference
            from Exhibit 10.36 of the 1995 Form 10-K).

10.37#      SPS Transaction Services, Inc. Amended and
            Restated Formula Plan for Non-Affiliate
            Directors (incorporated by reference from
            Exhibit 10.38 of the 1992 Form 10-K).

10.38#      SPS Transaction Services, Inc. Amended and
            Restated 1992 Employees Stock Plan (incorporated
            by reference from Exhibit 10.39 of the 1992
            Form 10-K).

10.39#      SPS Transaction Services, Inc. 1995 Omnibus
            Equity Plan (incorporated by reference
            from Exhibit 10.40 of the 1994 Form 10-K).

10.40#      SPS Transaction Services, Inc. Amended and
            Restated Tax Deferred Equity Participation
            Plan (incorporated by reference from
            Exhibit 4.3 of the Company's Registration
            Statement No. 333-412 on Form S-8).

10.41#      NOVUS Credit Services Inc. Supplemental
            Retirement Income Plan, formerly known as
            the Sears Consumer Financial Corporation
            Supplemental Retirement Income Plan, effective
            as of January 1, 1989 (incorporated by reference
            from Exhibit 10.36 of the MSDWD Registration
            Statement No. 33-56104 on Form S-1).

10.42#      Tax Deferred Equity Participation Plan
            (amended and restated October 21, 1994)
            (incorporated by reference from Exhibit 4.1
            of the Post-Effective Amendment No. 1 to
            the MSDWD Registration Statement No. 33-82240
            on Form S-8).

10.43       Sales Lead Letter Agreement dated January 26,
            1995, between SPS and Discover Card
            (incorporated by reference from Exhibit 10.47
            of the 1994 Form 10-K).

10.44       Amended and Restated Merchant Services Agreement
            made as of December 29, 1994, between HSB and
            Tandy (incorporated by reference from Exhibit
            10.48 of the 1994 Form 10-K).

10.45       Purchase Agreement made as of December 30, 1994,
            among Tandy National Bank, Tandy Credit
            Corporation and HSB (incorporated by reference
            from Exhibit 2.1 of the Company's Current Report
            on Form 8-K dated December 30, 1994).

10.46       Acquisition Agreement dated as of January 18,
            1995, as amended, among HSB, Tandy National
            Bank and Tandy Credit Corporation (incorporated
            by reference from Exhibit 2.1 of the Company's
            Current Report on Form 8-K dated March 30, 1995).

10.47       Agreement and Plan of Merger dated as of March 30,
            1995, among HSB, Hurley Receivables Corporation,
            Tandy and Tandy Credit Corporation (incorporated
            by reference from Exhibit 2.2 of the Company's
            Current Report on Form 8-K dated March 30, 1995).

10.48               Assignment and Assumption Agreement dated as of
            March 30, 1995, between SPS Newco, Inc. and Tandy
            Receivables Corporation (incorporated by reference
            from Exhibit 2.3 of the Company's Current Report
            on Form 8-K dated March 30, 1995).

10.49       Letter Amendment to Third Amended and Restated
            Master Receivables Purchase Agreement dated as of
            December 6, 1996 among HSB, SPS, DWD, RCC and
            Bank of America National Trust and Savings
            Association (incorporated by reference from
            Exhibit 10.49 of the 1996 Form 10-K).

10.50       Addendum to the Merchant Services Agreement dated
            as of April 1, 1994, between HSB and Goodyear
            (incorporated by reference from Exhibit 10.52 of
            the 1994 Form 10-K).

10.51       First Amendment to the Amended and Restated
            Borrowing Agreement dated as of May 3, 1996,
            between the Company and DWD (incorporated by
            reference from Exhibit 10.1 of the 1996 First
            Quarter Form 10-Q).

10.52       Second Amendment to the Amended and Restated
            Borrowing Agreement dated as of September 30,
            1996, between the Company and DWD (incorporated
            by reference from Exhibit 10.6 of the 1996
            Third Quarter Form 10-Q).

10.53       Service Agreement dated as of September 1, 1996,
            between SPS and NSI (incorporated by reference
            from Exhibit 10.3 of the 1996 Third Quarter
            Form 10-Q).

10.54       First Amendment to the Lease Agreement made on
            March 20, 1997, between NCSI and SPS (incorporated
            by reference from Exhibit 10.54 of the 1996
            Form 10-K).

10.55       Lease Agreement made as of January 1, 1997,
            between NCSI and SPS (incorporated by reference
            from Exhibit 10.55 of the 1996 Form 10-K).

10.56#      First Amendment to the NOVUS Credit Services Inc.
            Supplemental Retirement Income Plan (adopted
            December 8, 1992) (incorporated by reference from
            Exhibit 10.41 of the MSDWD Annual Report on
            Form 10-K for the fiscal year ended December 31,
            1993).

10.57#      Second Amendment to the NOVUS Credit Services
            Inc. Supplemental Retirement Income Plan
            (adopted June 15, 1993) (incorporated by reference
            from Exhibit 10.42 of the MSDWD Annual Report on
            Form 10-K for the fiscal year ended December
            31, 1993).

10.58#      Third Amendment to the NOVUS Credit Services Inc.
            Supplemental Retirement Income Plan (adopted
            February 13, 1995) (incorporated by reference from
            Exhibit 10.27 of the MSDWD Annual Report on Form
            10-K for the fiscal year ended December 31, 1994).

10.59*#     Amendment to the SPS Transaction Services, Inc.
            Amended and Restated Tax Deferred Equity
            Participation Plan (adopted April 29, 1997).

10.60       Third Amendment to the Amended and Restated
            Borrowing Agreement dated as of January 31, 1997,
            between the Company and DWD (incorporated by
            reference from Exhibit 10.1 of the 1997 First
            Quarter Form 10-Q).

10.61       Fourth Amendment to the Amended and Restated
            Borrowing Agreement dated as of April 13, 1997,
            between the Company and MSDWD (incorporated by
            reference from Exhibit 10.1 of the Company's
            Quarterly Report on Form 10-Q for the
            quarterly period ended June 30, 1997 (the
            "1997 Second Quarter Form 10-Q")).

10.62       Amendment to the Facility Fee Letter Agreement
            dated as of April 13, 1997 between the Company
            and MSDWD (incorporated by reference from Exhibit
            10.2 of the 1997 Second Quarter Form 10-Q).

10.63*      First Amendment to Third Party Processing and
            Cooperative Network Service Agreement entered
            into January 1, 1998 between NSI and SPS.

10.64#      Amendment to Tax Deferred Equity Participation
            Plan (adopted October 3,1997) (incorporated by
            reference from Exhibit 10.17 of the MSDWD Annual
            Report on Form 10-K for the fiscal year ended
            November 30, 1997).

10.65*      Second Amendment to the Terminal Service Agreement
            dated as of January 1, 1997, between SPS and NSI.

10.66*#SPS  Senior Management Retention Plan (adopted November
            19, 1997).

10.67*#SPS  Incentive Plan (adopted November 19, 1997).

11.0*       Statement Re: Computation of Earnings per Common
            Share.

13.1*       Annual Report to Stockholders.  Except for
            those portions expressly incorporated by
            reference herein, the 1997 Annual Report is
            furnished for the information of the Commission
            and is not deemed "filed" as part of this
            Annual Report on Form 10-K.

21.1        Subsidiaries of the Company (incorporated
            by reference from Exhibit 22.1 of the 1992
            Form 10-K).

23.1*       Independent Auditors' Consent.

24.1*       Powers of Attorney.

27.0*       Financial Data Schedule.

* Filed herewith.
# Management contract or compensatory plan or arrangement.