Two major credit card issuers may be teaming up, with Capital One announcing plans to buy Discover for a whopping $35.3 billion.
“Our acquisition of Discover is a once-in-a-lifetime opportunity to bring together two highly successful companies with complementary capabilities and franchises to create a payments network that can compete with the largest payment networks and payment companies,” said Founder. said Richard Fairbank, Chairman and Chief Executive Officer.Capital One Co., Ltd. Executive Officer press release.
Here’s what this move means for Discover and Capital One credit card holders.
Don’t panic, nothing has changed for now
There’s a lot of talk about what will happen and what will happen. But nothing is final or immediate.
“Initially, this potential merger will have no impact on consumers,” John Alzheimer said. credit card expert. “If you have a Capital One card or a Discover card (or both), you can continue to use them as you did yesterday.”
Regulatory rules still need to be cleared, and shareholders of both companies must approve the merger.but credit card expert CNET Money Expert Review Board member Aaron Hurd believes it will happen without a hitch.
“This transaction represents an immediate 27% gain for Discover stockholders,” Hurd said. “in my view, [it] The combined company will be well-positioned to compete for major co-branded deals with major banks. ”
In addition to stakeholders, federal regulators would also need to say yes, which could pose a hurdle. “Federal regulators’ appetite for bank mergers has diminished under the Biden administration, and regulatory frictions are deterring smaller mergers,” Hurd added.
Expert predictions for Capital One and Discover merger
Experts say if the deal goes through, it could be completed by the end of 2024 or early 2025. Experts have made the following predictions:
Rewards and benefits are subject to change
There’s still a lot to know about what this move means for Discover and Capital One cardholders, including changes to benefits, fees, and benefits. But Hurd said Discover cardholders may see the biggest benefits.
Discover cardholders may have access to extended warranties or travel insurance from Capital One.
“We hope that as Capital One harmonizes the benefits between its cards, it will add additional benefits to the Discover Card and further increase the value of the card for Discover Cardmembers,” Hurd said.
credit card expert Jason Steele also thinks the company could benefit from a potential merger. Both experts hope this will be good news for Discover cardholders who want access to Capital One’s travel partners.
“Capital One already has partnerships with airline and hotel brands that allow Venture Cardmembers to transfer miles to those brands,” Hurd said. With this deal, the Discover card may also have access to similar benefits. But Hurd doesn’t expect any changes to be implemented for at least another year after the merger is finally completed.
“We hope to extend Capital One’s travel insurance and purchase protection benefits to Discover cardholders,” Steele added.
Steele also noted that Capital One cardholders could benefit. Discover cash checkout feature You can withdraw cash at checkout at supermarkets and drugstores. Purchase APR may still apply.
And since both offer banking products such as certificates of deposit and high-yield savings accounts, more changes are likely to come. But for now, changes to cardmember benefits are just speculation.
Stronger payment networks could evolve
Capital One is a credit card issuer that offers cashback cards and travel credit cards. But Discover is both a credit card issuer and a payment processing network. Currently, Capital One can issue credit cards, but requires assistance from a processing network such as Visa to approve transactions. With Discover, you can do just that.
The planned acquisition will give Capital One the opportunity to move Mastercard and Visa credit cards to Discover’s network.
“I think this could be a good thing for both Capital One and Discover cardholders,” Steele said. “Capital One cardholders may be able to confirm that their products are part of the Discover payment network.” Bringing the processing network in-house reduces Capital One’s costs and Potential returns to cardholders in the form of lower fees and more benefits.
Steele said Discover has always lagged behind Visa, Mastercard and American Express as a payment network. Currently, Discover’s global merchant count is 44 million, much less than the other three networks.
Bringing Discover under the Capital One umbrella could create a payments network that is more competitive with Mastercard and Visa. By moving more of Capital One’s products to his Discover network internally, Capital One could increase the power of the Discover network and gain acceptance to more merchants.
However, it could also mean that if current Capital One cardholders are on the Discover network at its current size, the card will no longer be accepted in many places.
Combined, Discover and Capital One won’t become the largest credit card issuer in the foreseeable future, he said. But the deal could help Capital One compete with other large issuers such as Chase, Citi and American Express.
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