The content is accurate at the time of publication and is subject to change.
On February 19, Capital One Financial Corporation announced an agreement to acquire Discover Financial Services in an all-stock transaction valued at $35.3 billion. This deal, if approved, would form the sixth-largest U.S. bank by assets and one of the largest U.S. credit card companies that would complete with JP Morgan Chase and Citigroup.
Capital One may move at least some of its cards onto the Discover payment network over time. But at the same time the company still have contracts with Visa and Mastercard for many of its credit products. So the transition to the Discover network may be slow.
Since Discover banking services are mostly provided online, it will enable Capital One to expand further into digital banking.
Capital One plans to move its debit card business over to the Discover Signature debit network to help Discover compete with Visa®, Mastercard® and American Express.
Capital One will keep Discover's branding, so consumers will still see Discover stickers at points of sale and when checking out online.
Consumers won't see any changes from the acquisition for some time because the deal should be approved by shareholders and regulators, which will take time.
When the deal is complete and Capital One and Discover become one big company, there might be an increase in credit card interest rates and fees as bigger players tend to offer higher APRs and fees compared to small banks and credit unions, according to the Consumer Financial Protection Bureau data.
If the deal is approved, Capital One expects it to be complete by the end of 2024 or early 2025. But what does it mean to consumers? Here are some ideas to think over:
If you are a big Discover fan, don't get frustrated just yet. The deal should first pass federal regulatory scrutiny and if it does get a green light, you will have at least a year before you experience any changes. Or there may be no changes for you at all as Capital One wants to keep Discover's branding and continue developing the Discover payment network.
It's also unclear whether the two issuers consolidate their rewards programs and perks or invent something new. Would cardholders be able to transfer rewards? Or would Discover cardholders get access to Capital One airport lounges? What is clear now is that it will take a long time before any changes are done and any issues are settled.
