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If you're a credit card customer who is worried about the Capital One/Discover merger or curious about what it means for the future of credit cards: Take a deep breath. Relax. Nothing is going to happen yet. You don't have to do anything or change any accounts.
The deal is not done -- it still requires approval from federal government officials. And no one knows for sure when (or how) any changes might happen to the cards in your wallet. But as an average everyday credit card customer, your personal finances still might be affected by the Capital One/Discover merger in the future -- hopefully in a good way.
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Let's take a look at a few big reasons why Capital One buying Discover matters for people like you -- and a few possible credit card changes to watch for in the next few years.
1. Capital One is keeping the Discover brand
Current Discover customers don't need to worry: Capital One has already announced that it intends to keep the Discover brand. You can keep using your Discover cards and accounts, and the features you love most are likely to stay.
If any Discover-related changes happen, it might be to Capital One's debit cards. By buying Discover, Capital One is buying Discover's payment network -- and that means Capital One could potentially offer the same types of cash back rewards as Discover's debit cards.
2. Visa and Mastercard might offer better deals for credit card customers
Most everyday credit card customers don't realize this, but every time you swipe your card at a store or pay online, credit card companies are making money. Banks and payment networks are earning a small percentage of the money you just spent -- called credit card processing fees.
Currently, Visa and Mastercard are (by far) the two largest payment networks, American Express is the third largest, and Discover is the fourth. By buying Discover, Capital One is intending to use Discover's underdog payment network to compete against Visa and Mastercard. Over the long term, this could lead to some interesting new deals for credit card customers.
Capital One is planning to move its debit card payments to Discover's payment network, which might lead to a new logo appearing on your Capital One debit card. And some Capital One cards might stay with Mastercard and Visa, but only if those big payment networks give Capital One a better deal on processing fees.
3. Credit card rewards might get better
Some of the biggest implications of the merger are in how it affects credit card reward points. Capital One has also said that, by owning Discover's payment network, it might be able to offer interesting new deals and customer experiences in partnership with merchants and retailers.
Capital One could use its new payment network to do some creative things to launch new incentive programs or special offers. For example, what if you could get better-targeted personalized offers or customer loyalty programs from your favorite stores and brands, but all within your Capital One account?
Even if you're not a Capital One or Discover customer, Capital One's shakeup of the credit card industry could be good news for you. If Visa and Mastercard have to compete harder to keep banks working with them for credit card payments, this could open up new opportunities for other banks to earn a bit more money on every transaction. And that could mean better credit card rewards for people like you.
Bottom line
The future of credit cards is getting more interesting. Capital One buying Discover has sent a flurry of excitement through the credit card industry, with Visa and Mastercard working to adapt to the potential of new competition. No one knows how soon big changes could come to your wallet. The Capital One/Discover merger -- assuming it gets approved by federal regulators -- might not close until late 2024 or early 2025. And it could take many months or a few years for Capital One to implement big changes behind the scenes before it starts announcing new products or mailing new rewards credit cards to customers.
But at the moment, there is reason to be hopeful that Capital One buying Discover could be good news for credit card customers. If Capital One can successfully compete against Visa and Mastercard and launch innovative new rewards programs, this could drive other credit card companies to raise their game, too. When credit card companies have to try harder to earn your business and keep people interested in using their cards, that's often good news for customers like you.
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We're firm believers in the Golden Rule, which is why editorial opinions are ours alone and have not been previously reviewed, approved, or endorsed by included advertisers. The Ascent does not cover all offers on the market. Editorial content from The Ascent is separate from The Motley Fool editorial content and is created by a different analyst team.Discover Financial Services is an advertising partner of The Ascent, a Motley Fool company. American Express is an advertising partner of The Ascent, a Motley Fool company. The Motley Fool has positions in and recommends Mastercard, Target, and Visa. The Motley Fool recommends Discover Financial Services and recommends the following options: long January 2025 $370 calls on Mastercard and short January 2025 $380 calls on Mastercard. The Motley Fool has a disclosure policy.
