3 Little-Known Perks of the Capital One/Discover Merger

When Capital One announced in February 2024 that it is buying Discover® for $35.3 billion, many credit card customers started to ask "what's in it for me?" A lot of the details of the Capital One/Discover merger are rather technical and obscure, and related to behind-the-scenes functions of the banking system. But this big business deal could have some surprising benefits for average credit card customers.

No one knows exactly what will happen with the future of Capital One and Discover credit cards and other financial products. Capital One has said that it intends to keep the Discover brand and work more closely with merchants (retailers and restaurants) via its newly purchased Discover payment network. Don't expect any big changes overnight, but there could be some good deals coming for credit card customers because of this merger.

Let's look at a few perks of the Capital One/Discover merger and how it might help you get a better experience with credit cards.

1. It might stop Congress from killing credit card rewards

Congress is considering new legislation called the Credit Card Competition Act (CCCA). The goal of this bill is to reduce credit card swipe fees by requiring credit card companies to use a wider range of payment networks -- not just the biggest ones, Visa and Mastercard.

But critics of the CCCA have warned that, by driving down credit card transaction fees, it could mean the end of credit card rewards. If credit card companies lose some of that financial flexibility that comes from transaction fees, they likely would not be able to offer such a wide range of reward points, bonus miles, and other perks.

By buying Discover, Capital One is also getting Discover's payment network. This would give Capital One a powerful tool to use in competing against Visa and Mastercard. The goals of the CCCA ("more competition for Visa and Mastercard") could be accomplished by the Capital One/Discover merger. And unlike the CCCA, Capital One buying Discover will not bring about the end of the world of rewards credit cards as we know it.

2. It might bring new benefits to Discover (and Capital One) customers

Sometimes when companies merge, they try to find "synergies," or new ways of doing things that bring out the best aspects of both businesses. No one knows exactly when (or how) Capital One might change its lineup of cards, but here are a few ideas.

Discover card rewards will likely stay the same…or get better

Discover credit cards are known for generous cash back rewards and quarterly bonus categories. Since Capital One says that it's keeping the Discover brand, there's no reason to think that your Discover card will change anytime soon.

But if your Discover card does change as a result of this deal, it might be for the better. For example, what if Capital One decides to offer its Capital One Venture miles as another rewards option for all Discover card customers, as well as the usual Discover cash back?

Capital One cards could become more "Discover-like"

By buying the Discover payment network, Capital One could bring changes not just to credit cards, but to debit cards. Discover's debit cards offer generous cash back rewards. What if Capital One -- after achieving cost savings and earning more money from transaction fees -- could offer that same style of cash back (or other rewards) on Capital One debit cards?

If you're a current customer of Capital One or Discover, don't worry -- you don't have to do anything as a result of this business deal. It might be awhile before this deal is "official," and even longer after that before any changes occur to your card. But don't assume that your card is going to change for the worse. By buying Discover, Capital One is likely going to try to offer better deals to both brands' customers and cardholders.

3. It might drive other credit card companies to offer better deals

Another advantage of buying Discover's payment network is that Capital One will now be able to get a better bargain with Visa and Mastercard for its credit card payment fees on those networks. This could lead to Capital One customers getting slightly better perks or rewards from their Capital One credit cards.

Better deals for Capital One customers could also lead to better deals for customers of other credit card companies. If Capital One starts offering better reward bonus points, cash back, or interesting new experiences and loyalty programs from merchant partners, other credit card companies will likely try to compete and match those offers.

Bottom line

The Capital One/Discover merger still needs federal regulatory approval, and it's not a done deal yet. The FTC could block the deal if it feels that the post-acquisition company would be too big, and bad for consumers.

But based on the Credit Card Competition Act, some powerful members of Congress want to create more competition for Visa and Mastercard. Capital One's purchase of Discover would help accomplish that goal. This merger could bring a new kind of competition to the credit card industry -- with potentially more creative credit card offers and better benefits for customers.