Capital One announced Monday evening its plans to acquire Discover Financial Services in a stock-only transaction valued at $35.3 billion.

Bank mergers aren’t completed overnight, and this one still has a long way to go before it’s official, but Capital One estimated a late 2024 or early 2025 completion date. Most importantly, federal regulators (and current shareholders) must approve the merger.

In the interim, the announcement likely means little for existing Discover and Capital One cardholders, but it could have impacts down the road.

Let’s take a look at some of the possible impacts for cardholders, both current and future.

Updates to existing card products

Both issuers currently have cash back, travel rewards, small business, student and secured card products in addition to some co-branded offerings. In a presentation to investors following the merger announcement, Capital One indicated Discover’s slate of credit card products would be “additive and complementary” to Capital One’s existing collection of cards.

While Capital One and Discover both offer similar types of cards, they differ widely in terms of what the products offer. For instance, Discover doesn’t have a premium travel rewards card, though Capital One offers the Venture X Rewards Credit Card in that space. Likewise, Capital One features a number of cash back card options, but no rotating categories card like the Discover it® Cash Back.

It seems likely those widely differing cards could remain part of the combined suite of cards. But even if certain cards are ultimately shuttered, existing cardholders would either be permitted to continue using their cards or be transitioned to a new card with a similar structure.

Switching to a new network

Capital One CEO Richard Fairbanks said Tuesday there are long-term plans to transition “a growing portion of [Capital One’s] credit card business to the Discover network” as part of efforts to expand Discover’s footprint within the payment network landscape.

Star Alt

Keep in mind: If your existing Capital One card is transitioned to the Discover network from its current Visa or Mastercard, you would automatically receive a new credit card and the only real change could be where your card is accepted. That said, Discover cards are already widely accepted in the United States even if the perception is that they aren’t, according to Fairbanks. Moving Capital One products to Discover is intended to help raise the profile of the network, particularly internationally.

Changes in underwriting

Underwriting refers to the credit card approval process that issuers use to make decisions on which applicants qualify for their cards. Credit card issuers typically do not offer details around their underwriting process — and Capital One and Discover are no exception. However, there are some anecdotal takeaways that apply.

For instance, Capital One is understood to be fairly strict when it comes to card approvals for people who have numerous recent credit inquiries. To put it another way, Capital One is “inquiry sensitive.” Discover, however, doesn’t have that reputation.

Capital One also limits the number of cards a person can have to no more than two Capital One personal cards at a time and does only one card approval every six months.

It remains to be seen how Capital One will handle new applications for Discover’s suite of cards, assuming the merger goes through, but it’s something to keep in mind for future applications.

Network impact

Discover is one of the four major U.S. card payments networks, together with Visa, Mastercard and American Express.  Capital One expects that the merger will enable it to compete better with the larger networks. According to Capital One’s press release on the merger, the company’s debit card transactions will be moved to the Discover network, along with “selected” credit card transactions.

“Discover has built a rare and valuable global payments network with 70 million merchant acceptance points in more than 200 countries and territories. Even so, it is the smallest of the four US-based global payments networks. This acquisition adds scale and investment, enabling the Discover network to be more competitive with the largest payments networks and payments companies,” according to Capital One.

The pending Credit Card Competition Act legislation seeks to introduce more competition in the credit card network space, and this proposed merger could help dilute Visa and Mastercard’s market share in the card network space. The CCCA aims to give merchants more choice in terms of choosing a card network. The expectation is that if merchants pay less in credit card processing fees as a result of competition, they will pass some of the cost savings on to consumers.

The bottom line

The announcement that Capital One plans to acquire Discover Financial Services made a splash, but the exact impact on existing and future credit cardholders for both institutions remains largely unclear. Furthermore, the merger itself has regulatory and shareholder hurdles to clear before it becomes official.

Assuming the merger is ultimately approved, current and prospective cardholders could see updates in the card lineups for both issuers, as well as changes to the network servicing those cards. Capital One has transparently said it intends to move some of its existing card suite to the Discover network down the road. For new cardholders, there could also be changes in the applicant requirements for card approval.

For now, it’s a wait and see situation.