The two of the largest credit card companies in the U.S. are merging. Capital One announced monday that they will buy Discover Financial Services for more than $35 billion.
As a result of the deal, Discover shareholders will receive 1.0192 Capital One Shares. Once the deal closes, Capital One Shareholders will hold about 60% of the combined company.
This is a major deal for the credit card world. Capital One is capitalizing on a time where consumers are taking advantage of digital rewards programs. One reason online banks are able to offer great deals on cash back is because they do not have the brick-and-mortar costs that most traditional banks have.
Overall, everyone involved is benefitting. Discover account holders are gaining access to high yield savings accounts while Capital One is gaining a large number of card holders. After the deal, Capital one will have a market value of over $52 billion. This will add to the power in the banking world of the ninth largest bank in the US.
I think this merger is a bad move for the consumers and it should be stopped. Capital One and Discover are two of the Largest credit card companies in the market. If they merge, they will have less incentive to offer attractive deals and more power to raise prices and fees. This will reduce consumer choice and hurt the smaller credit card companies
ReplyDeleteI agree with Tim that a merger between Capital One and Discover may be bad for consumers and create a monopolistic situation. A merged Capital One has less incentive to offer deals to consumers and could potentially raise their fees since they are the giant among credit card companies.
ReplyDeleteI think from a consumer prospective, this is a huge win for Capital One. Discover was a great company for initially beginning ones credit score journey, but ultimately that's about all it was good for. The credit available for a Discover card is generally around $2,000 which is miniscule when compared to the $10,000 -
ReplyDelete$15,000 that Discover and other cards like AMEX offer. The deal in itself I think will promote greater benefits for long standing members of both companies and also serve a new gateway to initially gaining a good credit scores for new members.
Discover has always been recognized as a good entry credit card. I wonder how this merger will affect its reputation and accessibility?
ReplyDeleteI wonder if we will see an increase in new capital one customers after this merge. Will consumers see two of the largest credit card companies merging as a beneficial thing that allows better specialization, perks, and innovation or will consumers view the merge as a decrease in competition that decreases the company’s motivation to do what is best for the customer?
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