4 Ways Capital One-Discover Merger Could Affect Your Wallet

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The financial world got a jolt on Feb. 19 when Capital One Financial announced plans to buy credit card giant Discover Financial in a $35.3 billion all-stock deal. Beyond the buyout’s expected impact on the banking and credit card industry, it could also have a big effect on consumers if it wins approval from federal regulators.

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The deal is the biggest ever in the credit card industry, according to a Reuters report that cited data from Dealogic. It will likely face heavy antitrust scrutiny from regulators, though Capital One CEO Richard Fairbank said on Tuesday that deal was “well-positioned for approval.”

One reason the buyout might win approval is because a combined Capital One-Discover brand could cut into the credit card dominance of Visa and Mastercard, which would stir more competition. The combination would create the biggest U.S. credit card issuer with roughly $250 billion in card balances and a market share of 22%, Reuters reported, citing a report from TD Cowen analysts.

“The path to approval is a key question mark,” said HSBC Global Research analyst Saul Martinez. “The offset in regulators’ minds could be the potential for more competition among networks.”

The deal could impact consumer wallets in several ways, according to media and analyst reports. Here are four of them:

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1. Greater Competition, Better Rates?

Discover will become a much bigger threat to Visa and Mastercard if the deal is approved. Whenever there is more competition for consumer dollars, it usually leads to lower prices as companies scramble to defend their market share or gain new share. In the case of credit card companies, it could lead to lower interest rates, at least over the short term. In addition, Capital One’s purchase of Discover would give them an edge against credit card-issuing banks that don’t process transactions themselves, such as JPMorgan Chase, Bank of America and Citigroup.

2. More Options for People Living Paycheck to Paycheck

According to the PYMNTS website, bringing Capital One and Discover together “would pave the path toward creating a banking giant with particular expertise in serving the paycheck-to-paycheck consumer well beyond the credit cards that have been hallmarks of both firms.” This means consumers with lower credit scores could have access to more credit card loans.

3. Better Rewards

Synergies gained through the proposed merger have been estimated at $2.7 billion pre-tax. This could translate into cost savings and more efficient operations, which could then be passed on in the form of better rewards and other perks.

4. Stock Investing Opportunities

Shares of Capital One and Discover both moved higher on news of the deal. Some analysts expect those two stocks to be decent bets over the near term if the deal wins approval.

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This article originally appeared on GOBankingRates.com: 4 Ways Capital One-Discover Merger Could Affect Your Wallet