Two of the biggest names in banking — Capital One and Discover — made headlines recently after Capital One announced its plans to acquire Discover in a transaction valued at $35.3 billion.

The merger of these two institutions would represent one of the biggest banking deals of the past 15 years, a move that’s meant to “create significant value for consumers, small businesses, merchants, and shareholders,” according to Richard Fairbank, founder, chairman, and chief executive officer of Capital One.

The transaction is expected to close in late 2024 or early 2025, pending regulatory and shareholder approval. The marriage of these two companies could have profound implications not only for the credit card and banking industries but also for customers.

What is a bank merger?

A bank merger occurs when two or more banks combine to become one larger financial institution. This may involve two banks of similar size and position joining together or one large bank taking over a smaller one to add to its value through increased products, services, and accessibility.

Bank mergers can happen for various reasons, but often, it’s so the banks involved can increase their reach, expand their offerings, and reduce competition. This can lead to significant changes for existing customers and across the banking industry as a whole.

What could this mean for current Capital One and Discover customers?

Capital One’s acquisition of Discover will take several months to close, meaning existing customers likely won’t see the effects immediately. However, customers could experience a few changes once it’s finalized.

Larger payment network

If the merger goes through, Capital One will become the country’s largest credit card issuer by outstanding debt. Further, the press release notes that the merger will create a global payments platform at scale, with 70 million merchant acceptance points in more than 200 countries and territories — creating stiff competition for the Visa, Mastercard, and American Express networks currently dominating the space.

Higher fees and interest rates

In the short term, credit card customers may see more competitive APRs industry-wide, though there's a concern that Discover customers might face increased costs in the long run due to Capital One's traditionally higher APRs and fees.

A recent Consumer Financial Protection Bureau survey found that large banks typically offer worse credit card terms and interest rates than small banks and credit unions, regardless of credit risk. The 25 largest credit card issuers charged customers interest rates 8 to 10 points higher than small- and medium-sized banks and credit unions, which “can translate to $400 to $500 in additional annual interest for the average cardholder.”

These banks also charged customers bigger annual fees. Among large issuers’ credit cards, 27% carried an annual fee, compared to 9.5% of small firms. The average annual fee was $157 for the largest issuers, as opposed to $94 for smaller issuers.

Greater access to products and services

The merger aims to expand Capital One's digital banking reach, leveraging Discover's online banking presence (Discover is expected to retain its own brand). That could mean positive changes in the banking services available. For instance, Discover customers could gain access to Capital One's physical branches and a broader ATM network.

Better credit card rewards

Capital One and Discover offer robust rewards programs, including cash-back cards, travel rewards cards, and more. By joining together, customers could benefit from more enticing reward structures and perks.

This can come at a cost, though. Typically, the more perks offered by a credit or debit card, the higher the annual fee.

Read more: Credit card fees explained: 8 types you should know

The widespread impact of a bank merger

The impact of this merger remains to be seen. And many experts anticipate these banks will face intense scrutiny from lawmakers and advocacy groups who worry that the merger will reduce competition in the banking space and put cardholders at a disadvantage.

This is underscored by the Biden administration’s push to crack down on credit card fees and the bipartisan Credit Card Competition Act that seeks to increase competition in the credit card industry and lower consumer fees.

“The merger of Capital One and Discover threatens our financial stability, reduces competition, and would increase fees and credit costs for American families,” Senator Elizabeth Warren said in a tweet. “Regulators must block it immediately.”

Should you change banks?

While you wait for regulators to weigh in, now could be a good time to evaluate your current bank or credit union and decide if it's still working for you. Ask yourself the following:

Does your current bank’s product offerings suit your needs?

Your banking needs will change as your savings goals and financial situation evolve. If your bank doesn’t have all the features you need to manage your expenses, save for the future, or even invest, it may be time to consider a different bank offering the products and services you need to meet your goals.

What fees are you paying?

Many banks offer free accounts, but this isn’t always the case. You may be required to pay a monthly fee for accounts with extra perks or when you don’t meet minimum balance requirements. Re-read the fine print on your account agreement to determine if the fees you pay are worthwhile. If not, you may be able to find a free alternative elsewhere.

Is ATM/branch access adequate?

Not everyone needs to visit a physical branch or ATM regularly in the digital banking age. However, if you prefer to use cash or resolve banking problems in person, a lack of branch and fee-free ATM locations could be a pain point. So consider how your bank’s physical presence compares to other financial institutions; more branch locations or a larger ATM network could make for a smoother experience.

What kinds of added benefits and perks does your bank offer?

Financial calculators, budgeting tools, early direct deposit, and bonuses are common perks that make banking with a certain financial institution extra appealing. These tools and benefits can also help you manage your money more efficiently and reach future goals. If your current bank takes a no-frills approach that no longer works for you, it could be time to make a change.