{"id":1281,"date":"2024-02-21T12:02:34","date_gmt":"2024-02-21T12:02:34","guid":{"rendered":"https:\/\/businesstriumphs.com\/index.php\/2024\/02\/21\/capital-one-discover-merger-could-put-a-bigger-squeeze-on-credit-card-users-experts-warn\/"},"modified":"2024-02-21T12:02:34","modified_gmt":"2024-02-21T12:02:34","slug":"capital-one-discover-merger-could-put-a-bigger-squeeze-on-credit-card-users-experts-warn","status":"publish","type":"post","link":"https:\/\/businesstriumphs.com\/index.php\/2024\/02\/21\/capital-one-discover-merger-could-put-a-bigger-squeeze-on-credit-card-users-experts-warn\/","title":{"rendered":"Capital One-Discover merger could put a bigger squeeze on credit card users, experts warn"},"content":{"rendered":"
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Capital One\u2019s $35.3 billion deal to buy Discover is a long way from being completed.<\/p>\n

But consumer advocates and some lawmakers are already raising questions about how the proposed merger could affect credit-card users \u2014 many of whom are already under pressure from high interest rates and record debts.<\/p>\n

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Sen. Elizabeth Warren, D-Mass., a longtime proponent of tighter financial regulation, called for federal officials to block the deal.<\/p>\n

\u201cThe merger of @CapitalOne and @Discover threatens our financial stability, reduces competition, and would increase fees and credit costs for American families,\u201d Warren, who is also the chair of the Senate Banking Subcommittee on Economic Policy, posted on X.\u00a0<\/p>\n

Industry groups and experts warned against a shrinking credit card market dominated by a handful of large players, which they said are more likely to squeeze customers.<\/p>\n

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\u201cWe should be worried about the functionality of the credit card market in general. This merger probably heightens that,\u201d said Adam Rust, director of financial services at the Consumer Federation of America, a national network of consumer advocacy groups.<\/p>\n

While analysts generally say the merger stands a decent shot at securing regulatory approval, \u201cit would face gale-force headwinds from a Washington that is deeply skeptical of consolidation [and] anxious regarding consumer-facing issues in an election year,\u201d Isaac Boltansky, director of policy research at BTIG, a global financial services firm, said in a statement.<\/p>\n

But blocking the tie-up could be seen as helping Visa and Mastercard, the credit card giants some policymakers have criticized as a duopoly in need of a shakeup from more serious rivals.<\/p>\n

Both Visa and Mastercard grew their revenues by 11% and 12.5%, respectively, between late 2022 and the end of last year thanks to strong consumer spending. The four biggest card brands \u2014 Visa, Mastercard, American Express and Discover \u2014 saw more than $10 trillion in purchases in 2023, up 6.4% from the year before, according to the Nilson Report.<\/p>\n

The top 30 credit card companies comprise about 95% of Americans\u2019 credit card debt, BTIG estimates, which could fuel pushback over competition concerns.<\/p>\n

Rust nodded to a report last week from the Consumer Financial Protection Bureau, which found that the 25 largest credit card issuers already charge customers interest rates eight to 10 points higher than small- and medium-sized banks and credit unions.<\/p>\n

\u201cAll those reasons point to some kind of imbalance, and it\u2019s favoring large credit issuers,\u201d said Rust. \u201cIt has to do with their marketing budgets, their ability to get their brands in front of consumers on television or send out mailers.\u201d<\/p>\n

If it goes through, the deal could further whittle down customers\u2019 options to shop around for the best credit card, Rust and others warned.<\/p>\n

\u201cConsumers would always rather have more options, because more competition is generally better,\u201d said Matt Schulz, chief credit analyst at LendingTree. But \u201cif Capital One sees that there\u2019s a bunch of overlap between what they have and what Discover brings to the table, and they want to combine the two instead of keeping them as separate brands, you could end up seeing some of those offers get reduced,\u201d he said.<\/p>\n

The average credit card interest rate in the U.S. is 24.61%, according to LendingTree, the highest since the credit marketplace began tracking monthly rates in 2019. The Federal Reserve Bank of New York said earlier this month that credit card debts entering \u201cserious delinquency\u201d jumped from 4% to over 6% from the last quarter of 2022 to the same period last year, at a time when total consumer debt has hit a whopping $17.5 trillion.<\/p>\n

The National Community Reinvestment Coalition, an advocacy group that looks to funnel private investment into underserved communities, also wasted no time criticizing the merger.<\/p>\n

\u201cIt is very difficult to imagine how federal regulators could allow Capital One to buy Discover given the requirement that mergers benefit the public as well as insiders,\u201d <\/strong>CEO Jess Van Tol said in a statement Tuesday. \u201cThe deal also poses massive antitrust concerns, given the vertical integration of Capital One\u2019s credit card lending with Discover\u2019s credit card network.\u201d<\/p>\n

Representatives for Capital One and Discover didn\u2019t respond to requests for comment. The credit card industry has pushed back on accusations that it isn\u2019t sufficiently competitive. A banking industry group said last week in response to the CFPB\u2019s report that borrowers have plenty of card terms, perks and features to choose from.<\/p>\n

Experts expect it would take at least a year for a merger to be completed, and potentially longer for the full consumer impact to come into view.<\/p>\n

The Office of the Comptroller of the Currency, a financial industry watchdog, moved last month to enhance its review of proposed combinations. That could throw up more hurdles for Capital One and Discover, Rust said, potentially by involving more entities in the review process, such as local community groups in various cities where the companies operate.<\/p>\n

The Biden administration has tightened its scrutiny of big mergers and acquisitions, but last spring\u2019s collapse of Silicon Valley Bank and First Republic Bank put extra attention on the banking sector. The Department of Justice has said it\u2019s focused on guarding against \u201cexcessive market power\u201d as it reviews deals alongside bank regulators.<\/p>\n

If the Capital One-Discover deal isn\u2019t blocked, some credit card rates may well be lower by the time it\u2019s completed, with the Federal Reserve expected to begin cutting interest rates later this year. But borrowers shouldn\u2019t wait to pay down any existing high-interest debt, said Greg McBride, chief financial analyst at Bankrate. \u201cIt\u2019s going to stay high-cost credit card debt, regardless of who acquires whom,\u201d he said.<\/p>\n

There could be a silver lining for customers of both companies should the merger go through: rewards.<\/p>\n

Card issuers like Capital One have claimed the proposed Credit Card Competition Act \u2014 which would require them to allow merchants to use at least two card networks to process card transactions \u2014 would drive up their costs so much they\u2019d have to curtail credit card rewards programs.<\/p>\n

Acquiring Discover would give Capital One \u201can opportunity for more revenue and exposure,\u201d LendingTree\u2019s Schulz said, which could offset potential cost increases and help fund generous rewards.<\/p>\n<\/p>\n

This post appeared first on NBC NEWS<\/div>\n<\/div>\n","protected":false},"excerpt":{"rendered":"

Capital One\u2019s $35.3 billion deal to buy Discover is a long way from being completed. But consumer advocates and some lawmakers are already raising questions about how the proposed merger could affect credit-card users \u2014 many of whom are already under pressure from high interest rates and record debts. Sen. Elizabeth Warren, D-Mass., a longtime […]<\/p>\n","protected":false},"author":0,"featured_media":1282,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[4],"tags":[],"class_list":["post-1281","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-business"],"_links":{"self":[{"href":"https:\/\/businesstriumphs.com\/index.php\/wp-json\/wp\/v2\/posts\/1281","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/businesstriumphs.com\/index.php\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/businesstriumphs.com\/index.php\/wp-json\/wp\/v2\/types\/post"}],"replies":[{"embeddable":true,"href":"https:\/\/businesstriumphs.com\/index.php\/wp-json\/wp\/v2\/comments?post=1281"}],"version-history":[{"count":0,"href":"https:\/\/businesstriumphs.com\/index.php\/wp-json\/wp\/v2\/posts\/1281\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/businesstriumphs.com\/index.php\/wp-json\/wp\/v2\/media\/1282"}],"wp:attachment":[{"href":"https:\/\/businesstriumphs.com\/index.php\/wp-json\/wp\/v2\/media?parent=1281"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/businesstriumphs.com\/index.php\/wp-json\/wp\/v2\/categories?post=1281"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/businesstriumphs.com\/index.php\/wp-json\/wp\/v2\/tags?post=1281"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}