AMERICANS' RELIANCE ON CREDIT CARDS IS THE KEY TO CAPITAL ONE'S BID FOR DISCOVER

Americans have become increasingly reliant on their credit cards since the pandemic. So much so that Capital One is willing to bet more than $30 billion that they won't break the habit.

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Capital One Financial announced this week that it would buy Discover Financial Services for $35 billion. The combination could potentially shake up the payments industry, which is largely dominated by Visa and Mastercard.

For customers of the companies, it might eventually mean bigger perks and more merchant acceptance of Discover cards, and potentially lead to more competition in the payments industry. But most of the benefits will be going to the companies themselves, as well as the merchants who accept these cards.

WHY IS THE DEAL IMPORTANT?

Some of the biggest issuers of credit cards are banks, like JPMorgan Chase and Citigroup. But Capital One and Discover are first and foremost credit card companies — like American Express, but with different clientele. They have tens of millions of customers and target their products at Americans who do not travel heavily outside the U.S. and would like to get more value out of their everyday purchases like gas, groceries and domestic travel. In other words, people who typically don’t carry premium credit cards.