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Mastercard vs. Discover: Which Credit Card Stock is a Better Choice?

Stock Markets Oct 05, 2021 06:30PM ET
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© Reuters. Mastercard vs. Discover: Which Credit Card Stock is a Better Choice?
 
MA
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DFS
+0.68%
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Credit card transactions are on the rise due to increased discretionary consumer spending. So, credit card giants Discover Financial (DFS) and Mastercard (MA) should benefit. But which of these stocks is a better buy now? Read more to find out.Digital banking and payment services company Discover Financial Services (NYSE:DFS) operates in two segments: Digital Banking and Payment Services. While the Digital Banking segment offers Discover-branded credit cards, the Payment Services segment operates the PULSE network. On the other hand, Mastercard Incorporated (NYSE:MA) provides transaction processing and other payment-related products and services. It facilitates the processing of payment transactions, including authorization, clearing, and settlement.

The use of credit cards and other online payment methods has increased significantly over the past year, as people have relied more on the digital mode of payments amid a remote lifestyle. With gradual economic recovery this year, aided by rapid vaccination, spending on services and discretionary items has increased significantly. According to the Commerce Department, the overall consumer spending rose 0.8% in August. The growing technological innovation and rapid adoption of digital prepaid card services should drive the growth of the credit card market in the upcoming months. According to Research and Markets, the global credit card market is expected to grow at a CAGR of 3% to hit $103.06 billion in 2021.

DFS has gained 2.4% over the past month, while MA has returned 1.2%. Also, DFS’ 40.6% gains over the past nine months are significantly higher than MA’s negative returns. Moreover, DFS is the clear winner with 106.8% gains versus MA’s 1.6% returns in terms of the past year's performance.

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Mastercard vs. Discover: Which Credit Card Stock is a Better Choice?
 

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