Goldman's Winners and Losers: Parsing Trump's Credit Card Policy Overhang

The catalyst is clear and immediate. On Tuesday, President Trump fired another shot across the bow of the U.S. payments industry, signaling support for the Credit Card Competition Act. Shares of Visa and Mastercard sank 4.5% and 3.8% respectively, their worst daily declines in over six months. This move, following a separate call for a 10% interest rate cap, has reintroduced a tangible policy overhang.

Goldman Sachs quantifies the financial risk. The firm estimates that a 5% drop in credit card volumes routed through Visa and Mastercard could reduce their earnings by approximately 3% and 1%, respectively. This is a direct hit to their core $223 billion annual swipe fee revenue stream. The analysis assumes a 20-basis-point take rate, a figure that may overstate the impact since cross-border transactions-Visa and Mastercard's most profitable segment-are excluded from the model. The bottom line is a concentrated and asymmetric financial hit, not a systemic collapse.

This creates a tactical roadmap. The winners are clear: large merchants stand to gain from lower acceptance costs, while merchant acquirers for small businesses could see their net take rates rise if they choose not to pass on full fee savings. The losers are more nuanced. Buy now, pay later providers like Affirm are seen as least exposed because their revenue is driven by interest, not interchange fees. Traditional issuer processors like Fiserv and Fidelity National Information Services face slower growth if credit usage weakens or shifts toward debit.

The thesis is one of tactical mispricing. Goldman sees the potential earnings hit as manageable and does not expect a seismic shift. Yet the policy overhang is real and immediate, causing a sharp market reaction. For event-driven investors, the setup is defined by this gap between a contained financial impact and a significant market repricing.

The Mechanics: Who Gets Hit and Why

The proposed policies target two distinct but critical profit engines in the financial sector. The first, a 10% cap on credit card interest rates, would directly assault a major driver of bank earnings. The average rate on these cards stood at 20.97% in November, with some cards charging much higher. A cap to 10% would force a dramatic repricing of unsecured loans, a core business for issuers like Capital One and Synchrony. As JPMorgan's CFO warned, if implemented, it would be "very bad for consumers, very bad for the economy" and would require banks to "change the business significantly and cut back." The Jefferies analyst notes such a cap could dramatically alter financial-sector earnings and business models.

The second target is the $223 billion annual revenue stream from credit card swipe fees. This is the lifeblood of the card networks, Visa and Mastercard, which currently account for 84% of U.S. credit card volume. The proposed Credit Card Competition Act aims to break their duopoly by mandating that large banks allow transactions to route over at least two unaffiliated networks. This would directly attack the 2.35% average swipe fee paid by merchants in 2024. Goldman Sachs estimates a 5% drop in volumes routed through Visa and Mastercard could reduce their earnings by 3% and 1%, respectively.

The mechanics reveal a stark trade-off. The interest rate cap would squeeze issuer profitability by compressing the high-margin, high-risk lending spread. The competition bill would erode the interchange fee revenue of the networks. Both policies, if enacted, would force fundamental business model changes. Industry warnings are clear: a rate cap would likely lead to millions of American households and small businesses losing access to credit as lenders tighten standards. The bottom line for investors is that these are not minor tweaks but direct assaults on two of the most profitable segments of the financial industry.

The Implementation Reality: A High-Probability Overhang

The market's sharp reaction to the president's proposal is a classic case of policy overhang in action. The immediate feasibility, however, is the key to understanding the disconnect. Analysts widely believe Trump lacks the unilateral authority to impose a 10% interest rate cap. As a Jefferies analyst noted, the president doesn't have executive authority to make such a move on his own. Even if he brings the issue to Congress, it would likely be "dead on arrival" given the likely spillover effects and a lack of past support for similar initiatives.

This creates a high-probability overhang. The legislative risk remains relatively low, but it has clearly spiked. The president's surprise social-media post last Friday, calling for a cap starting January 20, blindsided the industry and sent shares of major banks and card issuers tumbling. Financial groups quickly scrambled to rebut the proposal, warning it would "be devastating" for millions of American families and small business owners who rely on credit cards. The industry's message is that a 10% cap would force lenders to sharply tighten standards, cutting off access for millions of borrowers and ultimately "weaker retail sales and consumption across the entire economy".

The bottom line is a tactical setup. The stock price moves reflect the political and economic pressure of the proposal, not an imminent financial shock. For now, the overhang is real, but the implementation scenario is highly unlikely. This disconnect is what creates the event-driven opportunity: the market is pricing in a severe risk that analysts see as remote, leaving room for a sharp reversal if the proposal fails to gain traction in Congress.

Catalysts and Watchpoints: The Tactical Setup

The immediate tactical question is when, or if, the policy overhang will dissipate. The setup hinges on a few near-term signals that will reveal the true political will behind the proposals.

The first catalyst is Congressional action. The Credit Card Competition Act has been a long-stalled bill; its fate will now be a key watchpoint. Any formal introduction or markup of the legislation would signal sustained political pressure, likely keeping the card network overhang alive. Conversely, a lack of movement would suggest the president's post was more of a political shot across the bow than a serious legislative push. For the interest rate cap, the path is even clearer. As analysts note, Trump doesn't have executive authority to make such a move on his own, and the proposal would be "dead on arrival" in Congress. The absence of a formal bill introduction by the end of the month would be a strong signal that the overhang is fading.

The second watchpoint is management commentary. Bank earnings calls in the coming weeks will be critical. Executives from Capital One, Synchrony, and American Express are likely to be pressed on the risks. Their preparedness and tone-whether they frame it as a manageable headwind or a existential threat-will provide clarity for investors. Regulatory testimony, if any is scheduled, would offer another direct line of communication on the perceived likelihood of implementation.

The key tactical risk remains the overhang becoming a sustained drag. Until there is concrete legislative movement or a clear signal from the administration that the proposals are shelved, the uncertainty will keep valuations suppressed. The market has already priced in a severe risk that analysts see as unlikely. This creates a binary setup: the overhang persists, keeping stocks under pressure, or it dissipates quickly, leading to a sharp reversal. For event-driven investors, the watch is on the Capitol Hill calendar and the next earnings season for the first signs of resolution.