Trump's 10% Credit Card Rate Cap and Its Impact on Payment Networks and Issuers

The proposed 10% cap on credit card interest rates by President Donald Trump has ignited a fierce debate over its implications for the financial sector. While the policy aims to alleviate consumer debt burdens, its regulatory feasibility and economic consequences remain contentious. For investors, the question is whether this policy shift creates opportunities in dividend-paying, low-risk payment networks like Visa and Mastercard-or exposes them to new uncertainties.

Transaction Volumes: A Mixed Outlook

Visa and Mastercard, as payment networks, derive revenue from transaction fees rather than interest income. A 10% cap on credit card rates would not directly impact their earnings. However, the indirect effects are less clear. Reduced credit availability-particularly for high-risk borrowers-could curb short-term transaction volumes, as consumers may struggle to access credit. Conversely, lower interest rates might encourage more spending, potentially boosting long-term transaction growth. According to a report by Yahoo Finance, analysts suggest that the net effect on transaction volumes will depend on how consumers adapt to the new rate environment.

For credit card issuers like JPMorgan Chase, Citigroup, and Capital One, the cap poses a more direct threat. These institutions rely heavily on interest revenue, which could shrink under a 10% cap. Researchers estimate that such a policy could save consumers $100 billion annually but may also reduce credit availability for those with lower credit scores. This duality creates a complex landscape for investors: while payment networks may remain insulated, issuers face potential margin compression and shifts in risk management strategies.

Profitability and Regulatory Feasibility: A High-Stakes Uncertainty

The regulatory path for Trump's proposal remains murky. The president has not clarified whether the cap will be implemented through executive action or congressional legislation. Legal experts argue that executive authority alone may be insufficient to enforce such a cap, as it likely requires legislative backing to withstand judicial challenges. This uncertainty complicates long-term investment planning.

For Visa and Mastercard, the primary risk lies in the broader regulatory environment. A 2025 biennial Federal Reserve report highlighted that interchange fees for debit card transactions totaled $34.12 billion in 2023, with banks earning outsized returns. While the recent $38 billion settlement with merchants reduced interchange fees by 0.1 percentage points over five years, it also expanded merchant control over card acceptance. These precedents suggest that payment networks can adapt to regulatory pressures, but the 10% cap introduces a new variable.

Credit card issuers, meanwhile, face a more immediate threat. A 10% cap could force banks to cut rewards programs or increase non-interest fees to offset lost revenue. As stated by the American Bankers Association, such a policy could push consumers toward alternative, high-cost borrowing options like payday loans. For investors, this raises concerns about the sustainability of current business models for issuers.

Investment Implications: Dividend Stability vs. Policy Risk

Visa and Mastercard's dividend sustainability remains a key draw for income-focused investors. Visa has increased payouts annually since 2008, while Mastercard has done so since 2006. Their historical resilience under regulatory changes-such as the 2025 interchange fee settlement- further supports their appeal as low-risk holdings. However, the 10% cap introduces a wildcard. If implemented, it could indirectly affect transaction volumes, though the extent remains speculative.

For credit card issuers, the risks are more pronounced. JPMorgan Chase and Capital One, for instance, derive significant portions of their profits from interest income. A 10% cap could erode margins unless they adjust fee structures or tighten credit underwriting. As noted by Bloomberg, this could lead to reduced credit availability for lower-risk borrowers, creating a potential feedback loop of declining transaction volumes for payment networks.

Conclusion: Navigating Uncertainty

The Trump administration's 10% credit card rate cap represents a policy experiment with far-reaching implications. For Visa and Mastercard, the immediate risks are limited, but the long-term outlook hinges on how the policy is implemented and whether it triggers broader regulatory shifts. Investors should monitor legislative developments and the banking industry's response, as these will shape the investment landscape.

In contrast, credit card issuers face a more direct threat to profitability. While their ability to adapt through fee adjustments or product innovation is notable, the policy introduces a layer of uncertainty that could weigh on valuations. For now, payment networks like Visa and Mastercard remain attractive for their dividend stability and historical resilience, but investors must remain vigilant as the regulatory environment evolves.