Why Top Analysts Are Doubling Down on Credit Card Stocks—Trump’s Threats Be Damned

Forget the political noise—Wall Street's sharpest minds are placing big bets on the plastic in your pocket.

The Unshakeable Cash Machine

While headlines scream about regulatory crackdowns, the fundamentals tell a different story. Transaction volumes keep climbing, swipe fees remain a golden goose, and consumer reliance on credit isn't just a habit—it's an addiction. The math works, politics or not.

Bypassing the Theater

Smart money looks past the podium and straight at the data. Recurring revenue streams, vast consumer networks, and pricing power that would make a monopolist blush. These aren't businesses; they're toll booths on the financial highway.

The Cynical Take

Let's be real—the only thing more predictable than a politician's threat is a banker's ability to profit from it. While Main Street worries, the Street quietly collects its vig. Some things never change, no matter who's tweeting from the Oval.

Key Takeaways

• Credit card stocks tumbled earlier this week after President Trump proposed capping interest rates on cards at 10% for a year, and endorsed legislation that could challenge Visa and Mastercard's payment network dominance.
• Analysts at William Blair and Citigroup expressed confidence the long-term impact on credit card stocks would be limited.
• Uncertainty about payment network reform weighed on financial stocks in the wake of the Global Financial Crisis, but card issuers found ways to recoup lost revenue and their stocks have vastly outperformed the S&P 500 over the last 15 years.

Credit card stocks are slumping this week after President TRUMP took aim at the industry, saying it "ripped off" U.S. consumers with high interest rates and swipe fees.

President Trump on Friday night called for a 1-year cap on credit card interest rates at 10% starting January 20. Trump ramped up the pressure on the industry Tuesday morning when he endorsed the Credit Card Competition Act, which WOULD require cards issued by large banks to enable at least two payment networks, only one of which could be Visa or Mastercard, America's two largest networks.

Shares of Visa (V) and American Express (AXP) are down 7% and 5%, respectively, since the start of the week as of Wednesday afternoon, making them two of the worst-performing stocks in the Dow Jones Industrial Average. Mastercard (MA) stock has declined about 5% over the same period. 

Why This Matters

Experts have expressed doubts this week about the likelihood Congress or the Trump administration can implement an interest rate cap or payment network reform. Regardless, the market has historically overestimated the financial impact of such reforms, offering substantial upside for dip buyers.

“We think long-term investors should accumulate Visa, Mastercard, and American Express shares amid uncertainty-driven weakness,” wrote William Blair analysts in a note on Tuesday. While the analysts believe Visa and Mastercard could offset lower processing fees and lost volume, they expect uncertainty to compress their stocks' multiples in the near-term, “creating 10%-20% downside.”

William Blair sees uncertainty making fintech investments “challenging” in the near-term. Nonetheless, they “expect no material change to U.S. payment system economics.” 

Analysts at Citigroup were also confident that the long-term impact on credit card stocks would be limited. “History has told us buying the sell-offs on fears over potential business model changes has been beneficial for investors,” the analysts wrote.

They point to the Durbin Amendment, a component of the Dodd-Frank Act that capped debit card transaction fees and imposed network requirements similar to those in the Credit Card Competition Act. Uncertainty about how the bill would affect payment networks weighed on shares of Visa and Mastercard in the lead-up to its enactment in July 2010.

Related Education

Ultimately, “despite requiring two unaffiliated networks on all debit cards, interchange rates have not been competed down” in the wake of the amendment, according to Jefferies analysts. They note that Visa and Mastercard found ways to recoup fees they lost to the amendment, strategies they could expand if similar rules are applied to credit cards. 

Visa and Mastercard stocks ROSE double digits in the year after Dodd-Frank was passed. About 15 years later, the stocks are up a respective 1,700% and 2,600%, handily beating the 550% return of the S&P 500 over that period.