Former President Donald Trump's renewed focus on the credit card industry, marked by a January 10 Truth Social post endorsing the Credit Card Competition Act (CCCA) and an earlier call for a 10% cap on credit card interest rates, has sent ripples through the financial markets. Immediately following his post, shares of Visa and Mastercard saw their worst daily drops in over six months, falling 4.5% and 3.8% respectively. Goldman Sachs analyst Will Nance noted that while the potential earnings hit to these card networks is "manageable" and not a "seismic shift," the legislative push creates a significant "overhang" for the industry.
The CCCA aims to reduce the "swipe fees" paid by merchants, which stood at an average of 2.35% per credit card transaction in 2024, according to Nilson data. These fees contribute to an estimated $223 billion in annual revenue for the payments ecosystem, with Visa and Mastercard accounting for 84% of U.S. credit card volume. Goldman Sachs suggests that a 5% drop in credit card volumes routed through Visa and Mastercard could reduce their earnings by approximately 3% and 1% respectively. The greatest risk, however, would be if political pressure drives U.S. interchange fees closer to international norms, as the U.S. is one of the few major countries with unregulated interchange fees, sitting around 200 basis points.
The potential impact of these changes would be widespread. Large merchants, such as Walmart, are expected to be the primary beneficiaries of lower acceptance costs, though the full savings may not reach consumers directly. Small merchants, on the other hand, might see less benefit, as processor pass-throughs could be inconsistent. Critics, including JPMorgan Chase CEO Jamie Dimon and Citi CEO Jane Fraser, warn that reduced interchange fees could jeopardize credit card rewards programs and restrict access to credit for riskier borrowers, labeling the proposed changes as an "economic disaster" that would make banks unable to price for risk. Competing networks like American Express and Discover Financial Services, along with buy-now-pay-later services such as Affirm, are considered less exposed or could potentially benefit from changes in the market dynamics.
