VisaMasterCard

The 10% cap panic: Visa and Mastercard sell off, banks take the hit

Equities 5 minutes to read
Ruben Dalfovo
Ruben Dalfovo

Investment Strategist

Key takeaways

  • The proposed 10% cap targets bank interest income, not Visa and Mastercard’s core transaction fees.

  • Visa and Mastercard are payment networks, not lenders, so the direct hit is smaller than the share move suggests.

  • The real watch-outs are second-order effects: tighter credit, shifts in payment mix, and broader fee regulation.


When a headline meets a misunderstanding

A proposed one-year cap on credit card interest rates at 10% sounds like it has a clear villain and a clear winner. Consumers win, and “credit card companies” lose.

Markets treated Visa and Mastercard as the villains anyway. On 13 January 2026, Visa closed 4.5%. Mastercard closed at 544.99 USD, down 3.8%.

The catch is that the policy is aimed at the part of the credit card system that earns interest. That is mostly the banks that issue the cards. Visa and Mastercard do not lend money to cardholders, and they do not earn the interest you pay when you carry a balance.

So why did the stocks drop like they were the ones setting the annual percentage rate (APR)? Because the market is not only reacting to what the policy targets. It is reacting to what the policy might change.

The headline gap: who earns interest, who earns fees

A credit card purchase looks simple: tap, beep, done. Behind the beep are two different businesses that often get blended together.

Business one is lending
A bank issues the card and extends credit. If you do not pay the full balance, the bank earns interest. That interest is what a 10% cap targets.

Business two is the payments network
Visa and Mastercard run the rails that move information and money between banks and merchants. They earn fees linked to payment activity, such as network services and transaction processing. They are closer to “toll roads” than “lenders.”

This matters because the proposed cap is big relative to current US pricing. Reuters reports the cap is framed as starting on 20 January 2026, and cites Federal Reserve data showing average credit card interest rates of 20.97% in November 2025. Cutting that to 10% is not trimming a hedge. It is taking a chainsaw to a revenue stream for card issuers.

If you want the simplest mental model, use this: banks own the loan, networks run the road. The policy targets the loan, but investors temporarily punished the road.

Why Visa and Mastercard still get pulled into the sell-off

Even if the direct hit is aimed at banks, there are a few realistic ways the networks can still feel it.

First, credit availability can shrink
If issuers earn less from revolving balances, they may tighten approval standards, cut credit limits, or reduce rewards. JPMorgan’s chief financial officer warned a cap could reduce access to credit and ripple into the wider economy.
Less credit can mean fewer purchases for some households, especially at the lower end of the income ladder.

Second, spending can shift, not vanish
Some consumers may move from credit to debit if credit becomes harder to get or less rewarding. Others may use “buy now, pay later” providers. The key point is that many of those transactions still run through Visa and Mastercard rails. That can soften the blow, even if the mix changes.

Third, investors fear the “next regulation,” not just this one
A rate cap is dramatic, but it is not the most direct policy risk for the networks. The longer-running risk is fee and routing regulation, meaning rules that influence how card payments are routed and what merchants pay. This is where Visa and Mastercard sit closer to the policy bullseye over time.

That is why a headline about bank interest income can still hit network shares. The market is pricing not only what is written, but what it worries comes next.

Risks to watch without losing sleep

The first risk is political follow-through. A proposal can move markets even before it becomes law. But its real impact depends on enforcement details and legislative traction. Until investors see a path from social post to statute, uncertainty does most of the damage.

The second risk is a genuine credit tightening cycle. If issuers cut limits and approvals, some consumer segments spend less, and transaction growth can slow. Watch issuer language on “credit availability” and “delinquencies,” and watch retail sales trends.

The third risk is the slow one: broader payment fee regulation. This is not about APR. It is about the economics of card acceptance and routing. If that debate heats up, it matters more for the networks than a one-year interest cap.

Investor playbook

  • Watch the next earnings calls for payment volume trends and cross-border activity, not political quotes.

  • Track issuer behaviour: tighter credit limits and weaker rewards are early signs of pressure from a cap.

  • Separate “policy risk” from “demand risk”: a weaker economy hurts volumes more than a rule aimed at lenders.

  • Keep a timeline: proposals move fast, laws move slow. Re-price the risk only when details become binding.

The real test is spending and credit, not headlines

The market’s first reaction to the 10% cap story is simple: sell anything that smells like credit cards. That is fast, emotional, and sometimes useful for traders.

Long-term investors need the slower version. Banks lend money and earn interest. Visa and Mastercard move transactions and earn fees. On 13 January 2026, the stocks traded as if those were the same business. They are not.

The real question is not “who gets blamed in the headline.” It is “what changes in spending, credit access, and regulation over the next few quarters.” The toll road still works tomorrow morning, even if the political traffic is noisy today.






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