Credit cards have been in the news quite a bit in recent weeks as two proposals have come out that could significantly impact the industry.
One is a proposal by President Donald Trump, and supported by lawmakers on both sides of the political aisle, to cap interest rates on credit cards at 10% for one year to help with the "affordability" crisis.
The other is a bill, the Credit Card Competition Act (CCCA), that is targeted at breaking the duopoly that the two largest credit and payment processors -- Mastercard (MA 0.85%) and Visa (V 1.47%) -- control. In short, the bill would require large banks to offer merchants at least two networks for processing transactions, including one that isn't Mastercard or Visa. The idea is to create more competition and potentially lower credit card processing fees.
Image source: Getty Images.
The ideas in the CCCA have been around since 2022, but prior bills have never garnered enough congressional votes to pass. But this latest bill has the endorsement of the president and seems to have some momentum, despite heavy lobbying efforts by the industry.
Investors may have seen these news stories and questioned how these proposals could impact Visa and Mastercard stocks.
My view is that Mastercard stock is still a buy, despite these potential headwinds.
Mastercard stock rises 4% after Q4 earnings
Mastercard reported earnings last week, showing a strong quarter with revenue up 18% and earnings up 24% year over year. Gross dollar volume increased 7%, while cross-border transactions increased 14%, and switched transactions rose 10%. These metrics all measure, in different ways, how often the Mastercard network is used for transactions.
In 2026, Mastercard expects healthy consumer spending, which will drive revenue growth by the high end of a low double-digit range -- so, 12% to 14%. That would be down from 16% in 2025.
But adjusted operating expenses are also going to be down to the low end of a low double-digit range, according to the earnings call, down from 14% in 2025. The company is reducing its workforce by 4% in Q1, which will incur a one-time restructuring charge but free up money long-term for investments.
Mastercard's stock price rose about 4% after the company reported earnings.
NYSE: MA
Key Data Points
What impact would an interest rate cap and CCCA have?
Mastercard management's 2026 projections don't reflect much in the way of headwinds from these proposals. There are a few reasons for that.
One, the 10% cap proposal would have a lesser effect on Mastercard because it is not a lender. It simply processes the payments on its network and makes money from fees for using the network, not from interest.
The cap would have a bigger impact on the banks that issue the cards and lend the money, like Capital One, JPMorgan Chase, Citigroup, and Bank of America. They would also impact Mastercard's rival, American Express (AXP 0.79%), which is an issuer, lender, and processor.
But it could have a long-term effect on Mastercard if fewer cards are issued. That would impact Mastercard's transaction volume and some of its services.
The CCCA would, on the other hand, directly impact Mastercard. It would create a reduction in swipes for U.S.-based credit transactions only, and analysts estimate it could have a 6% to 9% impact on revenue and be a 2% drag on earnings.
That's not insignificant, but it doesn't affect cross-border or debit card transactions, and it could be made up elsewhere.
Mastercard stock is still a buy
The thing is, while the CCCA bill has some renewed momentum, there is also a lot of opposition, and it remains to be seen if it will pass.
"What clearly has emerged is that there's a very united opposition to this proposed bill, as the benefits of the bill are yet to be proven while the risks are pretty clear," Mastercard CEO Michael Miebach said on the earnings call.
One of the risks, he said, is taking choice away from consumers in favor of merchants.
"They can't really ... pay the way they want to pay. You know, that choice moves to merchants. This has been discussed in the context of affordability, but there is no particular, you know, consideration in this bill to actually pass on any savings," Miebach said. He also cited cybersecurity risks and safety.
These two proposals create some uncertainty for investors, but they are far from a done deal, and both of them would face legal challenges if approved.
Mastercard's P/E ratio is as low as it's been since 2022, with the stock trading at 32 times earnings, so it has a fairly attractive valuation.
It remains a great business that's free of credit risk and is asset-light, which allows it to generate huge margins and lots of free cash flow. It also has a wide moat as one of two major players in a space with only a handful of competitors. That could be reduced a bit if the CCCA passes, but the competitive advantages will still be massive, given its model and the scale of its network.
Bottom line, Mastercard stock still looks like a strong buy, and the recent headlines have made it a bit more attractive from a valuation standpoint.
