Credit Card Rate Cap Undermines Bank ETFs After Year of Strong Growth

President Trump took a swipe at credit card issuers this week, vowing his administration wouldn’t let consumers be “ripped off” by high interest rates and sending bank stocks and financial-sector ETFs skidding downward.

Like many things in the Trump era, it’s hard to tell what is noise and what is an actual threat to businesses. In this case, the president told credit card issuers to cap interest rates at 10% (about half the current average across the industry) or risk running afoul of the law. But it doesn’t appear that there is any law at issue, and it would likely take Congressional approval to mandate any caps on interest rates. Nonetheless, the remarks add to the uncertainty banks are facing after a year of strong returns.

“Since the president took office, we’ve really seen a strong rally in these large US banks,” said Rene Reyna, head of thematic and specialty ETF strategy at Invesco. “A lot of that was around their ability to not only scale up and provide consistent revenue streams but also this idea around deregulation.”

Everyone Has a Limit

It’s unlikely that a credit card interest rate cap will happen in practice, but if it does somehow materialize, “it will have a significant impact on the earnings of banks and the ETFs that hold them,” said Aniket Ullal, head of ETF research and analytics at CFRA Research. “These changes are likely to impact ETFs that hold stocks like Capital One that rely heavily on credit card earnings.”

The major credit card issuers tumbled, with Capital One down more than 10% over five days, Citigroup 5%, JPMorgan Chase 6%, American Express 7% and Bank of America 4%. Invesco’s KBW Bank ETF (KBWB) slid 3% over five days. That $6 billion fund returned over 32% during 2025, more than twice the 15% of the S&P 500 Financials Index. “We’ve clearly seen investor demand, and we’ve had our best year in terms of flows,” Reyna said, of the more than $2 billion the ETF brought in last year.

Here’s how some of the biggest financial-sector ETFs have performed:

• State Street’s $54 billion Financial Select Sector SPDR ETF (XLF) dropped 4% over the past five days after a 15% gain in 2025.
• Vanguard’s $14 billion Financials ETF (VFH) declined 3% over five days after a 15% climb last year.
• The $4 billion iShares US Financials ETF (IYF) slipped 3% over five days, following an 18% increase last year.

Banking on Diversification: Also shaking up the market for lenders’ stocks are the White House’s highly publicized pressure campaign on Federal Reserve Chair Jerome Powell and a proposal to limit financial institutions from continuing to buy single-family homes. The developments contribute to a strong case for diversification among financial services company holdings, Reyna noted. The credit card issue “is creating a little bit of noise in the market. The fundamental question here is, ‘Can President Trump put this into law without legislative backing?’” he said. “As we are learning in his second term, there is a lot of testing the boundaries in terms of what he is able to do.”