Trump Proposes 10% Cap on Credit Card Interest Rates
President Donald Trump has proposed a one-year cap on credit card interest rates at 10%, a move aimed at easing financial burdens but sparking intense debate over its potential impact on credit access and the economy.
Key Takeaways
- The proposal could save US consumers an estimated $100 billion annually in interest.
- Banks warn it could severely restrict credit access for low-income and subprime borrowers.
- The plan has received initial bipartisan backing but faces strong opposition from the financial industry.
The announcement, made on Truth Social, frames the cap as a measure to stop Americans from being “ripped off” by credit card companies. Currently, average rates are near 24%, with some borrowers facing rates as high as 36%.
Potential Savings vs. Access Risks
A Vanderbilt University analysis suggests the 10% cap could save consumers about $100 billion a year. For example, interest on a $5,000 balance would drop from roughly $100 to $42 per month.
However, banking executives warn of severe unintended consequences. JPMorgan Chase CFO Jeremy Barnum argued the cap would harm consumers and the economy.
“Specifically, people will lose access to credit, like on a very, very extensive and broad basis, especially the people who need it the most, ironically,” Barnum said.
Analysts fear lenders would tighten credit for riskier borrowers, potentially reducing overall consumer spending by 5%.
Industry Pushback and Alternative Views
The American Bankers Association claims the cap would push consumers toward costlier alternatives like payday loans. Experts also warn it could lead to higher annual fees or devalued reward points.
“Absent that lever and potential revenue source, we would likely see banks raise annual fees dramatically, or drastically reduce the value of their points and transfer programs,” said Tiffany Funk of point.me.
Not all analysts agree. Some, like Shearer, argue the highly profitable credit card business could absorb the cut by adjusting other fees, and that warnings of mass account closures are overstated.
“The credit card business is massively profitable, so it could absorb a significant cut,” he said.
The Core Issue: Risk and Regulation
High credit card rates are primarily driven by risk, as the debt is unsecured. The 2009 CARD Act limited rate hikes and fees but set no ceiling on interest rates.
“There is no underlying asset like a car or a home,” said Ted Rossman of Bankrate. “The risk to lenders is they aren’t going to be paid back.”
The proposal’s fate remains uncertain, with questions about presidential authority to impose such a cap still unresolved.
