Trump Proposes 10% Limit on Credit Card Interest, Targeting Banks’ Most Profitable Assets

101 finance2026/01/10 15:15

By:101 finance

Trump Proposes 10% Cap on Credit Card Interest Rates

Photo Credit: Fairfax Media/Getty Images

Overview

President Donald Trump has called for credit card companies to limit interest rates to 10% for one year, directly challenging a highly profitable sector of the banking industry. This proposal targets a key source of revenue for banks, which have historically protected their credit card businesses.

Credit Card Rates Under Scrutiny

After a series of announcements focused on housing affordability, President Trump shifted his attention to the high costs associated with carrying credit card debt. His social media post put major card issuers like JPMorgan Chase, Capital One, and Citigroup in the spotlight.

Credit card interest rates, which have been above 20% in recent years, have drawn criticism from lawmakers across the political spectrum. Legislative attempts to lower these rates have faced strong opposition from the banking sector, which warns that drastic cuts could limit access to credit and push vulnerable Americans toward payday lenders and pawn shops.

Industry Response

In response to Trump’s proposal to lower rates by January 20, banking organizations such as the Bank Policy Institute and the Consumer Bankers Association issued a joint statement. They expressed support for making credit more affordable but cautioned that a 10% cap would likely reduce credit availability and harm millions of families and small businesses who depend on credit cards.

The Cost of Credit Card Debt

For consumers who rely on credit cards to cover extra expenses, high interest rates can be a significant burden. According to the Federal Reserve, the average credit card rate was about 21% at the end of last year. At this rate, repaying a $10,000 balance over three years would result in over $3,500 in interest charges.

By comparison, the average rate for a 30-year fixed mortgage is just over 6%, based on Freddie Mac’s data.

Why Credit Card Rates Are High

Banks argue that unsecured credit card debt requires higher interest rates because there’s no collateral to recover if borrowers default. Following the financial crisis, credit card charge-off rates exceeded 10%, while defaults on home loans remained below 3%.

Profitability and Potential Impact

Despite the risks, credit card lending has become extremely profitable. In 2024, JPMorgan reported a net yield of 9.73% on its $200 billion in card loans, generating the majority of its $25.5 billion in revenue from card and auto services, even after accounting for $7 billion in card-related losses.

It remains uncertain how Trump could enforce such a rapid rate reduction, especially since previous legislative efforts have stalled.

If a 10% cap were enacted, the effects would differ across the industry. Banks might have to close or restructure credit lines for riskier customers, increase minimum payments, or introduce new fees. The Bank Policy Institute estimated that a 10% cap would have reduced credit lines for over 14 million households, based on 2019 Federal Reserve data.

Specialized lenders, such as Capital One, Synchrony Financial, and Bread Financial, which serve customers with lower incomes, would be most affected, according to Bloomberg Intelligence analyst Himanshu Bakshi.

Credit union representatives have also warned that such a cap would make it impossible for most consumers to obtain credit cards at a 10% rate.

Possible Adjustments by Banks

Reducing or eliminating rewards programs
Scaling back promotional offers, like zero-interest periods
Raising annual fees or other charges
Increasing costs for balance transfers and cash advances

While banks might be able to lower rates slightly, cutting them to 10% would eliminate their profit margins, according to Matthew Goldman, founder of Totavi, a consulting firm for fintech companies. He suggests that only consumers with excellent credit would still qualify for cards under such a cap.

Regulatory Uncertainty

Trump’s sudden proposal has unsettled bank investors. The sector’s stocks have surged, driven by his administration’s deregulatory policies, including easing capital requirements and stress tests. The KBW Bank Index, which tracks 24 major lenders, has risen nearly 40% since Trump’s election victory in November 2024, outpacing broader market benchmarks. Many banks expect continued strong earnings from lending activities.

History of Rate Cap Debates

Interest rate limits have long been debated, with varying state laws prompting many banks to operate in states like Delaware and South Dakota. While Trump has previously addressed the issue, most legislative action has occurred in Congress. In 2019, Senator Bernie Sanders and Representative Alexandria Ocasio-Cortez proposed a 15% cap, and last year Sanders and Republican Senator Josh Hawley introduced a bill for a 10% limit. Although lawmakers tried to attach a cap to the Genius Act, which regulated stablecoins and was signed into law by Trump, the final version did not include the provision.

Banking Industry’s Political Influence

Banks have significant lobbying power in Washington, quickly forming alliances to oppose policies they see as threats. For example, they joined forces with consumer advocates to resist stricter capital rules during the Biden administration, arguing such measures could restrict lending.

After Sanders and Hawley introduced their bill, banking trade groups responded with a public letter warning that many Americans would lose access to credit cards. They pointed out that in Missouri, one in nine residents already uses payday loans, which can carry annual interest rates exceeding 300%.

Reporting assistance by Yizhu Wang, Hannah Levitt, and Todd Gillespie.