Trump Proposes 10% Interest Rate Cap as Credit Card Industry Watches Closely

President Donald Trump caught the attention of the credit card industry late last week when he called for a 10% cap on credit card interest rates to begin later this month and last for a period of one year.

Credit card issuers will be watching for indications on how Trump plans to implement any cap on card interest rates, as limiting the rate to 10% could severely threaten issuers revenue streams.

“Please be informed that we will no longer let the American Public be ‘ripped off’ by Credit Card Companies that are charging Interest Rates of 20 to 30%, and even more,” Trump wrote on the social media platform, Truth Social, on Friday. 

He did not offer further details in the post on how companies would comply with the cap.

Industry insiders will be watching the Trump administration’s next moves on the matter to learn how it plans to bring his plan to fruition. Trump previously called for a cap on card interest rates during the 2024 election, but analysts at that time said that Congress would need to approve such a plan before it could move ahead.

President Trump may be able to count on support from Democrats on his idea to cap credit card interest rates at 10%.

If Trump indeed presses on to bring a 10% cap to credit card interest rates, he may count on support from politicians who don’t always share his points of view.

U.S. Sen. Elizabeth Warren (D-MA), the Ranking Member of the Senate Committee on Banking, Housing, and Urban Affairs, said she hasn’t always seen eye to eye with Trump on issues that impact the finances of citizens in the country. But she has voiced her support for partnering with the President on this matter.

“I said a year ago — if Trump was serious, I’d work to pass a bill to cap rates,” Warren said, according to a report from Reuters.

Other politicians, including Sen. Bernie Sanders (I-VT), have previously supported placing a cap on credit card interest rates and may be keen to do so again.

A 10% cap on credit card interest rates would represent a severe drop from where many card rates stand today. A recent report from The Wall Street Journal indicates that the average interest rate on credit cards is significantly higher than the cap figure at approximately 23%. 

The same report reveals that cardholders with lower credit scores may currently be subject to even higher rates, with some extending as high as 36%.

A 10% cap on card interest rates could amount to big savings for cardholders over the course of a year, but it could also have consequences that negatively affect borrowers.

The American Bankers Association, Bank Policy Institute, Consumer Bankers Association, Financial Services Forum, and Independent Community Bankers of America issued a joint press release in the aftermath of Trump’s Truth Social post.

The statement casts doubt on whether the proposed cap would be as helpful to cardholders as some believe. The groups said they share with the President a common goal of helping Americans access credit options that are more affordable.

“At the same time, evidence shows that a 10% interest rate cap would reduce credit availability and be devastating for millions of American families and small businesses who rely on and value their credit cards, the very consumers this proposal intends to help,” the groups wrote.

Consumers with less-than excellent credit scores may have credit cards with interest rates higher than 30%.

“If enacted, this cap would only drive consumers toward less regulated, more costly alternatives,” the groups added.

Companies that stand to gain from a 10% credit card interest rate cap include those that offer buy now, pay later products as well as non-credit card lenders and payday lenders.

A 10% cap on interest rates could mean issuers could refuse to offer cards to people who don’t have pristine credit. Handcuffing an issuer’s ability to charge the interest rates on cards it determines to be appropriate could make many card accounts unprofitable and force credit card companies to rethink their growth strategies.

Other parties agree with the banking trade groups’ opinion that a cap could bring financial harm to the people it aims to assist.

“We believe a hard cap could lead to a disproportionate reduction of available credit to those [subprime] cohorts as it would drastically limit the ability for issuers to price for the higher risk associated,” analysts at Wolfe Research said, according to Payments Dive.

People with poor credit who seek to open a new credit card account with a 10% interest rate may have a much lower credit limit than they can access today.

Card issuers and subprime borrowers could face adverse effects from a 10% cap on credit card interest rates, but other groups may also see unfavorable outcomes as a result of a cap.

Consumers who have excellent credit and pay their credit card bills on time and in full each month may think a 10% cap on card interest rates won’t change their financial situation, but it could. Credit card issuers could charge this group more in the way of annual fees to make up for lost income.

And issuers that use revenue from interest income to fund rewards programs may move to substantially scale back rewards offerings in the face of significant revenue reductions.

More than 90% of people who own credit cards that offer perks value the rewards programs they have access to, a recent survey revealed. If issuers reduce the value of the rewards programs they offer, they could see cardholders make fewer purchases with their credit cards.

Credit card issuers may offer less valuable rewards programs if a 10% cap on card interest rates becomes a reality.

Issuers will have to rethink how to best manage their portfolios should Trump’s proposal gain momentum. But only time will tell if the idea will move forward.

The analysts at Wolfe Research don’t think a 10% cap on card interest rates has a chance of happening any time soon, Payments Dive reports. The reason for that has partly to do with the negative outcomes that could accompany the proposed cap.

“There could be significant adverse economic effects and political consequences for both parties if a meaningful percentage of the U.S. population’s access to revolving credit lines were dramatically reduced or cut off,” the Wolfe Research analysts said.