Former President Donald Trump has proposed a one-year cap on credit card interest rates at 10%, with an intended effective date of January 20, 2026. The proposal, announced via social media, aims to address high interest rates and consumer affordability. While researchers suggest the cap could save consumers billions annually and some lawmakers express support, banking industry representatives and financial experts have voiced concerns about its feasibility and potential impact on credit access.
Proposal Details
Mr. Trump announced his proposal via a social media post, stating his intention to cap credit card interest rates at 10% for one year, effective January 20, 2026. He cited "AFFORDABILITY!" as a key rationale, linking it to the cost of living and current interest rates, which he stated often range from 20% to 30%. Mr. Trump indicated his aim to prevent what he characterized as excessive charges by credit card companies.
The mechanism for implementing the proposed cap, such as through executive order, congressional legislation, or voluntary agreement from card issuers, has not been specified. White House Press Secretary Karoline Leavitt stated that Mr. Trump expects credit card companies to comply, but did not outline specific consequences for non-compliance.
Current Credit Landscape
Credit card interest rates have increased in recent years, reaching near-historical highs despite some recent declines partly attributed to Federal Reserve rate cuts. Average credit card interest rates have been reported between 19.64% and 22.3% in various periods over the past year. American households held approximately $1.23 trillion in outstanding credit card balances in the third quarter of last year, a record high. In 2024, an estimated 195 million people in the U.S. held credit cards, incurring $160 billion in interest charges. Federal Reserve benchmark rates, currently between 3.5% and 3.75%, influence consumer borrowing rates. Some reports indicate that 11% of Americans met only the minimum payment requirement on their credit card bill last April, with consumer debt delinquency reaching its highest level since the pandemic in the first three months of 2025.
Potential Consumer Impact and Support
Research conducted on Mr. Trump's initial campaign pledge estimated that a 10% cap could save Americans approximately $100 billion annually in interest payments. Brian Shearer, director of competition and regulatory policy at the Vanderbilt Policy Accelerator, whose research informed these projections, suggested that while the credit card industry would be impacted, it would likely remain profitable. Shearer's analysis indicated that such a cap might lead to slightly less lending at the margins, reduced rewards, and decreased advertising budgets, but that interest savings for consumers would likely outweigh any losses from reduced rewards.
The proposal has garnered bipartisan support from some lawmakers, including Senator Elizabeth Warren (D-Mass.), Senator Josh Hawley (R-Mo.), Senator Bernie Sanders (I-Vt.), Representative Alexandria Ocasio-Cortez (D-N.Y.), and Representative Anna Paulina Luna (R-Fla.). Senator Roger Marshall (R-Kan.) confirmed discussions with Mr. Trump and stated his commitment to developing supporting legislation.
Consumers have expressed mixed views; one individual noted that a 10% cap "would help a little bit," while another described it as "a step in the right direction." The U.S. currently has interest rate caps on certain financial products and for specific demographics, such as the 36% limit for active-duty service members under the Military Lending Act and an 18% cap for credit union credit cards.
Industry Opposition and Concerns
Banking industry groups and financial executives have expressed opposition to the proposed cap, citing a lack of clarity on its implementation and potential negative consequences. Many experts indicate that a rate cap would likely require Congressional approval.
Concerns raised by the banking industry include:
- Reduced Credit Access: Industry groups, including the Bank Policy Institute and the American Bankers Association, warned that a 10% cap could lead to reduced credit availability for millions of consumers, particularly those with higher risk profiles or lower credit scores. They projected that two-thirds of credit card users carrying a balance could see their credit lines reduced or canceled, potentially affecting nearly all 47 million Americans with subprime credit.
- Economic Impact: Executives such as JPMorgan Chase chief financial officer Jeremy Barnum and Citigroup CFO Mark Mason stated that such a cap could harm consumers by limiting credit access for those most in need and negatively impact the economy. Jane Fraser, Chair and CEO of Citigroup, cautioned of a "severe impact on access to credit and on consumer spending."
- Shift to Alternatives: Industry groups argued that an interest rate cap could push consumers toward less regulated and potentially more costly financial alternatives, such as payday loans or pawn shops.
- Profitability and Services: Banks contended that lower interest rates would impact their profits and likely necessitate lending less to high-risk borrowers. They referenced historical examples, such as a past cap on debit card merchant fees, which reportedly led to the removal of rewards and perks from those cards. Some analysts suggested banks might respond by limiting lending to lower-credit-score individuals or by increasing other fees like annual or late charges.
- Rationale for High Rates: Industry representatives explain that credit card interest rates are often high due to factors such as unsecured debt, the cost of providing card perks (like rewards points), and the system of interest-free days for customers who pay off their balances monthly.
Former Republican Senator Pat Toomey described the idea as detrimental, asserting it would reduce access to credit. Economist Brett House from Columbia Business School suggested such a cap could backfire by making credit less accessible.
Legislative and Political Context
The concept of capping credit card interest rates has been part of legislative discussions for years. Senators Bernie Sanders and Josh Hawley previously introduced a bipartisan bill in February 2025 to cap rates at 10% for five years, but it encountered opposition from banking groups and did not advance. Similar legislative proposals have also been introduced in the House.
Mr. Trump's proposal contrasts with his administration's past actions, which included efforts to deregulate the financial sector and reduce the authority of the Consumer Financial Protection Bureau (CFPB). His administration also previously opposed the Biden administration's $8 credit card late fee limit and sided with banks that sued to stop the rule's enactment. Aaron Klein, a senior fellow at the Brookings Institute, suggested that focusing on capping late fees and addressing other industry practices might be more effective than a broad interest rate cap.
White House economic advisor Kevin Hassett previously suggested that large U.S. banks could voluntarily issue "Trump cards" to underserved Americans, potentially indicating an alternative approach to broad industry changes. The Dodd-Frank Act, enacted after the 2008 financial crisis, includes provisions that prohibit at least one federal bank regulator from imposing usury limits on loans.
Market Reaction and Industry Adaptation
Following Mr. Trump's announcement, financial services stocks experienced declines. Major institutions such as Citigroup, JPMorgan Chase, Bank of America, Visa, Mastercard, Wells Fargo, and PayPal registered losses in premarket trading.
In response to the proposal, fintech company Bilt announced it is rolling out new credit cards that will cap interest rates at 10% for one year, aligning with Mr. Trump's suggested cap. Bilt CEO Ankur Jain indicated the company's aim to be proactive should such caps become widespread.
International Perspective
Australia has implemented policies to encourage responsible credit card use without capping interest rates. Over the past 15 years, the total value of interest-accruing credit card balances in Australia decreased from approximately $35 billion to $19.7 billion. Australian reforms include a ban on unsolicited credit limit increase offers, the right to request credit limit reductions and online card cancellations, and tougher responsible lending assessments. Payments expert Lance Blockley suggested that if a U.S. rate cap were implemented, it could restrict credit access for those who need it, potentially leading to reduced retail sales or a shift to alternative credit sources.