Trump Proposes 10% Cap on Credit Card Interest Rates
Former US President Donald Trump recently put forward a bold proposal. He wants to limit credit card interest rates to just 10% for one full year. Trump announced this plan on his Truth Social platform last week. He stated the cap would protect Americans from what he called being "ripped off" by major credit card companies.
Bipartisan Support Meets Strong Banking Opposition
The idea quickly gained bipartisan backing on Monday. However, the banking industry pushed back hard against the proposal. JPMorgan Chase's chief financial officer, Jeremy Barnum, spoke out strongly after the bank's quarterly results. He warned that such a cap would harm consumers and the wider economy.
"People will lose access to credit on a very, very extensive and broad basis, especially the people who need it the most," Barnum told CBS News. He called this a severely negative consequence for consumers and potentially damaging for the economy.
Current Rates Near Historic Highs
Credit card interest rates currently sit near historic highs. According to data from LendingTree, the average credit card rate hovers close to 24%. Borrowers with poor credit scores face even steeper rates, sometimes as high as 36%.
Potential Savings Versus Access Concerns
Researchers at Vanderbilt University analyzed the potential impact in September 2025. They estimated a 10% cap could save consumers around $100 billion annually in interest payments. At a 10% rate, someone carrying a $5,000 balance would pay roughly $42 monthly in interest. That compares to about $100 per month at the current average rate.
Despite these potential savings, many analysts express deep concern. They argue the cap could trigger unintended consequences. Lenders might respond by restricting credit access for low-income consumers and those with weaker credit histories.
"They would find it dramatically more difficult to access credit," said Ted Rossman, a senior industry analyst at Bankrate.
Broader Economic Implications
Such credit restrictions could weigh heavily on the broader economy. Analysts at Morgan Stanley note that credit card spending represents 30% to 40% of total annual consumer spending. If subprime borrowers reduce spending due to tighter credit, overall consumer spending could drop by around 5%. This decline might offset any boost from lower interest rates.
The American Bankers Association voiced strong opposition. They warned a 10% cap "would only drive consumers toward less regulated, more costly alternatives." These alternatives include payday loans and "buy now, pay later" products.
Impact on Rewards Programs and Bank Revenue
Tiffany Funk, co-founder and president of point.me, highlighted another potential shift. A rate cap could reshape popular credit card reward programs.
"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," she explained.
Counterarguments and Industry Profitability
Not all experts agree that a cap would cause widespread credit cut-offs. Some dispute claims that card issuers would shut out higher-risk borrowers. They argue banks would likely adjust other aspects of their offerings instead.
"The credit card business is massively profitable, so it could absorb a significant cut," one expert noted. He added that issuers have multiple revenue streams beyond interest charges.
Companies like Visa, Mastercard, and Capital One also earn income through annual fees and merchant interchange fees. These revenue sources would remain unaffected by the proposed cap.
"Claims from bank lobbyists that this would lead to account closures are greatly overstated, if not completely false," the expert told CBS News.
Understanding High Credit Card Rates
Experts explain that high credit card rates stem largely from risk. Annual percentage rates on credit cards significantly exceed those on mortgages or car loans. This difference exists because credit card debt is unsecured.
"There is no underlying asset like a car or a home," Rossman clarified. "The risk to lenders is they aren't going to be paid back."
Card issuers show reluctance to cut rates because doing so would reduce profits. The Credit Card Accountability Responsibility and Disclosure Act of 2009 limits how and when issuers can raise rates. It also curbs certain fees. However, it does not impose any upper limit on interest rates themselves.
Questions About Authority and Implementation
Significant questions remain about whether Trump possesses the authority to impose such a cap. The proposal has ignited a complex debate touching on consumer protection, financial access, and economic stability. As discussions continue, millions of American cardholders watch closely, wondering how this potential policy shift might affect their financial lives.
