In a surprising revival of a campaign promise, President Donald Trump has proposed a one-year, 10% cap on credit card interest rates, a move that could potentially save Americans more than $100 billion annually in interest charges. This announcement has drawn immediate resistance from the credit card industry, which has traditionally supported Trump and contributed significantly to his 2024 campaign.
While the details were vague on how this cap would be implemented—whether through executive action or legislative means—Senator Roger Marshall stated that he had communicated with Trump and would be working on a corresponding bill, with the president’s “full support.” Trump expressed his intention for the cap to take effect on January 20, coinciding with the one-year anniversary of his inauguration.
The declaration has not been met with enthusiasm from Wall Street or credit card companies, who argue that implementing such a cap could adversely affect lower-income consumers. They claim it could lead to a reduction or elimination of credit lines, pushing these individuals towards more expensive alternatives, such as payday loans or pawnshops. “We will no longer let the American Public be ripped off by Credit Card Companies that are charging Interest Rates of 20 to 30%,” Trump stated on his Truth Social platform.
Recent research indicates that a cap at 10% could result in significant savings for Americans, with the Consumer Financial Protection Bureau reporting that 195 million individuals held credit cards in 2024, incurring up to $160 billion in interest charges. The average credit card debt in the U.S. has reached approximately $1.23 trillion, with average interest rates ranging from 19.65% to 21.5%, near the highest levels since tracking began in the mid-1990s. This trend stands in stark contrast to a decade ago when interest rates averaged around 12%.
Historically, the Trump administration has been viewed as friendly to the credit card industry, as evidenced by minimal pushback against major banking mergers. The Consumer Financial Protection Bureau has also faced criticism for its inactivity concerning alleged wrongdoing by credit card companies under Trump’s administration. In a joint statement, the banking sector emphasized its opposition to the proposed cap, warning that it would likely redirect consumers to less regulated and more costly financial options.
Bank lobbyists have long contended that lowering credit card interest rates would necessitate stricter lending practices for high-risk borrowers. They point to past instances where caps on fees prompted banks to eliminate benefits from their products, highlighting the balance of maintaining profitability while providing consumer rewards.
There are existing caps on interest rates for specific demographics, including the Military Lending Act, which restricts rates charged to active-duty service members to 36%, and limits on credit union credit cards set at 18%. Some experts argue that a 10% cap could still maintain sufficient profitability for banks, as they generate revenue through merchant fees and customer charges in addition to interest.
Brian Shearer, a researcher with the Vanderbilt Policy Accelerator, noted that historical precedence indicates that caps often limit access to credit for less creditworthy individuals. In states like Arkansas, which has an enforced cap of 17%, evidence suggests that lower-income and less creditworthy consumers face difficulties in accessing credit markets. Shearer’s research indicated that a cap of 10% might result in decreased lending to borrowers with credit scores below 600.
As the debate continues, several lawmakers have started to propose similar legislation aimed at capping interest rates. Senators Bernie Sanders and Josh Hawley introduced a plan proposing an immediate cap at 10% for five years, hoping to leverage Trump’s renewed promise to highlight the need for legislative action. Representatives Alexandria Ocasio-Cortez and Anna Paulina Luna are also advocating for corresponding measures. The political dynamics surrounding this issue remain intricate, as Trump’s administration has faced scrutiny for deregulating banking practices that have allowed credit card companies to increase fees significantly.
