Trump’s limits on credit card interest rates might help Americans save $100 billion annually, research indicates.

Trump’s Proposed Credit Card Rate Cap Could Save Americans Billions

A recent paper from Vanderbilt University suggests that if President Donald Trump’s pledge to cap credit card interest rates were enacted, Americans might save approximately $100 billion annually on interest payments.

Interestingly, a survey conducted by student papers indicates that banks and credit card companies could still remain profitable even with a national interest rate cap.

Vanderbilt’s Findings on Trump’s Credit Card Rate Cap

The study from Vanderbilt determined that banks could maintain profits even if credit card interest rates were limited to 15%. This could be achievable if banks continue to provide perks like rewards points and lounge access to most customers.

If interest rates were capped at 10%, the banks might face challenges in their business models. However, they could still make money from many cardholders by cutting back on certain rewards.

According to the paper, it appears that consumers will likely not see a decline in their compensation since banks mainly fund these programs through merchant fees.

Notably, individuals with lower credit scores, often seen as riskier borrowers, might experience the most significant reduction in rewards.

Those with lower credit scores tend to carry credit card balances, unlike consumers who pay off their full balances each month.

Current Credit Card Debt Among Americans

The Federal Reserve reports that Americans collectively hold around $1.21 trillion in credit card debt, averaging about $6,400 per person. Moreover, the average credit card interest rate stands at around 21%, which is notably higher than a decade ago.

Banks derive their revenue from credit cards through transaction fees charged to merchants and fees imposed on consumers, such as annual fees and interest on outstanding balances.

There have been legislative proposals similar to Trump’s credit card cap, with figures like Senator Josh Hawley from Missouri and Vermont’s Senator Bernie Sanders pushing for a similar cap at 10%.