Trump Proposes 10% Credit Card Interest Rate Cap

NEW YORK — President Donald Trump is looking to revisit a campaign pledge by proposing a one-year limit on credit card interest rates at 10%. This initiative could potentially save Americans a substantial amount, possibly reaching tens of billions of dollars, but has already faced resistance from the credit card industry, which has significant influence in Washington.

In a social media post on Friday night, Trump didn’t specify whether this cap would come about through executive actions or new legislation. However, one Republican senator mentioned they had been in discussions with Trump and indicated plans to work on the proposal with the president’s backing. He aims for the cap to be implemented by January 20, marking one year since his inauguration.

Opposition is expected from Wall Street and credit card firms that have financially supported Trump’s re-election efforts. The banking sector argues that capping interest rates could disproportionately impact low-income individuals, potentially reducing access to credit and pushing them toward more costly alternatives like payday loans.

Trump stated on his platform, Truth Social, “We will no longer allow the American people to be defrauded by credit card companies that charge 20% to 30% interest.”

Analysis of Trump’s previous promises suggested that limiting credit card interest rates to 10% could save Americans approximately $100 billion annually. Although the credit card industry would face challenges under this cap, experts believe it could still remain profitable, albeit possibly with reduced rewards and incentives for consumers.

As of 2024, around 195 million Americans had credit cards, collectively accruing $160 billion in interest, according to the Consumer Financial Protection Bureau. The average credit card debt has climbed to nearly $1.23 trillion as reported by the New York Federal Reserve.

Currently, average credit card interest rates range from 19.65% to 21.5%, based on data from the Federal Reserve and other financial trackers. While interest rates have dipped slightly as central banks lowered benchmark rates, they remain near record highs since the mid-1990s. In contrast, a decade ago, the average was closer to 12%.

Traditionally, Republican administrations have favored the credit card industry. For instance, Capital One did not face much opposition from the White House when it recently merged with Discover Financial Inc., creating the largest credit card issuer in the U.S. Meanwhile, the Consumer Financial Protection Bureau, designed to monitor fraud in the industry, has not been particularly effective since Trump’s presidency began.

The banking sector promptly expressed disapproval of Trump’s plan. The American Bankers Association argued in a joint statement that implementing such a cap would merely drive consumers towards less regulated and pricier options.

Historically, there have been concerns that lowering interest rates could lead banks to restrict lending to higher-risk borrowers. For example, when Congress capped merchant fees on debit card transactions, banks stripped most perks from debit products. It has taken time for some of those benefits to return.

It’s worth noting that the U.S. has previously enacted interest rate caps for specific financial products. For example, the Military Lending Act prohibits charging active military personnel more than 36% interest. Additionally, credit unions set maximum rates at 18% for their credit cards.

Credit card companies earn revenue through three main avenues: merchant fees, customer fees, and interest on balances. Some researchers and progressive policymakers argue that despite a cap, banks would remain profitable through ongoing merchant revenue.

“Introducing a 10% cap, as the banks warn, would save American consumers $100 billion annually without leading to mass account closures since banks maintain substantial profits,” noted Brian Shearer from the Vanderbilt Policy Accelerator, who researched the implications of Trump’s proposals.

However, there are notable historical examples where interest rate caps have led to the exclusion of higher-risk borrowers from the financial market, such as in Arkansas, which has a strict 17% rate cap affecting those with lower credit scores. Shearer’s research suggests that a 10% cap might similarly limit access for individuals with scores below 600.

The White House has not clarified how it intends to implement this cap or if discussions have occurred with credit card companies regarding the proposal.

Sen. Roger Marshall (R-Kansas), who directly spoke with Trump, stated that this effort aims to alleviate costs for American families while addressing the practices of credit card companies that have allegedly preyed on hardworking citizens.

If successfully passed by both chambers of Congress, this bill could realize Trump’s goal.

Earlier in February, Senators Bernie Sanders and Josh Hawley announced a joint effort to impose a 10% interest rate limit for five years, hoping to garner support from Trump’s campaign commitments.

Preceding Trump’s announcement, Sanders criticized the administration’s deregulation, which has allowed larger banks to impose higher fees.

Legislators such as Alexandria Ocasio-Cortez and Anna Paulina Luna have also introduced similar proposals, with Ocasio-Cortez often criticized by Trump while Luna aligns closely with him.