Trump Proposes 10% Cap on Credit Card Interest Rates
President Donald Trump has advocated for a 10% limit on credit card interest rates, a move that could significantly change access to credit for many Americans and potentially affect small businesses as well.
On Friday, Trump announced a plan that would introduce this interest rate cap, intended to prevent consumers from facing exorbitant rates—which sometimes exceed 20%. This proposal is set to take effect for a year, starting January 20. It mirrors legislation introduced last year by Senators Bernie Sanders and Josh Hawley, aiming to set the same interest rate ceiling.
Richard Hunt, the executive chairman of the Electronic Payments Coalition (EPC), highlighted that analysis from the EPC suggests the cap could lead to the cancellation of credit cards or a severe reduction in credit limits for 82% to 88% of cardholders, disproportionately impacting low-to-moderate income individuals.
“We recognize the president’s good intentions to help the American people. However, this study reveals the serious consequences that this could have for his supporters and Congress members,” Hunt remarked, conveying a sense of urgency about the situation.
Impact of Proposed Rate Cap
According to EPC’s study, a 10% interest rate cap would likely result in most credit accounts being closed or heavily restricted for those with credit scores under 740. This could affect anywhere from 175 million to 190 million Americans, leading to severe loss of access to credit for many low and middle-income households. Data from the Federal Reserve Bank of New York indicates that the average credit score for low-income Americans is around 658, whereas middle-income households typically have an average of 735.
The remaining cardholders would face diminished credit limits, stricter application processes, and possibly fewer or no rewards, further complicating their financial situations.
“It’s important to remember that people from diverse backgrounds engage in rewards programs—people with varying incomes and credit scores,” Hunt added thoughtfully.
Concerns from Financial Experts
Hunt also pointed out that while many might value rewards like airline miles, low-income cardholders often depend more on cash back options. “During holiday seasons, for instance, using points to cover credit card bills becomes crucial for many,” he said.
As the situation unfolds, those who rely on credit might find themselves turning to riskier financial options such as payday loans and unregulated online lenders, which operate outside the safeguards meant to protect consumers.
Increasing Household Debt
The ongoing conversation about credit card interest rates comes amid rising credit card and overall household debt across America. Hunt emphasized that this proposed change could hurt both consumers and small businesses, as many business owners also use credit cards for day-to-day operations and cash flow needs.
This situation is evolving, but it’s clear that if implemented, the proposed interest cap could have profound and perhaps unintended consequences for a large number of Americans.
