Concerns Over Proposed Credit Card Interest Rate Cap

JPMorgan’s CFO, Jeremy Burnham, expressed concerns on Tuesday regarding President Trump’s proposal for a 10% cap on credit card interest rates. He suggested that such a measure could negatively impact the economy and limit credit access for many individuals.

During a conference call tied to JPMorgan’s fourth-quarter earnings, Burnham explained that the changes might lead to a significant drop in service availability, particularly for those who need credit the most. He pointed out that there could be “serious negative consequences” for consumers and the economy overall.

Moreover, he mentioned that this proposed cap presents a “significant” challenge for JPMorgan’s credit card operations.

Experts, including Matt Schultz, chief consumer finance analyst at LendingTree, echoed Burnham’s sentiments. Schultz warned that if these interest rate caps are enacted, consumers with lower credit scores may face even greater difficulties in acquiring credit cards, resulting in a decline in spending and potential harm to the economy. The overall perks that accompany these cards might also be greatly diminished.

Burnham’s remarks align with earlier warnings that Trump’s interest rate cap would limit credit card access for numerous U.S. consumers and extend its implications to small businesses too.

The proposal, which came following Trump’s announcement of wanting to impose 10% tariffs, intends to protect consumers from exorbitant interest rates, sometimes reaching above 20% for specific borrowers. The cap is planned to be in effect for a year starting January 20.

Interestingly, former Trump aide Richard Hunt from the Electronic Payments Coalition raised alarms about the introduction of this 10% cap. His analysis indicated that nearly all credit card accounts associated with credit scores below 740 would either be significantly restricted or closed entirely if such a cap were to be implemented.

This situation would likely affect around 175 million to 190 million American cardholders, particularly those from low to middle-income backgrounds, who already face challenges in accessing credit. The Federal Reserve Bank of New York notes that the average credit score for low-income Americans stands at 658, while it is 735 for those in middle-income households.

Schultz shared that, while it remains unclear how all of this will unfold, he pointed to the 18% interest rate cap on Federal Credit Union cards as an example of how certain benefits can still exist under restrictions. He speculated that although options like 0% balance transfers may vanish with a new cap, interest paid under such a cap would still remain lower than current rates.

Politicians continue to advocate for these proposals largely due to their popularity, despite concerns about access to credit and reduced rewards. A recent survey by LendingTree indicated that three out of four credit cardholders support such limits.