Former President Donald Trump proposed limiting annual interest rates on credit cards to a maximum of 10 percent during a campaign rally on Long Island on Wednesday night, but banking groups pushed back against the idea as a Republican version of the “price controls” widely criticized by Democratic candidate Kamala Harris.
“I'm going to put a temporary cap on credit card interest rates until working Americans catch up,” Trump told a crowd of about 16,000 at the Nassau Coliseum as he outlined his economic plan. “The cap will be around 10 percent. I can't let you charge 25 percent or 30 percent interest.”
As of May of this year, the average credit card interest rate was 21.5%. According to Data provided by the Federal Reserve. Interest rates have been rising sharply since the start of 2022 amid a feverish inflation surge from the COVID-19 pandemic.
According to Federal Reserve data going back to 1994, credit card interest rates have never fallen below 10%.
But critics warned that Trump's plan would most hurt the very people he professed to help.
“Government-imposed price controls on credit card interest rates would hurt all cardholders, especially the lowest-income Americans who are the ones these measures are intended to help,” banking industry officials at the Consumer Bankers Association told The Post on Thursday.
“This will result in credit cards being issued only to consumers with higher incomes and better credit scores, who represent less risk to card issuers.”
“Trump was simply proposing his own set of price controls,” said Peter Schiff, chief economist at Euro Pacific Asset Management.
“That would collapse the industry and millions of Americans would lose their credit cards,” he added. “Credit card losses from people not paying are huge, so you need high interest rates to offset that. There's also a lot of fraud.”
President Trump and his allies slammed Harris last month after she announced a plan to crack down on so-called price gouging in the food industry.
The 45th president denounced her as a “Marxist” and suggested her proposals were in fact “communist.”
In 2019, several politicians, including Sen. Bernie Sanders (I-VT) and Rep. Alexandria Ocasio-Cortez (D-NY), Supported measures to limit interest payments on credit cards It's 15%.
“We have opposed similar interest rate cap proposals in the past,” said a spokesman for the American Bankers Association, a trade group that represents banks and their employees across the country.
“As a result, consumers who need credit the most will lose it. Instead, they will be forced to turn to less regulated and riskier alternatives, such as payday lenders and loan sharks.”
The Trump campaign did not immediately respond to a request from The Washington Post about how it would implement a cap on credit card interest rates.
Ahead of the Long Island rally, Trump also promised to significantly cut auto insurance costs.
“Your car insurance rates have gone up 73%. Vote for Trump and we'll cut it in half!” he posted on X.
On Wednesday, Federal Reserve Chairman Jerome Powell announced the first major interest rate cut since the start of the COVID-19 pandemic.
As he had previously indicated, Chairman Powell made a bold decision, opting to cut the Fed's target interest rate by as much as 50 basis points (half a percentage point) from 5.25% to 5.50%, to a range of 4.75% to 5%.
The Federal Reserve's target rate is closely watched because it can influence other key interest rates.
