New York
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President Donald Trump’s proposal for a one-year 10% cap on bank card rates of interest has struck a chord in debates about affordability — and arrange a possible conflict with Wall Street.
A price cap may provide short-term reduction, although it’s unclear if it could meaningfully deal with the root trigger of affordability considerations.
But it may additionally lead card issuers to restrict credit availability and rewards, probably hurting shopper spending and financial progress.
“An interest rate cap would restrict access to credit to those who need it the most and, frankly, would have a deleterious impact on the economy,” Mark Mason, the chief monetary officer at Citigroup, stated on a name with reporters on Wednesday.
But advocates for reform say a cap may save Americans tens of billions a 12 months.
“The banks are just scrambling because this is their cash cow and suddenly people are paying attention to the fact that they are charging way too much on credit cards,” stated Brian Shearer, director of competitors and regulatory coverage at the Vanderbilt Policy Accelerator.
The 10% price cap proposal is the president’s newest try to deal with Americans’ considerations about affordability, as the US midterm elections method later this 12 months. He had touted the proposal on the marketing campaign path in 2024.
The present common bank card price is nineteen.64%, in response to Bankrate.
Lawmakers have mentioned such a cap earlier than. Populist lawmakers like Independent Sen. Bernie Sanders, GOP Sen. Josh Hawley and Democratic Rep. Alexandra Ocasio-Cortez at totally different instances have all sponsored payments capping charges at totally different percentages.
It’s unclear how Trump may obtain that cap, which he stated he desires to enter impact by January 20. Legislation would require Congress to behave; voluntary participation would want buy-in from card issuers.
The White House didn’t reply to requests for remark.
“This is an old idea, and it’s a very bad idea,” former Republican Sen. Pat Toomey instructed NCS.
“It seems like it’s a way to be able to say, ‘Look what I’m doing about affordability. I’m making your credit cards more affordable.’ But it’s not going to work,” Toomey stated. “What it’s going to result in is people having less access to credit, period.”
Setting card rates of interest is an element of the bread-and-butter mannequin for main banks and bank card firms.
“If you bring the caps down, you’re going to constrict credit, meaning less people will get credit cards and the balance available to them on those credit cards will also be restricted,” Brian Moynihan, the chief government at Bank of America, stated on his firm’s earnings name on Wednesday.
“You have to balance that against what you’re trying to achieve on the affordability. We’re all in for affordability,” Moynihan stated. “That cap, you will see unintended consequences of that.”
Executives at Citi and JPMorgan Chase had been upfront about their opposition to a price cap.
“A rate cap is not something that we can support,” stated Jane Fraser, chair and CEO of Citigroup, on the firm’s earnings name Wednesday. “And I think the reception from the Hill also seemed less than enthusiastic from what we could tell.”
Jeremy Barnum, CFO at JPMorgan Chase, stated on a name with reporters Tuesday that “everything is on the table” in responding to the proposal.
Steve Biggar, director of monetary providers analysis at Argus Research, instructed NCS that banks may look to create choices with decrease charges to seek out center floor with the administration. But finally, banks would reject a price cap, he stated.
“If you make something less profitable or not profitable at all, they’ll escape from the business,” Biggar stated. “They just won’t underwrite that.”
American households had $1.23 trillion in excellent bank card balances in the third quarter of 2025, up 5.75% year-over-year, in response to data from the Federal Reserve Bank of New York. That’s the most bank card debt on document going again to 1999.
Proponents of reform say these bank card firms’ and banks’ margins are thick, and a cap wouldn’t harm their backside line sufficient for them to exit the enterprise.
Research from Shearer, of the Vanderbilt Policy Accelerator, discovered {that a} 10% cap on bank card charges may lead to Americans saving $100 billion yearly.
That price cap would additionally result in $27 billion much less in credit score rewards for shoppers with FICO scores of 760 or decrease. However, these shoppers would finally save extra in curiosity than what’s misplaced from the discount in rewards, in response to Shearer.
“There might be slightly less lending at the margins, and we would see some reduced rewards, and banks would need to pull back on their excessive advertising budgets, but it’s not the sky-is-falling picture that banks would have you believe,” Shearer stated.
But even proponents of bank card reform stated Trump’s proposal contrasts together with his previous actions to decontrol the monetary sector and gut the Consumer Financial Protection Bureau, which screens the bank card trade.
“Trump is failing to address the affordability crisis, so he’s flailing and throwing radical ideas against the wall,” Aaron Klein, a senior fellow in financial research at the Brookings Institute, instructed NCS.
Klein, who labored in President Barack Obama’s Treasury Department, stated Trump ought to give attention to capping late charges and addressing different trade practices that harm shoppers. The president final 12 months scrapped a Biden administration-era legislation that capped late charges at $8 however had been blocked by a choose.
Rohit Chopra, a former director of the Consumer Financial Protection Bureau who was fired by Trump, instructed NCS {that a} cap on bank card rates of interest can be significant, however he doubts the president will observe by way of.
“There is a lot of room to reform some of the abuses in the credit card industry, but based on the Trump administration’s record this past year, overall, the credit card industry has really gotten what it wants,” Chopra stated.
“The credit card industry knows that the president will chicken out,” he stated.