Trump proposes credit card rate cap

President Donald Trump’s renewed push to impose a one-year cap of 10 per cent on US credit card interest rates has jolted financial markets and reopened a long-running debate about the balance between consumer protection and credit availability.

Cap on credit cards could backfire

The proposal, announced via Trump’s Truth Social account, would apply from January 20, 2026.

The president framed the move as a crackdown on what he described as excessive borrowing costs, arguing that consumers were being “ripped off” by card issuers charging rates well above 20 per cent.

Yet the mechanics of how such a cap would be enforced remain unclear, particularly in the absence of new legislation.

A legally uncertain intervention

Unlike price controls imposed through Congress or independent regulators, Trump’s proposal currently rests on political signalling rather than statutory authority.

Analysts at Goldman Sachs and others have noted that, without an executive order or fresh legislation, card issuers would not obviously be in breach of the law if they ignored the call.

That ambiguity has not prevented a market reaction.

Shares in major card lenders, including Capital One and Synchrony Financial, fell sharply after the announcement, reflecting investor concern about the potential hit to earnings.

Wells Fargo estimates suggest a one-year cap could reduce pre-tax profits at large banks by 5–18 per cent, while specialist card lenders could see profits wiped out altogether.

Industry backlash and political alignment

US banking trade groups, including the American Bankers Association and the Bank Policy Institute, have pushed back forcefully.

Their central argument is that interest rate caps distort risk-based pricing, making it uneconomic to lend to higher-risk borrowers.

The result, they warn, would be reduced access to mainstream credit and a drift towards costlier, less regulated alternatives.

This critique mirrors opposition voiced last year when Bernie Sanders and Josh Hawley advanced bipartisan legislation to cap card rates at the same level, albeit for five years.

Trump’s endorsement now places him in unusual alignment with parts of the progressive left, despite the resistance of the banking industry.

Consumer credit under pressure

The timing of the proposal is significant.

Federal Reserve data show US consumer credit outstanding at roughly $5.1tn, with growth slowing in recent months.

Average credit card interest rates have climbed to more than 22 per cent, up sharply from pre-pandemic levels, intensifying political scrutiny as household budgets remain under strain.

Yet economists caution that blunt caps rarely produce the intended outcomes.

While a 10 per cent ceiling would offer immediate relief to some borrowers, it could also accelerate credit rationing precisely as consumers become more selective and risk-aware.

Winners beyond the banks

One potential beneficiary is the buy now, pay later sector.

Analysts at Mizuho argue that a hard cap on card interest could make instalment-based alternatives more attractive, helping firms such as Affirm capture additional share.

For now, Trump’s proposal remains more political signal than regulatory reality.

But its impact on markets underscores how sensitive the payments ecosystem has become to even tentative interventions in pricing — and how quickly old debates resurface when borrowing costs rise.