Credit Card Industry Profitability Under Regulatory Pressure: Assessing Financial Resilience Amid Trump's 10% Interest Rate Cap Proposal

The U.S. credit card industry has long been a cornerstone of banking profitability, driven by high-interest margins and robust consumer spending. However, the sector now faces a seismic regulatory shift with President Donald Trump's proposed 10% interest rate cap, set to take effect in January 2026. This policy, aimed at curbing "exorbitant" borrowing costs, could fundamentally alter the financial dynamics for major issuers like JPMorgan Chase, Citigroup, Wells Fargo, and Bank of America. This analysis evaluates the industry's current profitability, the potential impact of the cap, and the varying vulnerabilities of key players.

Current Profitability and Structural Challenges

In 2024 and 2025, credit card operations delivered mixed results. While spend volumes rose-Citi's branded card spend increased by 4%, and Wells Fargo's point-of-sale volume grew by 9.5%-profitability metrics revealed underlying fragility. Credit card profitability reached 3.87% of average quarterly assets in 2024, up from 3.31% in 2023, but return on assets (ROA) for the sector declined from 4.70% in 2022 to 3.33% in 2023, reflecting rising delinquencies, charge-offs, and interchange costs.

By Q1 2025, net charge-off rates for large bank credit card accounts hit a series high, and delinquency rates remained elevated compared to historical averages. Despite this, interest income from revolving balances-accounting for ~80% of total program profit-remained a critical revenue driver. For instance, JPMorgan Chase reported a 28.5% year-over-year increase in noninterest card income in 2024, while Bank of America's noninterest card income grew by 6.7%.

Trump's 10% Interest Rate Cap: A Game Changer

President Trump's proposal to cap interest rates at 10% for one year, effective January 2026, has sparked intense debate. The policy, which aligns with the bipartisan 10 Percent Credit Card Interest Rate Cap Act (S.381), seeks to address consumer affordability amid inflationary pressures. However, industry critics argue that such a cap could reduce credit availability, force cuts to rewards programs, and erode issuer margins.

The average credit card APR in 2025 stood at 22.83%, with major banks offering rates ranging from 14.74% (Bank of America) to 28.24% (Chase and Citi). A 10% cap would slash interest income for issuers reliant on high APRs. For example, Bank of America's net interest income (NII) in Q2 2025 totaled $14.8 billion, representing 55.7% of its total revenue. If credit card interest income-a key component of NII-were reduced by ~50% (assuming a linear relationship between APR and revenue), the bank's overall profitability would face significant strain.

Issuer-Specific Vulnerabilities

The financial resilience of major issuers varies based on their net interest margins (NIM), ROA, and reliance on credit card interest income:

1. JPMorgan Chase: With a NIM of 1.3% in 2025 and an ROA of 1.30% (as of September 2025), JPMorgan's thin margins leave little room for error. Its credit card operations contribute heavily to NII, and a 10% cap could exacerbate margin compression, particularly as its NIM is already among the lowest in the sector.

2. Wells Fargo: The bank's NIM of 5.8% and ROA of 1.01% (September 2025) suggest stronger profitability than JPMorgan, but its credit card segment remains exposed. A 10% cap could erode its high-margin consumer lending strategy, which relies on elevated APRs.

3. Bank of America: While its NIM of 5.4% and Q2 NII of $14.8 billion highlight its reliance on interest income, the absence of a clear ROA figure for 2025 complicates risk assessment. However, its credit card segment's contribution to total revenue (estimated at ~20–25% based on industry benchmarks) positions it as a high-risk candidate under the cap.

4. Citigroup: With a NIM of 4.1% and a 7% year-over-year increase in branded card revenue, Citi's exposure is moderate. However, its wealth management division's dependence on deposit spreads could amplify indirect impacts if credit card losses force capital reallocation.

Implications for Investors

The proposed cap introduces asymmetric risks. Smaller institutions, which often operate with narrower margins and higher reward costs, may face existential threats, while national banks like JPMorgan and Wells Fargo could adapt through cost-cutting or product innovation. However, the latter's ability to offset lost interest income via fee-based models or expanded rewards programs remains untested.

For investors, the key variables will be:
- Regulatory Implementation: Will the cap be enforced via executive action or voluntary compliance?
- Consumer Behavior: Could reduced APRs trigger increased spending, partially offsetting revenue losses?
- Credit Quality: Will tighter underwriting practices (already reducing new account growth) mitigate delinquency risks?

Conclusion

The credit card industry's profitability hinges on a delicate balance between high-interest margins and credit risk. Trump's 10% cap, while politically popular, threatens to disrupt this equilibrium. Major issuers with higher NIMs and diversified revenue streams (e.g., Wells Fargo) may weather the storm better than peers with narrow margins (e.g., JPMorgan). However, all players face a common challenge: reengineering their business models to thrive in a low-APR environment. For investors, the coming months will test the sector's resilience-and its capacity to innovate under regulatory pressure.