Why a Proposed 10% Cap on Credit Card Interest Is Rattling Big Banks

U.S. President Donald Trump announced a proposed one-year cap on credit card interest rates at 10%, effective January 20, 2026. In a post on Truth Social, he stated the move aims to prevent consumers from being 'ripped off' by high interest charges. The proposed cap lacks detailed implementation plans, but its potential impact has already triggered market concerns.

Financial institutions, including JPMorgan Chase and Citigroup, have raised concerns about the cap's implications. Bank executives argue that limiting interest rates could reduce credit availability and profitability for lenders. They warn that price controls may force banks to restrict credit or abandon high-risk lending altogether.

The banking industry, through a joint statement from multiple trade groups, has pushed back against the proposal. The statement notes that a rate cap could drive consumers toward less regulated, more costly alternatives. It emphasizes the importance of maintaining access to credit for millions of families and small businesses.

Why Did This Happen?

Trump's call for a 10% cap is part of a broader push to address consumer affordability concerns. The president has previously introduced similar proposals during the 2024 campaign, and bipartisan efforts to cap credit card rates have been made in past years. However, these proposals have largely stalled in Congress. The recent announcement appears to be a continuation of this political strategy.

The average credit card interest rate in the U.S. currently stands at 19.65%, according to Bankrate. Many consumers carry revolving balances, which accumulate high interest costs over time. Subprime borrowers, who are more reliant on credit, are particularly vulnerable to these high rates.

The announcement sent shockwaves through the banking sector. Stocks of major credit card issuers like JPMorgan Chase, Citigroup, and Bank of America dropped significantly in the days following the proposal. Analysts estimated that a rate cap could eliminate billions in interest income for banks and make credit card lending unprofitable for subprime accounts.

Financial analysts and industry experts have also weighed in on the potential consequences. Some suggest that the cap may lead to tighter credit standards and reduced credit availability. Others warn that it could force banks to raise fees.

Analysts are monitoring how banks might respond to a rate cap. Barclays analysts noted that lenders could tighten credit access for high-risk borrowers and restructure their credit card offerings. This could lead to a shift in consumer behavior, with more people turning to alternative lending options like buy-now, pay-later services.

Consumer advocates and credit union groups have also expressed concerns. They argue that a 10% cap would limit access to credit for many middle-class and low-income Americans. Credit unions warn that financial institutions might reduce credit limits or close accounts for those with lower credit scores.

The broader economic implications are also under scrutiny. Analysts at Jefferies have highlighted that a reduction in credit card spending could weigh on consumer-driven GDP growth. With credit card spending representing a significant portion of consumer activity, tighter credit access could have ripple effects across retail, travel, and hospitality sectors.

The political feasibility of the proposal remains uncertain. While some legislators have shown interest in enacting the cap, key Republican leaders in the House and Senate have yet to express support. The need for congressional approval and the lack of a clear executive pathway suggest that the cap may not be implemented in the near term.

Banks and industry groups continue to push back against the proposal. They argue that a rate cap would not solve the underlying issues of affordability and could lead to unintended consequences. Instead, they advocate for targeted solutions like financial education and expanded access to lower-rate credit products.

The debate around credit card interest rates is likely to remain a key issue in the coming months. As banks, analysts, and policymakers assess the potential impacts, the market will be watching closely for any developments.