Trump's 10% Credit Card Interest Rate Cap: Assessing Long-Term Investment Risks for Banks and Rewards-Driven Consumers

The proposed 10% credit card interest rate cap by former President Donald Trump has reignited debates about the balance between consumer protection and financial system stability. While the policy aims to alleviate debt burdens for millions of Americans, its long-term implications for banks and rewards-driven consumers warrant careful scrutiny. Drawing on historical precedents and recent analyses, this article examines the potential ripple effects on credit availability, bank profitability, and consumer behavior, highlighting key investment risks for stakeholders.

Consumer Benefits and Immediate Relief

A 10% cap on credit card interest rates could provide significant short-term relief to borrowers. According to the Vanderbilt Policy Accelerator, such a cap could save Americans up to $100 billion in interest payments annually. For consumers carrying revolving balances, this reduction would ease monthly financial pressures, particularly for those with imperfect credit histories who rely on credit cards for liquidity as analysis shows. However, these benefits come with caveats tied to the structural responses of financial institutions.

Bank Profitability and Credit Availability

Financial institutions have consistently warned that a rate cap would erode their profitability. Credit card interest income is a cornerstone of bank revenue, and a 10% cap would force lenders to compensate through alternative strategies. JPMorgan, for instance, has argued that banks might tighten credit standards, reduce credit limits, or withdraw from subprime lending altogether to offset lost revenue according to their analysis. Historical precedents, such as the 2010 Durbin Amendment-which capped debit card interchange fees-offer a cautionary tale. Banks responded by reducing free checking accounts by 40 percentage points and shifting costs to consumers through higher fees as documented. A similar dynamic could unfold under a 10% cap, with banks potentially scaling back rewards programs or introducing new fees to maintain margins according to CNBC reporting.

Consumer Risks: Credit Access and Unregulated Alternatives

While the policy aims to protect vulnerable borrowers, it risks unintended consequences. Two-thirds of consumers who regularly carry credit card balances-often those with lower credit scores-could face reduced or eliminated credit lines under a 10% cap as research indicates. This contraction in credit availability might push borrowers toward unregulated alternatives like payday loans, which charge exorbitant interest rates and pose greater financial instability according to the ABA. The 2025 CFPB Credit CARD Act report underscores this risk, noting that subprime borrowers increasingly rely on credit cards to rebuild credit scores and manage financial uncertainty as detailed in the report. A policy that restricts access to these tools could exacerbate financial exclusion.

Rewards Programs and Market Stratification

Credit card rewards programs, a key differentiator for banks, may also face long-term adjustments. With reduced interest income, issuers could scale back cashback incentives, travel perks, or other benefits to preserve profitability according to CNBC analysis. The 2025 CFPB report highlights a growing stratification in the credit card market, where premium rewards are increasingly targeted at high-credit-score consumers, while subprime borrowers face higher APRs and fewer incentives as the report shows. This trend could accelerate under a rate cap, further segmenting the market and limiting rewards-driven consumers' access to lucrative programs.

Long-Term Investment Risks

For investors, the 10% cap introduces material risks for banks and related sectors. Reduced interest income could pressure net income, particularly for institutions with large credit card portfolios. Historical data from the Durbin Amendment show that banks often offset regulatory losses by shifting costs to consumers, but this strategy may not fully mitigate long-term earnings declines as research indicates. Additionally, the potential for credit contraction could dampen consumer spending, indirectly affecting small businesses and broader economic growth according to JPMorgan analysis. For rewards-driven consumers, the erosion of perks and increased fees could diminish the value proposition of credit cards, altering spending behaviors and loyalty dynamics.

Conclusion

Trump's 10% credit card interest rate cap represents a high-stakes policy experiment. While it promises immediate relief for borrowers, the long-term risks-ranging from reduced credit access to strained bank profitability-highlight the complexity of regulatory interventions. Investors must weigh these factors against historical precedents and evolving consumer trends. As the debate unfolds, the challenge lies in balancing affordability with sustainable access to credit, ensuring that well-intentioned policies do not inadvertently deepen financial vulnerabilities for the very populations they aim to protect.