Trump Calls for 10% Credit Card Rate Cap, Sparking Industry Pushback

President Donald Trump has called for a one-year cap of 10% on credit card interest rates starting January 20, 2026. He announced the move on Truth Social, asserting that such a cap would benefit consumers by reducing borrowing costs. The plan, however, lacks details on enforcement and legal backing, leaving financial institutions uncertain about its feasibility.

Major bank executives, including Citigroup's Jane Fraser and JPMorgan Chase's James Dimon, have voiced strong opposition to the proposal. Fraser warned that the cap would make credit card products unprofitable, potentially reducing access to credit. Dimon echoed these concerns, noting that credit restrictions could disproportionately impact low-income borrowers.

Financial stocks experienced a sharp decline following the announcement. Synchrony Financial, Capital One, and American Express saw significant drops, as investors reacted to the uncertainty of the policy. Analysts noted that while legislative approval is unlikely, the mere proposal has already created market volatility and shaken investor confidence.

How Did Markets Respond?

The immediate market reaction was swift. Credit card issuers and banks with substantial credit card portfolios faced steep stock declines. For example, Synchrony Financial dropped over 8%, while Capital One fell 6.4%. Investors fear that the proposed cap could disrupt traditional business models, especially for lenders with high subprime exposure.

The ripple effect extended beyond financial institutions. Airlines such as Delta Air Lines and United Airlines also faced declining shares, as their credit card reward programs depend heavily on interest revenue. Retailers like Macy's and Kohl's similarly saw their stocks fall, as they also rely on credit card partnerships for revenue.

What Are the Potential Consequences for Credit Availability?

Industry leaders and analysts have raised concerns that a 10% cap would significantly alter the credit landscape. A joint statement from banking associations warned that such a move would reduce access to credit and force consumers toward less regulated alternatives like payday lenders or loan sharks.

Bank of America's CEO, Brian Moynihan, noted that credit restrictions would affect those who rely on credit cards the most. He warned that the cap could constrict lending, reduce credit line availability, and lead to a "very severe consequence" for consumers and the economy.

Analysts at Truist and Barclays estimated that the cap could make credit card businesses unprofitable, particularly for subprime lenders. If enacted, banks would likely tighten lending criteria and reduce credit availability for riskier borrowers.

What Are Analysts Watching Next?

The White House has not provided a clear path for implementing the cap, leaving the financial industry in limbo. White House Press Secretary Karoline Leavitt stated that the administration expects compliance but did not specify consequences for non-compliance.

White House economic adviser Kevin Hassett floated the idea of "Trump cards," suggesting that banks might voluntarily offer lower-rate credit products instead of facing legislative action. However, this remains speculative, and major credit card issuers have not expressed willingness to participate.

Analysts are closely monitoring whether Congress will introduce legislation to support the rate cap. While past efforts have failed, the administration's renewed emphasis on affordability could reignite the debate.

Investors are also watching for shifts in bank business models. If interest margins shrink, credit card issuers may introduce annual fees, reduce rewards, or limit credit lines for subprime borrowers. The move could reshape the broader financial landscape, with long-term implications for both banks and consumers.

The uncertainty continues as the January 20 deadline approaches, with no clear legal or regulatory framework in place. The financial sector remains in flux, balancing the immediate political pressure with long-term strategic adjustments.