Can Trump Actually Cap Credit Card Interest Rates at 10%?

On Friday, President Donald Trump called for capping credit card interest rates at 10% for one year, posting on Truth Social that Americans are being “ripped off” by issuers. Experts say that won’t quite be as easy as it sounds.

Forcing credit card issuers to lower fees is a goal that has drawn bipartisan support from lawmakers in the past, and Trump made it a plank of his 2024 presidential campaign. It’s not hard to see the appeal: The Federal Reserve says that people who revolve a balance from month to month pay an average APR (annual percentage rate) of 22.3%. The typical credit card borrower owes a little over $6,700, according to credit bureau Experian.

But lowering rates isn’t something that can be done with the presidential stroke of a pen — and if Trump were to try to execute this via executive order, he could expect swift legal pushback.

“It would be immediately challenged by banks, and they would probably have an easy case to put an injunction on this,” says Danielle Zanzalari, an assistant professor of economics at Seton Hall University.

What could lower credit card rates?

Zanzalari points out that existing regulations like the Truth in Lending Act give banks wide latitude when it comes to rate-setting. It likely would take legislation to enshrine an interest rate cap into law.

“Congress could pass this if they wanted to,” Zanzalari says.

In this case, the president’s support and the bully pulpit he commands could be instrumental. Lawmakers in both parties have put aside their differences to try to advance credit card caps more than once in recent years, but none have succeeded.

Just the threat of a cap was enough to drive financial stocks down on Monday, though. Megabanks like JPMorgan Chase, Bank of America, Citigroup and Wells Fargo all fell into the red. Other major credit card issuers, like American Express and Capital One, sustained even sharper drops.

That's because unlike debts that are secured by a home, car or other property, credit card issuers have no protection if a borrower defaults. Charging riskier borrowers more interest is a primary tactic banks use to mitigate losses if a debtor stops paying, so losing that option would be a major threat to business.

“There’s nothing to take. Unsecured credit is very risky,” Zanzalari says.

According to a recently published study by the Consumer Financial Protection Bureau, the average APR for store credit cards — which are generally the easiest type of card for someone with a low FICO score to get — is 31.3%.

Credit card rewards, access to borrowing could be slashed

The most recent Fed data puts America’s collective credit card debt at a whopping $1.2 trillion. A reprieve that knocks 15 percentage points off a borrower’s repayment terms — even a temporary one — might sound like a good idea. All other things being equal, lower interest rates would mean lower monthly payments, and paying less money in interest could help you pay down your debts more quickly.

A research paper from Vanderbilt University says that capping credit card interest at 10% could save Americans $100 billion a year — and it makes the case that banks could afford to do so. It acknowledges, though, that banks would probably slash their rewards programs significantly, which would impact all borrowers except for those with FICO scores of 760 or higher — a score well above the national average of 715.

In reality, way more than just rewards would be cut if Trump were able to get his proposal greenlit, according to credit expert John Ulzheimer. Banks would most likely respond to a cap by lowering borrowers’ credit limits and closing cards.

The upshot, he says: less access to borrowing for most Americans.

The greatest impact would hit people with subprime credit, since limiting access to credit has a detrimental effect on a person’s credit score all on its own.

“It should terrify everybody who has really bad credit scores,” he says. "History has proven how lenders are going to react when something like this happens, and they tend to be very risk-averse for people who have lower credit scores."

Ulzheimer adds that even though Trump’s proposal calls for a one-year cap starting Jan. 20, the financial impact on borrowers could be much longer.

“That’s better than capping it at 10% in perpetuity, [but] the problem is, if a bank closes my credit card because of the cap, then who cares if it's only 12 months? I still lost my card,” he says.

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