Credit card issuers make money in three primary ways — through interchange fees, through interest charges, and through annual fees. Along those lines, President Trump is suggesting he’s going to be majorly regulating this, and it could have implications for consumers, both positive and negative.
In this post:
Trump calls on one year cap on credit card interest rates
Trump has taken to his Truth Social platform to suggest that credit card companies should cap their interest rates at 10% as of January 20, 2026, for a period of one year. Here’s the text of what he wrote:
Please be informed that we will no longer let the American Public be “ripped off” by Credit Card Companies that are charging Interest Rates of 20 to 30%, and even more, which festered unimpeded during the Sleepy Joe Biden Administration. AFFORDABILITY! Effective January 20, 2026, I, as President of the United States, am calling for a one year cap on Credit Card Interest Rates of 10%. Coincidentally, the January 20th date will coincide with the one year anniversary of the historic and very successful Trump Administration. Thank you for your attention to this matter. MAKE AMERICA GREAT AGAIN! PRESIDENT DONALD J. TRUMP
It’s not entirely clear if he plans to enforce this through some sort of executive action, or if he’s simply trying to pressure credit card companies into voluntarily complying. The way he suggests he’s “calling for” credit card companies to do this suggests that maybe the latter is the case, but who knows?
For context, credit cards are known for often having high interest rates, which are currently an average of over 20%. These are the charges that apply if you don’t pay your full balance before the payment due date. You don’t pay interest charges if you simply charge your purchase to a credit card, and then pay your balance in full.
My take on Trump’s credit card interest rate cap
The concept of capping credit card interest rates is something that generally has bipartisan support, so I don’t think this is any radical concept. Now, I am a little confused about if there’s actually an enforcement mechanism here, because that seems like an important detail.
I also don’t understand the logic of this only being rolled out for a year. That strikes me as odd, because if it’s good policy, wouldn’t it make sense longer term than that? By having it only apply for one year, it seems like it creates huge uncertainty in the market, but then again, that’s not something that Trump shies away from. Like, surely it’s not a coincidence that this will expire at the same time as the midterm elections, right?
A cap on credit card interest rates would be good news for some people who finance credit card charges, sine they’d be paying a lot less in interest.
That being said, I wouldn’t even say it’s good for everyone financing charges — there’s no denying that if interest rates were capped at 10%, lots of consumers with not-great credit would be locked out of getting credit cards, and might even have their accounts closed, because card issuers would find it too risky to loan them money at that rate. After all, there’s a huge risk to people not making payments, and the economics of that work differently with 10% interest rather than 25%+ interest.
Beyond that, if we did see a long term cap on credit card interest rates, it would completely change the credit card landscape in terms of how rewarding cards are, with everything ranging from welcome bonuses, to rewards on spending, to perks.
Right or wrong, credit card economics are heavily reliant on a cross-subsidized system. That’s the whole reason some of us are able to get such outsized value. Credit card rewards structures nowadays largely more or less rebate back interchange fees to consumers, as it’s easy to earn 2% cash back with cards, or even to earn huge multipliers on spending.
The reality is that the revenue that subsidizes a lot of rewards is the interest charges, since that’s the highest margin revenue stream from many card issuers. So we’re earning huge welcome bonuses and 5x points on some transactions because someone else is paying close to 30% interest.
I’m not saying that’s a good system, but I’m just being realistic about how it works. If interest rates are forced to be slashed by more than half in the long run, it will have major implications for rewards. Maybe that’s objectively not a bad thing, but it will happen.
For that matter, it would even have a major impact on airlines — they’re so reliant on credit card revenue nowadays to turn profits, and this would greatly hurt their margins in that area as well.
Bottom line
President Trump is “calling for” credit card companies to cap interest charges at 10% for a period of one year, starting January 20, 2026. Currently, credit cards charge an average of over 20% interest, so this would majorly slash interest charges.
For those with great credit who are financing credit card charges, this would of course be great news. Meanwhile for those with less great credit (who are higher risk for card issuers), don’t be surprised if this leads to them no longer being extended credit, and having their accounts shut down.
For that matter, this would without a doubt be bad for credit card rewards, since these interest charges are largely funding the lucrative card benefits we see nowadays, from lounges, to spending multipliers, to big welcome bonuses.
How do you see this credit card interest rate cap playing out?
Can the Government actually do this? When you sign up to a credit card you agree to their contract and the interest charged. Would the banks not then need to issue variation letters. I would suspect that a bank may call in the loan as they would not be making enough money or they would just hike fees at the same time. Like everything great on paper but I doubt it would work.
For American issued credit cards. I am all for anything that levels the points and miles playing field for holders outside the US as the outsized rewards offered by US cards have skewed the redemption market.
As usual for this administration, the idea was scribbled out on a cocktail napkin after 5 seconds of contemplation and will now be pushed forward to become law. The 10% APR is based on the first thing that entered Trump's mind with no statistical analysis involved. Riddle me this: how do you graduate from Wharton Business School and still have a fourth grade vocabulary (I'm guessing daddy's money "greased the skids")?
Despite the many negative comments regarding the one year expiration to this proposed policy, I think it's a good idea for this and for almost any "new" area of federal regulation. We often see unintended consequences when the government steps into an area in which they lack experience. However once a law or regulation is enacted it's often tough to get it reversed. The use of a sunset clause, or a predefined stopping metric, included...
Despite the many negative comments regarding the one year expiration to this proposed policy, I think it's a good idea for this and for almost any "new" area of federal regulation. We often see unintended consequences when the government steps into an area in which they lack experience. However once a law or regulation is enacted it's often tough to get it reversed. The use of a sunset clause, or a predefined stopping metric, included in the original legislation or presidential order would mitigate this problem.
That's a political problem not a policy problem. A 1 year expiration is a policy problem, assuming you're actually trying to make good policy and not just temporary fixes.
The banking and finance bros are some of the staunchest supporters of the GOP and very generous in their financial support of congressional candidates.
This goes nowhere.
This.
When can I decide how much everyone can charge me…what percentage of taxes I pay.
Hahaha. American Airlines might as well stAArt putting themselves into administration. Good opportunity to buy the dip before he reverses it, but I haven’t yet decided what stock I should buy.
I think it's bad policy that will hurt lower income users.
That said, I doubt it affects high end rewards much.
Bank considers expected value of every customer separately. In the Amex Plat/CSR/VC segment, interest charges are about 10% of revenue. If that drops to 3-4%, annual fees might need to bump by $50 to maintain the same 'coupon book' of offers.
Bloodbath on the subprime end.
Aren't Republicans the champions of deregulation? Trump must be a RINO then.
Capping credit card rates at 10% would mean a large swath of the "credit challenged" would have credit limits significantly decrease. The issuers have rates in excess of 20% because they have larger losses as well as needing to have bigger allowances for doubtful accounts. A "sub prime" provider like Credit One (their ads are everywhere) could not survive on a 10% cap. Some think this good because lower end consumers spend their entire life...
Capping credit card rates at 10% would mean a large swath of the "credit challenged" would have credit limits significantly decrease. The issuers have rates in excess of 20% because they have larger losses as well as needing to have bigger allowances for doubtful accounts. A "sub prime" provider like Credit One (their ads are everywhere) could not survive on a 10% cap. Some think this good because lower end consumers spend their entire life in debt peonage buying stuff they really can't afford.
"...lower end consumers spend their entire life in debt peonage buying stuff they really can't afford."
That includes food, housing, and medicine.
You really do hate the poor. You are pitiable.
Oh please….the thing is attempting to play to the mid terms. A one year cap makes absolutely no sense and is just an idiotic ploy to address affordability. What it does do is inject yet more uncertainty into our economy similar to the opacity swirling around the validity of the tariffs. The thing said it itself, if Congress goes blue, the tenor of the last two years of its presidency will be at best be...
Oh please….the thing is attempting to play to the mid terms. A one year cap makes absolutely no sense and is just an idiotic ploy to address affordability. What it does do is inject yet more uncertainty into our economy similar to the opacity swirling around the validity of the tariffs. The thing said it itself, if Congress goes blue, the tenor of the last two years of its presidency will be at best be very challenging. Desperate attempts by an unhinged individual, pure and simple.
This is just a political stunt to show that the Administration cares about affordability. There are no laws to enforce the cap on the interest rates charged by private lenders. And it would be foolish for US Treasury to issue their own credit cards.
Are we adopting a centrally planned economy? Have we not learned from history that such a move would be inflation-inducing? Along with tariffs? Some of us remember the US economic crisis in late 1979. Among other actions, the Federal Reserve abolished its Regulation Z, which then allowed interest rates to be market-driven. It is what ultimately tamed inflation.
Are you trying to argue with a master businessman like Donald Trump? He owned the 1980s. And every other decade.
A couple of things in play here.
1) This is just a campaign tactic. The president doesn’t have the power to unilaterally dictate these terms, but it’s very easy to say this and then, when it obviously doesn’t happen, blame the Democrats for “blocking” it.
2) If such a thing were enacted (by Congress), it might not actually hurt bank profits too much. Obviously, the income from individual borrowers would decrease, but with...
A couple of things in play here.
1) This is just a campaign tactic. The president doesn’t have the power to unilaterally dictate these terms, but it’s very easy to say this and then, when it obviously doesn’t happen, blame the Democrats for “blocking” it.
2) If such a thing were enacted (by Congress), it might not actually hurt bank profits too much. Obviously, the income from individual borrowers would decrease, but with a lower interest rate, it’s entirely possible that more cardholders would, at least occasionally, run balances, as the opportunity cost of borrowing at 10% (vs 30%) is so much lower. Writ large, this change could probably make up for a large chunk of lost revenue while potentially decreasing write-offs.
"The president doesn’t have the power"
I think the President has demonstrated numerous times things he did even if he doesn't have the power.
So our President is lowering interest rates that would help every American. Yet this blogger finds it necessary to attack him???
(1) That was proposed by AOC and Sanders.
(2) Just for a year, guess why
I noticed that in a separate article that there was a bipartisan bill sponsored by Sanders and some Republican. I thought “Dod hell freeze over that President Trump was backing something Sanders proposed?” LOL.
Eh, the readers of this blog rely on credit card rewards, so I don't think the proposal would indeed help every American.
How did he attack him? He stated both sides of the argument from a travel/ points perspective. You troll farms fools are incredibly dumb.
TACO will quietly walk it back, just wait
Where's the attack?
I love it when people who doesn't get econ or finance says stupid things like this.
"So our President is lowering interest rates that would help every American."
Maybe they want less people to have credit cards?
Maybe they want to slow the number one driver of the economy, consumer spending? What year did you drop out of school?
As someone working in the industry, I can tell you that this will have limited impact on rewards (though the uncertainty it will cause will lead to a lot of confusion). Revenue and profits are largely driven by interchange fees and as long as that isn’t touched everything will be fine.
I was thinking the same thing. I don't work in the industry, but I was thinking about this a while back when there was legislation on the news that would cap interchange fees.
I was always under the impression that credit card companies make most of their money from interchange fees. Think about it, every time you pay something with a credit card, while you do get rewards back, it is typically less than...
I was thinking the same thing. I don't work in the industry, but I was thinking about this a while back when there was legislation on the news that would cap interchange fees.
I was always under the impression that credit card companies make most of their money from interchange fees. Think about it, every time you pay something with a credit card, while you do get rewards back, it is typically less than the interchange fee. The exception might be the 4x/% and 5x/% rewards we see, but that loss is small compared to how many people put their other non-bonused category spending on those cards. My assumption was that credit card companies' interest revenue is mostly just used to lend out more to users. I assume that if this 10% cap is introduced (and becomes permanent in a hypothetical world), what would be affected is how much banks lend out to users, specifically risky users. Maybe sign up bonuses as well, but I think competition will drive that more. Thats my thinking anyway.
I think you look at this like similar to other "big" announcements in the past. Look at the announcements about food dyes last year. Many companies got on board long before a ban was to be put in place. It gets the conversation front and center. If you haven't figured out this tactic, used a lot by this Admin, then you haven't been paying attention. Secondly, it pulls the affordability topic away from Democrats, who,...
I think you look at this like similar to other "big" announcements in the past. Look at the announcements about food dyes last year. Many companies got on board long before a ban was to be put in place. It gets the conversation front and center. If you haven't figured out this tactic, used a lot by this Admin, then you haven't been paying attention. Secondly, it pulls the affordability topic away from Democrats, who, while banging on their pots and pans, haven't really done anything on that front.
Why would he advance a policy objective to help Republicans in the midterms that they would certainly oppose and Democrats would likely embrace? Republicans have been turning back credit card rate caps for decades.
Surely some will grumble, but a lot will get on board.
Certainly oppose? lol. There is not a Republican in either house that will oppose anything that man does even if it meant selling out their own family and constituents. Except releasing THE FILES, of course. Can't have that. "Certainly"...lolololol.
I thought "affordability" was a hoax?
pRiCe Of EgGs… hE’s ToO oLd… BuT hEr EmAiLs…
What’ll it be next time? And yet, Trump hasn’t dealt with inflation, is also too old and getting worse mentally, and his administration violates the laws on secured communications (Singal-gate, documents-scandal), and that’s not even the worst he’s done. We need accountability, no matter how long it takes.
False. He's 'making headlines' because of midterms elections approaching. He will not do any of this. Wake up people!
The fact that it’s only for a year which ends shortly after the midterms makes it definitely seem more political. People will definitely continue to carry balances beyond one year.
This is certainly an area for sensible federal legislation, but that’s not coming anytime soon. I doubt an EO would survive the first round in federal court. Trump may think the banks would suck it up and voluntarily submit to an EO since he’s only proposing a one year cap, but they won’t. Even if they did, banks would cut expenses rather than profit margins, which could mean a reduction in frequent flyer perks, but...
This is certainly an area for sensible federal legislation, but that’s not coming anytime soon. I doubt an EO would survive the first round in federal court. Trump may think the banks would suck it up and voluntarily submit to an EO since he’s only proposing a one year cap, but they won’t. Even if they did, banks would cut expenses rather than profit margins, which could mean a reduction in frequent flyer perks, but more likely would mean a contraction of credit to the poorest and highest risk consumers. That’s not what he wants in an election year.
Move on, this won't happen...
For real. Unless Congress/Fed/Courts really have just become the State Duma (a rubber stamp for our dictator), like, Presidents do not set interest rates, especially not on a whim.
That's exactly what this congress has been - a rubber stamp. No congress, that I knew, ceded so much of its power to the executive branch. The SCOTUS is in Trump's pocket. The district courts are trying their best. Eliminating nationwide injeuctions is SCOTUS' way of making it harder for them.
Rewards are evil. They just increase cost. Rewards don't just pop up free with no cost to merchants, who pay a higher rate when reward cards are used.
Rich people are the ones that get the rewards. They should be punished. Frequent flyer miles are even worse. There should be a wealth tax on miles in your account. If you are an elite member, should should earn fewer miles per dollar, like 5 miles per...
Rewards are evil. They just increase cost. Rewards don't just pop up free with no cost to merchants, who pay a higher rate when reward cards are used.
Rich people are the ones that get the rewards. They should be punished. Frequent flyer miles are even worse. There should be a wealth tax on miles in your account. If you are an elite member, should should earn fewer miles per dollar, like 5 miles per $. General non-elite members should earn 10-12 miles. Frequent flyer miles are now a regressive system. Tax the rich fat cats
You forgot the “/s”
Even if one takes this seriously (which one should not), from a policy perspective, a 1 -year cap is completely inane. Those who are most vulnerable to overspending on credit cards would just spend more, only to find that a year later, they're paying the same old high rates, but on an even higher balance. It's an absolutely moronic policy, which is no surprise.
The US needs to cap interchange fees, which will have a much bigger impact on the economy. A 3-4% markup for credit card fees is built into everything we buy, which disproportionately affects those paying cash or with cards that don’t have a lot of benefits. Interchange fees in the EU, for example, are capped at 0.3%.
In the grands scheme of things, interest rates are a smaller issue that the market and competitive dynamics will sort out.
This is all about getting more money into the average person's hands to spend, invest and buy good/services. Between capping CC rates, what is quoted to be the biggest average tax return amount in history and trying to artificially lower mortgage rates, it's all about giving people more money to spend temporarily.
More money to spend equals a perceived healthy economy. Another reason why a tariff stimulus check has been discussed. Unlikely to pass, but still.
And, only proposed for a year because once he collects on this as a midterm issue he doesn’t really care after that.
A big tax refund just means you had too much withheld during the year. It doesn't mean you're paying more or less tax.
The regime’s lunatic titular leader will sink most Americans’ credit score if he gets his way on this.
The Musk-Trump-Vance must be opposed on everything, including on this lame-brained idea of meddling in how and to whom businesses lend money.
Their idea of ‘great’ is to make us all poorer and worse off… and in return we get… white cis male supremacy? Psh. What a bunch of losers.
Trump has REQUESTED interest rate caps.
It will go precisely nowhere and won't even be a thing in 2 weeks when some other idea pops into his head.
@ Tim Dunn -- Well he doesn't say "requested." He says "we will no longer let" credit card companies charge those rates. You may very well be right that this goes nowhere, but it sure seems like he's doing a poor job managing expectations. I imagine there will be an influx of people calling their credit card companies on January 20, demanding the 10% interest rates they've been promised.
Ben, haven't you noticed that Trumplestilskin says lots of silly things that make absolutely no sense? Haven't you also noticed that he forgets all about them at least as easily as your own toddler forgets about one toy as soon as he's distracted by another one?
Ben
Exxon has had no problem telling me that my expectations for sub $2/gal gas doesn't align with their expectations.
Kroger has no problem telling me that they aren't giving away milk even though lower prices on both products would lower my cost of living.
Tim,
Did Trump "REQUESTED" Maduro to stand trial in USA?
By the way, ExxonMobil never told anyone about $2 gas or Kroger giving free milk.
THIS IS ALL IN YOUR HEAD TIM and you fluff it up and use it as facts like always.
Fluffy Tim.
I was against this cap when the Democrats were for it, and I'm still against it. But I don't see how this impacts rewards at all? You are suggesting that people who spend a lot (and receive a lot of rewards) are loss leaders subsidized by people who pay interest? I know that is what main street thinks, but I find that completely unreasonable.
If a cap to interchange was implemented, it would destroy rewards,...
I was against this cap when the Democrats were for it, and I'm still against it. But I don't see how this impacts rewards at all? You are suggesting that people who spend a lot (and receive a lot of rewards) are loss leaders subsidized by people who pay interest? I know that is what main street thinks, but I find that completely unreasonable.
If a cap to interchange was implemented, it would destroy rewards, but I think this will just prevent marginal consumers from getting credit cards at all. The interchange fees pay for rewards.
If stores were allowed to accept some Visa/Amex, etc but not all, that would also impact rewards.
But I don't see how this does.
Patio11 wrote a good article on this a few months ago in his very good newsletter (Bits about Money).
@ Kyle0727 -- "You are suggesting that people who spend a lot (and receive a lot of rewards) are loss leaders subsidized by people who pay interest?"
I'm not saying it's a full-on loss leader situation without financing (it depends on the consumer), but a majority of the margins are coming from financing charges, especially on premium cards.
For example, when the Sapphire Reserve launched, Chase made it clear that the product wasn't as...
@ Kyle0727 -- "You are suggesting that people who spend a lot (and receive a lot of rewards) are loss leaders subsidized by people who pay interest?"
I'm not saying it's a full-on loss leader situation without financing (it depends on the consumer), but a majority of the margins are coming from financing charges, especially on premium cards.
For example, when the Sapphire Reserve launched, Chase made it clear that the product wasn't as profitable as the bank expected, as consumers weren't financing charges at a sufficient rate.
Especially among premium cards, where consumers are likely to actually eventually pay back what they're owed (due to having great credit in the first place, which allowed them to get the card), I do believe this would have a significant impact.
I think that premium cards are a very profitable segment which is why there is so much competition for it. If there is a change due to this, I think it would be minor.
Note that I'm also not against a cap on interchange fees. I think the argument they just raise the prices on everything for the benefit of rich consumers with premium cards and credit card companies is hard to argue with. It would make my travel much less fun though!
@ Kyle0727 -- I agree, I'm not saying lower fees all-around would necessarily be bad for the public. But it's not just "rich consumers" who benefit from the current system.
If interest rates were actually capped, a huge percentage of the population would be locked out of credit cards, because the risk would no longer be worth it for card issuers. They'd move to debit cards then, which offers less consumer protection, less flexibility...
@ Kyle0727 -- I agree, I'm not saying lower fees all-around would necessarily be bad for the public. But it's not just "rich consumers" who benefit from the current system.
If interest rates were actually capped, a huge percentage of the population would be locked out of credit cards, because the risk would no longer be worth it for card issuers. They'd move to debit cards then, which offers less consumer protection, less flexibility if they need a few extra weeks to make a payment, etc.
The Chase Sapphire Reserve wasn't as profitable as the bank expected because their team didn't do the math properly on handing out 100k sign up bonuses like water for that card. The amount of sign up's they experienced was unprecedented.
I mean, lower revenue is lower revenue regardless of the source. Yes, ending the ridiculous interchange fees in the US would have a bigger impact, but any constraint on credit card revenue will reduce the rewards system.
You really don't understand why one year only? Think about it. Midterms. That's it.
Yup, exactly. Everything that happens this year is to try and juice midterms. I don't think it will work and Republicans will get blown out but hey, they can certainly try all tactics.