Banks Concerned Over Potential 10% Cap on Credit Card Rates

Banks are expressing deep concern over President Trump’s recent call for a one-year 10% cap on credit card interest rates. This proposal, shared on social media, has generated significant backlash as it threatens a major profit source for card issuers.

Banks React to Interest Rate Cap Proposal

Financial institutions are involved in a delicate balancing act. They must avoid openly criticizing the President’s decree while privately warning that such a cap could restrict consumer access to credit. Notably, bank stocks have suffered this week. Companies like Capital One and Citigroup have seen a decline of approximately 7% and 8% in their stock values, respectively.

Economic Impact of the Proposed Cap

The President’s suggestion is seen more as a wish than a directive. Legal experts indicate that implementing an interest cap would require Congressional action, which appears unlikely given the current political climate.

Statements from Industry Leaders

• Jamie Dimon, CEO of JPMorgan Chase, stated that a cap might raise inflation expectations.
• Speaker Mike Johnson mentioned potential negative effects, including cutbacks in lending by credit card companies.

Despite the pushback, there is some Congressional support for capping interest rates. Senators Bernie Sanders and Josh Hawley had previously introduced a bill for a similar measure, which has stalled without broader backing.

Potential Savings for Consumers

Current credit card debt in the U.S. exceeds $1.21 trillion, with about 37% of American adults carrying balances. Average credit card interest rates were reported at around 22% as of November. If rates were capped at 10%, consumers could save approximately $100 billion annually, which averages $899 per person according to Vanderbilt University research.

Implications for Lenders

For credit card lenders, a cap would significantly impact their profitability. The industry earned $160 billion from interest fees in 2024, a rise from $105 billion in 2022. Analysts estimate that a cap would cut lenders’ earnings by about half, according to Michael Miller from Morningstar.

Credit Availability Concerns

• JPMorgan’s CFO, Jeremy Barnum, warned of decreased credit access.
• Wells Fargo’s CFO echoed similar sentiments, predicting a wide-ranging negative impact on credit availability.

However, some researchers believe banks could adapt by cutting marketing budgets instead of credit lines, potentially keeping credit avenues open for consumers with suitable credit scores.

Future Outlook

In anticipation of potential legislative action, major banking associations have publicly reiterated their commitment to ensuring access to affordable credit. However, they strongly argue against the proposed 10% interest rate cap, claiming it would harm millions who rely on credit cards.

With President Trump’s target implementation date of January 20 looming, there are currently no major lenders committing to reducing interest rates voluntarily. Industry analysts suggest that the prospects for substantial legislative changes in the near future remain low.