Why This Matters
President Trump’s call for a temporary 10% cap on credit card interest rates marks a significant intervention in consumer finance markets. The announcement comes as Americans carry record credit card debt exceeding $1.2 trillion while facing average interest rates above 20%. The proposal raises fundamental questions about presidential authority over financial markets, the role of government in consumer protection, and potential consequences for credit availability.
The timing of the announcement, one year before the 2026 midterm elections, has prompted analysis of whether this represents genuine policy reform or strategic political messaging amid voter concerns over living costs.
Background: Rising Rates and Record Debt
Credit card interest rates have climbed steadily over the past decade. Federal Reserve data shows that average interest rates on credit card accounts reached 20.97% in the fourth quarter of 2025, while rates for accounts accruing interest averaged 22.30%. New credit card offers carry even higher rates, averaging 23.79% as of January 2026.
This represents a significant increase from pandemic-era levels. In 2020, when the Federal Reserve implemented near-zero interest rate policies, credit card rates averaged approximately 16%. The subsequent series of Federal Reserve rate hikes beginning in 2022 pushed credit card costs to levels not seen in decades.
Simultaneously, American consumers accumulated unprecedented credit card debt. According to the Federal Reserve Bank of New York, total credit card balances reached $1.233 trillion in the third quarter of 2025, the highest level since tracking began in 1999. This represents a 33% increase from pre-pandemic levels and a 60% surge from the pandemic-era low of $770 billion in early 2021.
Average household credit card debt among those carrying balances stood at approximately $7,886 in the third quarter of 2025, with some households owing substantially more. Americans paid an estimated $105 billion in credit card interest charges in 2022 alone.
Trump’s Announcement and Unclear Implementation
On January 9, 2026, President Trump announced his proposal via Truth Social, declaring that Americans would no longer be “ripped off” by credit card companies charging rates between 20% and 30%. The president called for a one-year cap on credit card interest rates at 10%, effective January 20, 2026, coinciding with the first anniversary of his second inauguration.
The announcement, however, provided no details about implementation mechanisms. Trump did not specify whether he was seeking voluntary compliance from credit card issuers or planning to pursue government enforcement. The White House did not immediately respond to media requests for clarification about the proposal’s legal framework.
Legal experts widely agree that the president lacks unilateral authority to impose interest rate caps on private financial products. Such action would require congressional legislation. Federal regulators do not currently possess explicit statutory authority to enforce a blanket credit card interest ceiling at the national level.
Legislative Efforts Already Underway
Trump’s announcement comes against the backdrop of existing bipartisan legislative efforts in Congress. Senator Bernie Sanders, an independent from Vermont, and Senator Josh Hawley, a Republican from Missouri, introduced S.381, the 10 Percent Credit Card Interest Rate Cap Act, in February 2025. The bill would cap credit card interest rates at 10% for five years through January 2031.
Similar legislation was introduced in the House of Representatives by Democratic Representative Alexandria Ocasio-Cortez of New York and Republican Representative Anna Paulina Luna of Florida. These bills would amend the Truth in Lending Act to enforce the cap, with violations resulting in forfeiture of interest and potential civil liability.
Trump made similar campaign promises during the 2024 presidential election but has not explicitly endorsed any specific pending legislation. Hours before Trump’s Friday announcement, Sanders criticized the president on social media for not following through on his campaign pledge, noting that the administration had instead pursued deregulation benefiting large banks.
Banking Industry Raises Alarm
The banking industry responded swiftly with strong opposition to any interest rate cap. A coalition of major banking trade groups issued a joint statement arguing that a 10% ceiling would harm the very consumers it intends to help.
The Consumer Bankers Association, Bank Policy Institute, American Bankers Association, Financial Services Forum, and Independent Community Bankers of America stated that such a cap would reduce credit availability and prove devastating for millions of American families and small business owners who rely on credit cards.
In a 2024 letter to Sanders and Hawley, banking groups warned that consumers unable to access traditional credit cards would be forced to seek alternatives through pawn shops, auto title lenders, or unregulated online lenders charging even higher rates. The Bank Policy Institute estimated that more than 14 million American households that rarely pay their credit card balances in full could have their credit access eliminated or curtailed by a 10% cap.
Major credit card issuers including JPMorgan Chase, Capital One, American Express, Citigroup, and Bank of America declined to comment publicly on the proposal.
Expert Analysis and Market Reactions
Reaction from financial experts revealed sharp divisions over the proposal’s merits and feasibility.
Billionaire hedge fund manager Bill Ackman, who endorsed Trump during the 2024 election, called the proposal a “mistake” on social media. Ackman argued that without the ability to charge rates sufficient to cover losses and earn adequate returns, credit card lenders would cancel cards for millions of consumers, forcing them to turn to loan sharks at higher rates and inferior terms.
Senator Josh Hawley quickly voiced support for Trump’s call, stating he couldn’t wait to vote for it. Senator Elizabeth Warren, the top Democrat on the Banking, Housing and Urban Affairs Committee, dismissed the proposal as a “joke,” arguing that asking credit card companies to voluntarily play nice would accomplish nothing. Warren stated that if Trump were serious, she would work to pass legislation implementing the cap.
Consumer advocacy groups have generally supported interest rate caps, pointing to research showing that credit card rates have climbed far above the cost of providing credit. A 2024 study by the Consumer Financial Protection Bureau found that credit card interest rates had soared beyond what could be justified by lending costs.
Public opinion appears favorable toward rate caps. A 2024 survey by LendingTree found that 77% of respondents supported implementing a credit card interest rate cap, even if it meant sacrificing certain rewards programs.
The Deregulation Paradox
Trump’s interest rate cap proposal stands in stark contrast to his administration’s earlier deregulatory actions affecting credit cards. In 2025, the Trump administration moved to eliminate a Biden-era rule that would have capped credit card late fees at $8. The administration sided with banking groups challenging the regulation in federal court, arguing the rule was illegal.
This reversal allowed credit card issuers greater flexibility in setting late fees, which consumer advocates argue function more as profit centers than administrative cost recovery. Critics have characterized the simultaneous pursuit of interest rate caps and late fee deregulation as internally inconsistent.
Supporters of the administration’s approach argue that the two issues are distinct. They contend that deregulation reduces compliance burdens and preserves market efficiency, while an interest rate cap addresses what they view as exploitative pricing practices.
Potential Impact on Consumers and Credit Markets
The economic implications of a 10% interest rate cap would be substantial and multifaceted.
For consumers currently carrying credit card balances at high interest rates, the savings could be significant. A consumer with $5,000 in credit card debt at 28% interest could save more than $7,000 in interest payments over time under a 10% cap, assuming minimum payments.
However, economists and industry analysts warn of potential unintended consequences. Credit card issuers use risk-based pricing, charging higher rates to borrowers with lower credit scores or higher default risk. A uniform 10% cap could make it unprofitable for issuers to serve higher-risk customers.
This could lead to stricter underwriting standards, with issuers tightening credit requirements and denying cards to millions of Americans with lower credit scores. The Federal Reserve Bank of Philadelphia noted in its first quarter 2025 report that the subprime share of large bank credit card originations had already fallen to 16.4% from 23.3% three years earlier, reflecting tighter lending standards.
Consumers unable to access traditional credit cards might turn to alternative lending products that are less regulated and potentially more expensive, including payday lenders, pawn shops, or online installment loans. This could shift debt burdens rather than reduce them.
Credit card rewards programs could also face pressure. Banks might reduce cashback percentages, travel rewards, or other benefits to offset revenue losses from capped interest rates. Cards with annual fees might become more common as issuers seek alternative revenue streams.
Credit Unions Face Different Considerations
Credit unions, which are nonprofit financial cooperatives serving members, already operate under a statutory interest rate cap significantly lower than what applies to banks. The National Credit Union Administration currently caps credit union interest rates at 18% in most circumstances.
The Defense Credit Union Council expressed opposition to blanket interest rate caps, arguing they could undermine the broader service model that credit unions provide. Chief Advocacy Officer Jason Stverak noted that limiting institutions’ ability to price loans according to risk does not eliminate the need for credit but merely shifts demand to less regulated, higher-cost alternatives outside the credit union system.
Credit unions provide additional services beyond lending, including financial counseling, fraud protection, and deployment-related assistance for military families. A one-size-fits-all cap could threaten the sustainability of these services.
Political Context and Timing
The timing of Trump’s announcement carries political significance. With midterm congressional elections scheduled for November 2026, affordability remains a top concern for voters across the political spectrum. Persistent inflation and accumulated price increases from previous years have created economic pressure on many households.
Republican lawmakers have urged Trump to address cost-of-living concerns more aggressively. Senator Lisa Murkowski of Alaska previously criticized Trump for calling affordability concerns a “hoax,” warning that such dismissiveness could undermine voter confidence.
The interest rate cap proposal allows Trump to position himself as a consumer advocate willing to challenge powerful financial interests. Whether this represents a genuine policy priority or primarily serves as political messaging ahead of midterm elections remains an open question.
The proposal’s one-year duration, expiring just before the 2027 inauguration of the next Congress, suggests a temporary rather than permanent intervention in credit markets. This timeframe could limit disruption to lending markets while providing political benefits.
Historical Precedent and State Laws
Federal interest rate caps on consumer credit are not unprecedented in American history. Usury laws limiting interest rates date back to colonial times, though their application and scope have varied widely.
Currently, there is no general national cap on credit card interest rates. State usury laws technically apply to credit cards based on where the issuing bank is headquartered, not where the consumer resides. A 1978 Supreme Court decision allowed national banks to charge interest rates permitted by their home state, regardless of the borrower’s location.
This prompted many credit card issuers to relocate to states with favorable usury laws, particularly Delaware and South Dakota, which have minimal restrictions on consumer credit interest rates. This regulatory arbitrage effectively eliminated meaningful state-level interest rate caps for most credit card holders.
A national interest rate cap would override this system and apply uniformly across all states. The Truth in Lending Act, which regulates credit card disclosures and practices, could serve as the legislative vehicle for such a cap if Congress chooses to pursue it.
Path Forward Remains Uncertain
For Trump’s proposal to become law, Congress would need to draft and pass legislation specifying the cap’s terms, implementation mechanisms, and enforcement provisions. The bill would require approval by both the House of Representatives and the Senate before reaching the president’s desk for signature.
Republicans currently hold narrow majorities in both chambers, but the issue has demonstrated bipartisan appeal. The Sanders-Hawley bill shows potential for cross-party cooperation, though significant political obstacles remain.
Financial industry lobbying against the cap is likely to be intense. Banks and credit card issuers possess substantial political influence and resources to shape legislative outcomes. Consumer advocacy groups will likely mobilize in support, creating a classic Washington battle between industry interests and consumer protection advocates.
The Federal Reserve’s monetary policy trajectory could influence the debate. The central bank made three quarter-point rate cuts in late 2024 and three more in late 2025, bringing the federal funds rate down from pandemic-era highs. If the Fed continues cutting rates, credit card interest rates may decline naturally, potentially reducing pressure for legislative action.
However, credit card rates have historically remained elevated even when the Fed’s benchmark rate falls. During the pandemic’s zero-rate environment, credit cards still charged approximately 16% on average, suggesting that natural market forces alone may not bring rates to 10% without regulatory intervention.
What This Means for Consumers
For now, credit card holders should not expect immediate changes to their interest rates. Trump’s announcement represents a proposal rather than implemented policy. Cardholders will continue facing current interest rates until and unless Congress acts.
Consumers carrying credit card debt can take several steps to reduce interest costs without waiting for legislative action. Balance transfer cards offering 0% introductory APR periods of 12 to 21 months can provide temporary relief, though approval typically requires good credit scores above 680.
Contacting credit card issuers to request rate reductions can prove effective. A June 2025 survey by LendingTree found that 83% of cardholders who asked for lower APRs succeeded in obtaining some reduction.
Paying off balances in full each month remains the most effective way to eliminate interest charges entirely, making the card’s interest rate irrelevant. For those unable to pay in full, paying more than the minimum can significantly reduce interest costs over time.
Financial counseling services, often available through nonprofit organizations and credit unions, can help consumers develop debt repayment strategies and potentially negotiate with creditors.
Conclusion
President Trump’s call for a 10% credit card interest rate cap has injected new urgency into ongoing debates about consumer protection, credit access, and financial regulation. The proposal addresses real concerns about the burden of high-interest debt on American households while raising complex questions about market intervention, credit availability, and regulatory authority.
The contrast between this consumer-focused proposal and the administration’s earlier deregulatory actions creates apparent inconsistencies that critics have highlighted. Whether the interest rate cap represents a genuine policy priority or primarily serves political messaging purposes ahead of midterm elections remains to be seen.
The proposal’s ultimate fate depends on congressional action. Existing bipartisan legislation provides a potential framework, but significant political, legal, and economic hurdles remain. Banking industry opposition, concerns about credit availability, and questions about enforcement mechanisms will shape the legislative debate.
For American consumers carrying $1.2 trillion in credit card debt at record-high interest rates, the stakes are substantial. Whether this proposal evolves into concrete legislation or remains an unfulfilled promise will have real consequences for household finances and the broader credit market.
The coming months will reveal whether political will exists to challenge the banking industry’s resistance and implement fundamental changes to credit card pricing. Until then, the Trump credit card interest cap stands as a high-profile proposal that reflects widespread frustration with borrowing costs while facing an uncertain path to implementation.
