Business

Trump Calls for 10% Cap on Credit Card Interest Rates. What It Could Mean for Consumers

President Donald Trump earlier this month gave credit card companies until Tuesday, Jan. 20, to comply with his call to cap interest rates at 10% for one year.

The goal is to limit the amount of credit card debt in the United States, which reached a staggering $1.23 trillion in the third quarter of 2025.

Consumer groups, politicians and bankers alike remain unclear on what the White House has planned.

So far, the White House has not provided details about what will happen to credit card companies that don’t lower card rates. White House Press Secretary Karoline Leavitt said the president has “an expectation” that credit card companies will accede to his demand that they cap interest rates on credit cards at 10%.

“I don’t have a specific consequence to outline for you but certainly this is an expectation and frankly a demand that the president has made,” Leavitt said.

A researcher who studied Trump’s proposal when he first floated it during the 2024 presidential campaign found that Americans would save roughly $100 billion in interest a year if credit card rates were capped at 10%. The same researcher found that while the credit card industry would take a major hit, it would still be profitable, although credit card rewards and other perks might be scaled back. The administration has amplified that research, posting it on one of the White House’s official Twitter pages.

Critics argue the move could result in increased credit card fees and companies refusing to lend to borrowers with lower credit scores.

There have been bills introduced into both houses of Congress by both Republicans and Democrats this year and years past, but House and Senate Republican leadership have been cold to the idea of passing a law capping interest rates.

Why Is Credit Card Debt So High?

Consumer financial company Bankrate conducted a survey that found that lower-income households had the highest amount of debt.

“Lower-income cardholders are also more likely to carry debt from month to month,” according to a news release from Bankrate. “The majority (56%) of cardholders with annual household incomes under $50,000 carry credit card debt from month to month, versus 51% of those earning between $50,000 and $79,999 per year, 43% earning between $80,000 and $99,999 and 36% earning $100,000 or more per year.”

Bankrate found that 41% of people surveyed said the primary cause of their credit card debt was emergency and/or unexpected expenses, such as medical bills or car repairs.

Day-to-day expenses like groceries, child care and utilities were the second most common reason for carrying a balance (33% of participants). Retail expenses like clothing and electronics were the primary cause of debt for 10% of participants, while 7% listed vacation and entertainment expenses.

“The cumulative effects of high prices and high interest rates are weighing on American households,” Bankrate senior industry analyst Ted Rossman said in a statement. “It’s not that prices have run away from us this year. It’s when we zoom out and consider the past several years that we see how much the cost of living has risen and how many people have taken on debt and dipped into savings as a result.”

Could the President’s Plan Help Tackle Debt?

Abol Jalilvand, a professor of finance at Loyola University Chicago, said interest rates have a compounding effect on the massive amount of credit card debt Americans face.

He believes Trump’s attempt to cap credit card rates could help Americans save billions of dollars — provided that proper guardrails are put into place.

“It is very interesting that the rate is primarily determined by the banks,” Jalilvand said, “and the Consumer Financial Protection Bureau really doesn’t have the authority to regulate that rate. I think it’s a good idea to focus on the development and the determination of that rate and figure out how that has to be applied to various structures of society.”

Jalilvand said the lack of transparency around how credit card companies establish their interest rates disproportionately affects lower-income borrowers.

Horacio Mendez, CEO and president of the Woodstock Institute, said he believes Trump’s demands are well-intentioned — but Mendez doubts the efficacy of capping interest rates and warns of unintended consequences.

“This idea forces credit card companies and banks to make less money and there isn’t any political or regulatory pressure to force them to just deal with it — then you’re going to see them take a number of actions to limit those losses and try to find different ways to make money,” Mendez said.

Mendez said that without a regulatory body, there is nothing stopping companies from capping credit card spending out of the blue, closing accounts or even denying more credit card applications.

“One other option that I actually heard from a lender was, ‘We may just roll over your balance into an installment loan that isn’t covered by this,’” Mendez said.

Mendez said people with limited options may be forced out of credit and left only with financial products from predatory lenders, like pay-day loans.

The Woodstock Institute collaborated with the state of Illinois to pass the Predatory Loan Prevention Act, which Mendez described as “ironclad.” He said the act could serve as a framework for national regulation.

The Woodstock Institute provided a statement: “If the president really wants to help consumers and start to tackle the affordability crisis, he should work with Congress to limit junk fees and limit what predatory lenders can charge by passing a nationwide across-the-board consumer loan rate cap, or at least a margin-based cap that would fluctuate with inflation.”

The Associated Press contributed to this report. 

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