Trump suggests 10% credit card interest cap — what it could mean for consumers

President Donald Trump has suggested temporarily capping credit card interest rates at 10%, a proposal that could significantly lower borrowing costs for millions of Americans but would require congressional approval to take effect.

Trump said in a Jan. 9 social media post that he would pursue a one-year cap on credit card interest rates, arguing that current rates — often above 20% — are too high for consumers. 

“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,” Trump said. 

Trump said the cap would take effect Jan. 20, though legal experts note that the president cannot impose such a limit without action from Congress.

The proposal has drawn mixed reactions from lawmakers and the financial industry.

Sen. Elizabeth Warren — who said she supports the idea of a credit card cap on interest rates — said she spoke with Trump about the idea. 

“After my speech, the president called me, and I delivered this same message on affordability to him directly,” Warren said in a statement. “I told him that Congress can pass legislation to cap credit card rates if he will actually fight for it.”

Some from the banking industry opposed the idea of a 10% cap. 

According to a press release from the American Bankers Association, Trump’s proposed executive order on credit cards would be harmful to consumers. 

“We share the President’s goal of helping Americans access more affordable credit,” the statement said. “At the same time, evidence shows that a 10% interest rate cap would reduce credit availability and be devastating for millions of American families and small businesses who rely on and value their credit cards, the very consumers this proposal intends to help. If enacted, this cap would only drive consumers toward less regulated, more costly alternatives. We look forward to working with the administration to ensure Americans have access to the credit they need.”

Here’s what to know about how a 10% cap would affect American consumers. 

The average credit card interest rate is currently around 20%, though rates can be significantly higher — reaching up to 36% for borrowers with lower credit scores.

To impose a nationwide cap on credit card interest rates at 10%, Congress would need to pass legislation setting a legal ceiling on annual percentage rates.

That would require bills to be introduced and approved by both the House and Senate and signed by the president or enacted through a congressional override of a veto. Under current law, the president cannot unilaterally impose an interest rate cap on credit cards.

Supporters of an interest rate cap argue it could significantly lower monthly costs for consumers carrying credit card balances.

According to an analysis from researchers at Vanderbilt University, a borrower with a $5,000 balance at a 24% interest rate would pay about $100 per month in interest. At a 10% rate, that monthly cost would drop to about $42, saving more than $700 per year.

Critics, however, warn that a lower cap could limit access to credit for some borrowers.

According to TIME, Dr. Samuel Gregg, interim president of the American Institute for Economic Research, said people who rely heavily on credit and struggle to repay balances could be most affected.

“If there’s a credit card cap put in place, then banks have no incentives to lend to those people,” says Gregg. “It would become harder for people who either have bad credit histories, or who don’t have huge incomes or have a certain degree of financial instability, for them to get credit at all.”