US banks and financial institutions are pushing back against President Donald Trump’s proposal to cap credit card interest rates at 10 per cent, saying it could restrict access to credit for millions of Americans and small businesses.
Trump, under pressure to address rising living costs, called on Friday for a one-year limit on credit card rates starting January 20. He did not provide details on enforcement, and analysts said implementing such a cap would likely require congressional approval.
Financial groups responded swiftly on Monday. The Electronic Payments Coalition, which represents banks and payment networks, said a 10 per cent cap could lead to the closure or severe restriction of nearly all credit card accounts associated with credit scores below 740, which account for 82 to 88 per cent of open credit card accounts. “A one-size-fits-all government price cap may sound appealing, but it wouldn’t help Americans – it would do the exact opposite, harming families, limiting opportunity, and weakening our economy,” said EPC Executive Chairman Richard Hunt.
Lenders said subprime borrowers would face the greatest impact, while other cardholders could see higher annual fees, reduced rewards, and more monthly account charges. Some also warned that a cap could slow consumer spending and harm overall economic growth.
Credit cards play a central role in US consumer finance, providing households with flexible access to credit. High interest rates and fees, while often criticized, are a major source of profit for banks and card issuers. According to the Consumer Financial Protection Bureau, average annual percentage rates reached their highest levels since 2015 in 2024, with general-purpose cards averaging 25.2 per cent and private-label cards at 31.3 per cent. The share of cardholders making only the minimum payment also reached its highest point since 2015.
Industry experts said a 10 per cent rate limit would make credit cards unprofitable, likely prompting lenders to reduce lending. “President Trump’s statement was mostly a call to action and did not contain any policy or legislative announcements,” said Morningstar analyst Michael Miller. “We think a cap is unlikely to be implemented, but if enacted it would have dire consequences for credit card profitability. Many credit card portfolios carry credit costs that are too high to be supported under a 10% limit.”
Research suggests a rate cap could still save consumers money. A study by Vanderbilt University’s Policy Accelerator estimated that a 10 per cent cap could reduce annual costs for Americans by $100 billion, although it would also reduce credit card rewards for borrowers with credit scores of 760 or lower. “We often hear these complaints that this would cause banks to close people’s credit card accounts. What we found is that the profit margins are absolutely massive,” said Brian Shearer, director of competition and regulatory policy at Vanderbilt Policy Accelerator.
The debate highlights a growing tension between consumer relief efforts and the financial industry’s reliance on high-interest credit cards for revenue.
