Credit card rates at 10 percent. For one year. Donald Trump just put that idea on the table, and the finance world is scrambling to game it out. If enacted, it would be the biggest direct hit to card interest in decades. It would also spark a fast fight over who gets credit, who loses margin, and who pulls back lending.
What the proposal says
Trump is calling for a one year, nationwide cap of 10 percent on credit card APRs. That would slice today’s average APR, which sits in the low 20s, by more than half for many borrowers. Revolvers would feel it fast. Minimum payments would drop. Interest charges would fall.
For households still battling high prices and high rates, it sounds like instant relief. For lenders, the math is stark. Card yields fund rewards, fraud losses, and charge-offs. A 10 percent lid would compress those margins overnight.
A 10 percent cap would be a price control on unsecured credit, not a tweak to fees or disclosures.
Can a president do this?
Short answer, not cleanly. A national cap would likely need Congress. Here is why.
Congress holds the keys
Federal law lets national banks export the interest rate allowed in their home state. A Supreme Court case locked that in years ago. That is why many issuers base cards in states with lighter usury limits. To override that framework, Congress would almost certainly have to pass a new law that sets a federal ceiling for all issuers.
Agencies have limits
Banking regulators can nudge on risk and fees, but they do not set credit card APRs. The Consumer Financial Protection Bureau can police unfair or abusive practices. A bright line APR cap, even for one year, is a different step. If an agency tried to jam in a cap through rulemaking, banks would sue within hours.
Courts would move fast
Any executive action would face immediate legal challenges from issuers and industry groups. Expect injunction requests, rapid appeals, and a race to the Supreme Court. The legal question would center on statutory authority. History says courts will ask for clear direction from Congress, not creative readings of old laws.
How could it happen, in theory:
- Congress passes a one year cap with explicit preemption over state laws
- A negotiated deal ties the cap to other bank regulations or tax changes
- Regulators push voluntary rate reductions, paired with capital or fee relief
- Emergency action is attempted, then paused by courts while Congress debates
The economic trade offs
A cap would save revolving borrowers real money in the short run. On a 3,000 dollar balance at 22 percent, annual interest is about 660 dollars. At 10 percent, it drops to about 300 dollars. That is grocery money, rent money, and a meaningful cushion.
But lenders adjust. Risk based pricing would be constrained. Issuers would likely tighten credit, lower credit limits, and pull offers to subprime borrowers. Balance transfer deals could dry up. Rewards could get cut. Annual fees could rise. Some co brands might change terms midyear.
Card backed asset backed securities would reprice. Spreads could widen on fear of lower yields and higher charge offs if credit tightens too much. Bank funding is stable today, but card portfolios are key profit engines. Squeezed yields would hit earnings guidance.
If pricing is capped, access becomes the release valve. Expect tougher approvals and smaller lines, especially for lower score borrowers.
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Market view, what to watch now
Investors should separate headlines from pathways. The proposal is bold, but the odds hinge on Congress. Still, regulatory risk is now back on the table for the card complex.
- Card heavy banks: Capital One, Discover, Synchrony, American Express
- Big banks with card exposure: JPMorgan, Citi, Bank of America, Wells Fargo
- Networks: Visa and Mastercard do not set APRs, but volumes could wobble if credit tightens
- Retailers: sales could slow if financing gets scarce, even as some households get relief
Credit is the pressure point. If a cap looks likely, expect issuers to defend margins by cutting promotions and repricing fees. Watch guidance on loss reserves, marketing spend, and rewards economics. In the bond market, monitor card ABS spreads and trust yields.
Hedge exposure by pairing card issuers with networks, or rotate into lenders with secured or installment focus. Consider short duration financials debt if spread volatility rises.
The political calculus
A one year cap is simple to explain to voters. It is harder to execute in law. Banks will argue the cap distorts risk and reduces access for those who need credit most. Consumer advocates are split. Cheaper balances help, but a clamp on underwriting could hit new borrowers and small businesses that rely on cards.
If Congress engages, the final shape could move. Lawmakers could add income thresholds, carve outs for small issuers, or safe harbors tied to loss rates. They could swap a hard cap for a formula tied to the prime rate. Any of those routes would still test margins and likely tighten supply.
Bottom line
The 10 percent idea lands like a thunderclap, simple and sweeping. For borrowers, the promise is real savings. For banks, it is an earnings shock. For markets, it is regulatory risk that will trade day to day. The key test is legal authority. Without Congress, a cap is a headline. With Congress, it is a new price control on unsecured credit, with clear winners and clear costs.
