The numbers are staggering: $1.23 trillion in credit card balances, the highest level in American history. Average interest rates exceeding 20%. Delinquency rates stabilized but near the highest levels in a decade. Into this charged environment landed President Trump's proposal for a 10% rate cap—and the debate it ignited reveals deep divisions over how America should manage consumer credit.

The battle lines are drawn. Consumer advocates argue that credit card companies have been "ripping off" Americans for decades, profiting excessively from financial vulnerability. Banking industry groups counter that rate caps would restrict credit access, pushing the very consumers meant to be helped toward more expensive alternatives like payday lenders.

The truth, as always, lies somewhere in the messy middle.

How We Got Here

Credit card debt has grown relentlessly since the pandemic, driven by a combination of factors: elevated prices for essentials, stagnant wage growth for many workers, and the gradual depletion of pandemic-era savings cushions.

About seven in ten Americans polled by CBS News in December said they were struggling to pay for food, housing, and healthcare. For many households, credit cards have become a lifeline—a way to bridge the gap between income and expenses.

But that lifeline comes at a steep cost. A family carrying $10,000 in credit card debt at 22% APR and paying 3% of the balance monthly would take over 20 years to pay off the debt—and pay nearly $20,000 in interest along the way.

The Case for Rate Caps

Proponents of Trump's proposal argue that the current system is fundamentally exploitative. Credit card companies have perfected the art of maximizing interest income: extending credit to borderline borrowers, structuring minimum payments to extend repayment periods, and raising rates on existing balances when market conditions allow.

Senator Bernie Sanders, who co-sponsored rate cap legislation with Republican Josh Hawley last year, has argued that a 10% cap would save American households collectively $100 billion annually. That money, redirected into the broader economy, could provide significant stimulus.

"Americans are being ripped off. Credit card companies can borrow money at 4%, and they're charging you 20% or 25% or 30%. That's outrageous."

— President Donald Trump, Truth Social, January 9, 2026

The Case Against

The banking industry's opposition is fierce and, critics would say, predictable. But their arguments deserve serious consideration.

The Bank Policy Institute estimates that more than 14 million American households could lose access to credit cards entirely if rates are capped at 10%. The math is straightforward: credit card defaults average around 3-4% annually. Add operating costs, customer acquisition, rewards programs, and required capital reserves, and many banks argue they cannot profitably serve higher-risk borrowers at 10%.

JPMorgan analyst Vivek Juneja warned that restricted bank lending would "push consumers towards more expensive debt"—potentially including payday lenders charging effective APRs of 400% or more.

The Enforcement Question

Beyond the policy debate, serious questions remain about whether Trump can actually implement a rate cap. The National Bank Act allows credit card companies to charge rates permitted by the state where the bank is headquartered—a framework established by Supreme Court precedent.

Senator Elizabeth Warren dismissed Trump's proposal as "meaningless without a bill being passed by Congress," calling his approach "begging credit card companies to play nice."

Jefferies analysts echoed that assessment, calling the cap "dead on arrival" without legislation and noting "we see no path to 60 votes in the Senate."

A Middle Path?

Some economists suggest alternatives that might address affordability concerns without restricting credit access. These include:

  • Enhanced disclosure requirements showing total interest costs over typical repayment periods
  • Mandatory minimum payment increases to accelerate debt payoff
  • Caps on penalty rates and late fees rather than baseline APRs
  • Tax incentives for lenders who offer lower rates to qualified borrowers

None of these generate the political appeal of a simple rate cap, which may explain why they receive less attention.

What Comes Next

For now, Trump's proposal remains more political signal than policy reality. But the issues it highlights aren't going away. Credit card debt will likely continue growing. Affordability concerns will persist through the midterm elections. And the fundamental tension between consumer protection and credit access will remain unresolved.

For individual consumers, the most practical advice remains unchanged: pay down high-interest debt aggressively, consider balance transfer offers when available, and build emergency savings to avoid reliance on credit cards for necessities.

The policy debate will continue. But financial health starts with individual decisions, regardless of what Washington ultimately decides.