In a move that could upend the consumer credit industry, President Donald Trump announced Friday that he is calling for a one-year cap on credit card interest rates at 10 percent, effective January 20—the first anniversary of his return to the White House.

"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," Trump wrote on Truth Social. The announcement immediately raised questions about implementation, industry response, and what it would mean for the millions of Americans carrying high-interest debt.

The Current Landscape

Credit card interest rates have reached historic highs. According to Federal Reserve data, the average credit card APR now exceeds 21 percent—a record level that reflects both the elevated interest rate environment and issuers' risk-based pricing strategies.

For context, the average rate was around 15 percent before the Federal Reserve began its aggressive rate-hiking campaign in 2022. Even after three rate cuts in 2025 brought the federal funds rate down to 3.5-3.75 percent, credit card rates have remained stubbornly elevated.

Americans currently carry approximately $1.233 trillion in credit card debt, also a record. For a borrower with the average balance of roughly $8,000 paying the average 21 percent APR, interest charges alone amount to roughly $1,680 annually—compared to just $800 if rates were capped at 10 percent.

How Would a Cap Work?

Trump's announcement left crucial details unspecified. A credit card rate cap could theoretically be implemented through several mechanisms:

Voluntary Industry Compliance

The administration could pressure card issuers to voluntarily adopt lower rates, similar to how companies have agreed to price freezes during emergencies. However, asking banks to voluntarily slash their most profitable product's yield by half seems unlikely to succeed without significant incentives.

Executive Action

Some legal scholars have suggested the president could attempt to use emergency powers or regulatory authority to impose caps, though such an approach would almost certainly face legal challenges and might not survive judicial review.

Congressional Legislation

The most durable path would be legislation. Notably, a bipartisan bill introduced last year by Republican Senator Josh Hawley of Missouri and independent Senator Bernie Sanders of Vermont proposed exactly this: a 10 percent cap on credit card interest rates.

"The greed of the credit card industry has gone unchecked for far too long. American families deserve relief from predatory interest rates."

— Senator Josh Hawley, co-sponsor of the 10% rate cap bill

Industry Opposition

Banking industry groups responded swiftly and negatively. The American Bankers Association, Bank Policy Institute, and Consumer Bankers Association issued a joint statement arguing that a 10 percent cap "would reduce credit availability and be devastating for millions of American families and small business owners who rely on and value their credit cards."

The Bank Policy Institute estimated that more than 14 million American households that rarely pay their credit card balances in full could have their access to credit eliminated or curtailed under a 10 percent cap. The argument: at 10 percent rates, banks cannot profitably extend credit to higher-risk borrowers, who would instead be pushed toward even less regulated lending products.

The Math Behind the Pushback

To understand the industry's concern, consider the economics of credit card lending. Banks currently fund credit card portfolios at roughly 4-5 percent (based on their cost of funds plus operating costs). They lose approximately 3-4 percent of balances annually to defaults and fraud. Add marketing, customer service, and rewards program costs, and a 10 percent cap would leave razor-thin margins—or losses—for many portfolios.

This explains why credit card rates don't track the federal funds rate one-for-one. Unlike mortgages or auto loans, credit card debt is unsecured and has higher default rates, requiring wider spreads to remain profitable.

Potential Consequences

If a 10 percent cap were actually implemented, several outcomes are possible:

  • Credit rationing: Issuers would likely tighten approval standards, reducing access to credit for borrowers with lower credit scores or limited credit histories.
  • Reduced rewards: The lucrative rewards programs that many consumers enjoy are funded partly by interest revenue. A rate cap could lead to reduced cashback, fewer points, and higher annual fees.
  • Fee increases: Banks might compensate through higher late fees, annual fees, balance transfer fees, or new charges.
  • Product changes: Some issuers might exit the credit card market entirely or shift toward debit-focused products.

What Borrowers Should Do Now

Given the uncertainty around implementation, borrowers shouldn't count on rate relief anytime soon. Instead, consider these strategies:

  • Transfer balances: Many cards still offer 0% introductory APR balance transfer promotions, allowing you to pay down debt interest-free for 12-21 months.
  • Negotiate directly: Call your card issuer and request a rate reduction. Success rates are higher than most people assume, especially for customers with good payment histories.
  • Prioritize payoff: If carrying high-interest debt, focus discretionary income on paying it down before investing elsewhere. No investment reliably returns 20+ percent annually.
  • Consider personal loans: For larger balances, a personal loan at 8-12 percent might be preferable to ongoing credit card debt.

The coming weeks will reveal whether Trump's rate cap call is a negotiating tactic, a preview of forthcoming legislation, or simply a statement of principle. For now, Americans carrying credit card debt should continue focusing on what they can control: paying down balances and seeking lower-rate alternatives.