Trump Credit Card Rate Cap Raises Bank Risk
Trump credit card rate cap would limit APRs to 10% and threaten issuer interest income, prompting traders to reprice bank and card shares.
KEY TAKEAWAYS
- Measure would cap credit card APRs at 10% for one year starting Jan. 20, 2026.
- That gap would squeeze interest income and compress issuer revenues reliant on high-APR revolving balances.
- Issuers may tighten underwriting, cut limits, and reprice models, raising credit availability concerns.
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The Trump credit card rate cap, set to take effect on Jan. 20, 2026, has prompted bank and card executives to warn it would reduce credit availability and compress interest income at major issuers, leading to tighter underwriting and potential re-pricing of card business models.
Proposal and Legal Challenges
President Donald Trump announced on Jan. 9 via Truth Social a proposal to cap credit card interest rates at 10% for one year. The measure, as reported, lacks clear details on how it would be implemented—whether through legislation, executive order, or agency rule. A nationwide cap would require congressional approval and faces legal hurdles, especially given prior regulatory actions involving the Consumer Financial Protection Bureau. Republican lawmakers have largely opposed the proposal, and a 2025 Senate bill with a similar cap was referred to the Senate Banking Committee.
Industry Impact on Issuers
U.S. average credit card annual percentage rates (APRs) currently range from roughly 19.7% to 23.0%, depending on borrower credit scores, creating a significant gap between prevailing rates and the proposed 10% ceiling. Major issuers such as American Express and Capital One, along with payment networks including Mastercard and Visa, would be affected through their revolving credit portfolios. Capital One and Synchrony hold notable shares of higher-APR lending.
Industry executives and trade groups warn the cap would restrict risk-based pricing, prompting lenders to tighten credit lines, decline more applications from higher-risk borrowers, and shift products. This would compress interest margins, reduce revenue, and could force cuts to interest-funded rewards programs. Some issuers may offer temporary relief through existing hardship programs or voluntary rate reductions, but long-term pricing flexibility would depend on congressional action.
The proposal has already led markets to reprice regulatory risk, affecting bank and card shares as investors reassess earnings sensitivity to potential rate limits. For issuers and payment networks reliant on interest income and revolving balances, the cap could reshape underwriting practices and earnings outlooks if enacted.
