A decades-long drive to cap credit card interest rates has received a sudden jolt from President Donald Trump \u2014 and widespread pushback from banks. <\/p>\n
Trump said Friday he wants to put a one-year 10% cap on the credit card rates, a move that has received support from Republican and Democratic politicians, some of whom have pushed legislation in recent years toward the same goal. <\/p>\n
Consumer advocates have long pushed for some limitations on credit card rates with little success. Banks have argued that any caps would force them to limit credit availability.<\/p>\n
It\u2019s a point they have revisited in force in recent days.<\/p>\n
\u201cPeople will lose access to credit, like on a very, very extensive and broad basis, especially the people who need it the most, ironically,\u201d Jeremy Barnum, chief financial officer at JPMorgan Chase, said in the bank\u2019s earnings call Tuesday. Executives at Citi and Bank of America have echoed that sentiment.<\/p>\n
Credit card interest rates have skyrocketed since 2022, according to Federal Reserve data<\/a>, hitting an all-time high in the summer of 2024. Average credit card interest rates were at 19.65% as of Jan. 7, according to Bankrate\u2019s tracking<\/a> of weekly national average rates.<\/p>\n While interest rates have crept up, so have credit card bills. American consumers\u2019 credit card balances totaled $1.23 trillion, according to Federal Reserve third quarter debt and credit data<\/a> published in November. <\/p>\n Trump\u2019s plans, at least for now, are unclear. Trump said in a post on Truth Social<\/a> announcing his intended rate cap that \u201cwe will no longer let the American Public be \u2018ripped off\u2019 by Credit Card Companies that are charging Interest Rates of 20 to 30%.\u201d He said his cap would go into effect Jan. 20 but did not relay how it would be implemented. <\/p>\n The Consumer Financial Protection Bureau\u2019s main focus is to write and enforce federal consumer financial rules, including for credit cards. It\u2019s the key agency that Trump would likely need to work with in order to get a rate cap implemented. <\/p>\n Some legislators have an idea. Sens. Bernie Sanders, I-Vt., and Josh Hawley, R-Mo., introduced a bill<\/a> last February to cap interest rates at 10% until 2031. In a separate bipartisan effort in the House last year, Reps. Alexandria Ocasio-Cortez, D-N.Y., and Anna Paulina Luna, R-Fla., introduced a bill<\/a> to cap rates at 10%. <\/p>\n On Monday, Hawley reopened his push<\/a> for Congress to pass his and Sanders\u2019 bill, saying, \u201cPresident Trump is right: working Americans are drowning in record credit card debt while the biggest credit card issuers get richer and richer by hiking their interest rates to the moon.\u201d <\/p>\n Sen. Elizabeth Warren, D-Mass., a longtime advocate of consumer protections for credit cards, told Trump on a phone call on Monday that Congress could pass the proposed cap \u201cif he will actually fight for it,\u201d according to a statement posted on X<\/a>. <\/p>\n The president\u2019s push comes as consumers are dealing with a multifaceted debt cycle between mortgage payments, student loans and credit cards. <\/p>\n For consumers already in credit card debt, Ted Rossman, a Bankrate senior industry analyst with a focus on credit cards, said this proposed cap is unlikely to do much for existing balances. Applying the change \u201cretroactively would be a really sticky legal argument,\u201d he said.<\/p>\n However, it could save consumers on future debt costs. According to a September report<\/a> from Vanderbilt Policy Accelerator, savings could total $100 billion per year. <\/p>\n While this means consumers could save a large chunk of change, it also means creditors would lose out on major profit and likely adapt their business models. <\/p>\n \u201cIt\u2019s sort of uncharted territory,\u201d Rossman said. \u201cMy expectation is that access to credit would be slashed, especially for those with lower incomes and lower credit scores.\u201d <\/p>\n Banks have continued to argue that any such cap would force their businesses to adjust.<\/p>\n \u201cWe\u2019re all in for affordability,\u201d Bank of America CEO Brian Moynihan said Wednesday on the bank\u2019s earnings call. But with a rate cap \u201cyou will see unintended consequences of that,\u201d he said, adding that people can expect \u201cstrict credit.\u201d<\/p>\n On the other hand, some credit card lenders are already falling in line. Bilt, a rewards payment program for renters, announced<\/a> Wednesday three new credit cards with interest rates of 10% for one year \u2014 matching the president\u2019s proposed cap. <\/p>\n While a rate cap could eat into traditional creditors\u2019 bottom lines, newer and less-regulated credit alternatives could get a boost. <\/p>\n The American Bankers Association, alongside other banking groups, warned about these potential replacements in a statement<\/a> Friday, saying that \u201cif enacted, this cap would only drive consumers toward less regulated, more costly alternatives.\u201d<\/p>\n