Credit Card Rate Cap Proposals Usually Go Nowhere. This One Spooked Wall Street.
Every few years, a politician floats the idea of capping credit card interest rates, generating a lot of headlines before ultimately going nowhere.
This time, however, it feels different.
In a Truth Social post on Friday, President Donald Trump proposed capping credit card interest rates in the U.S. at 10% for one year. (He had previously floated the idea of a permanent cap while on the campaign trail in 2024.) Then, on Sunday, he doubled down, reportedly saying that credit card issuers that don’t cap rates at 10% by Jan. 20 would be “in violation of the law.”
It’s unclear what power the president would have to enact a rate cap of any duration without the help of Congress, and no similar proposal has gained real traction on Capitol Hill in recent years.
However, despite all that, it appears that investors aren’t just shrugging off this proposal the way they have those by politicians on both sides of the aisle over the years. Several credit card issuer stocks were down in early trading on Monday, with many observers attributing the decline to nervousness about a potential credit card rate cap. (Investors may also be reacting to Friday’s news of a federal criminal investigation into Federal Reserve Chair Jerome Powell, but many observers are pointing to the rate cap rather than the Powell case as the primary reason for the dips.)
In years of watching these rate cut proposals come and go, this is the first time I can recall the markets having any significant reaction to one. That tells you that Wall Street is viewing this rate cut proposal differently than the rest, which is noteworthy.
What to know about credit card interest rate caps
Here are a few key things to know about credit card rate caps.
- When it comes to rate caps, banks have long been adamant that customers should be careful what they wish for. They say that any rate cap would make lenders less likely to extend credit to people with low credit scores because it would be too great a financial risk. They also say it would lead to diminished credit card rewards because credit card issuer profits fuel credit card rewards. The lower the capped rate, the bigger the impact. Some have speculated that at a 10% rate cap, issuers would stop lending to subprime borrowers and that credit card rewards would largely vanish overnight.
- Despite the potential ramifications, rate caps are enormously popular with Americans, and politicians know it. A 2024 LendingTree survey showed that 77% of American credit cardholders support a cap on credit card interest rates. Among those who do, 66% still support a rate cap even if it means reduced rewards, and 60% still support it even if it means restricted access to credit. That’s why we’ve seen big names on both sides of the aisle — from Rep. Alexandria Ocasio-Cortez (D-N.Y.), Sen. Elizabeth Warren (D-Mass.) and Sen. Bernie Sanders (I-Vt.) on the left to Trump and Sen. Josh Hawley (R-Mo.) on the right — propose rate caps. After all, no one’s ever going to get booed at a political rally for attacking credit card companies.
- Credit card rate caps aren’t unheard of in this country. There has been a cap on credit card interest rates for federal credit unions for years. Currently, that cap is set at 18%. However, there has never been a national cap on bank credit cards. There’s no question that it would be a big deal for credit cardholders if it came to pass.
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The average APR on a new credit card today is 23.79%, nearly two-and-a-half times the maximum rate proposed by Trump. Rates have fallen from a record 24.92% in September 2024 in the wake of cuts by the Federal Reserve, but they’re still sky-high — light-years beyond what the president’s rate cap would allow. Here’s how much interest a cardholder could save by lowering their APR from 23.79% to 10%, using our credit card interest calculator:
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Scenario 1: Typical balance at today’s average APR
- $7,000 balance
- 23.79% APR — the average APR on a new credit card offer in America today
- $250 monthly payment
- 41 months to pay down
- $3,314 in interest
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Scenario 2: Typical balance with a 10% APR
- $7,000 balance
- 10% APR — Trump’s proposed maximum
- $250 monthly payment
- 32 months to pay down
- $1,004 in interest
- The savings: 9 fewer months and $2,310 less in interest
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Scenario 1: Typical balance at today’s average APR
I still think it’s a long shot that any sort of credit card rate cap comes into play. It’s unclear what power the president has to enact a cap, and the opposition is so fierce in the financial services industry that there’s little chance that a cap could pass through Congress — regardless of how popular it might be with Americans.
Still, perhaps the most important thing for credit cardholders to know is this: You have more power over your money than you realize.
You don’t have to wait for a rate cap to lower your card’s interest rates. A 0% balance transfer credit card can help you avoid interest entirely, often for more than a year, and is likely your best tool against card debt. A low-interest personal loan can be great, too. You can even call your credit card issuer and ask it to lower your rate. A 2025 LendingTree survey found that 83% of people who did that in the prior year were successful and the average reduction was about 7.0 percentage points — a substantial cut. I show people how to do this, including word-for-word scripts, in my book, “Ask Questions, Save Money, Make More: How to Take Control of Your Financial Life.” Often, all it takes is a phone call.
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