As banks warn of a credit crunch, Trump calls for a cap of 10% on credit card interest rates.

By proposing a broad measure that he claims would provide relief to millions of American borrowers struggling with high borrowing costs, President Donald Trump has reignited a contentious debate regarding the costs associated with credit cards by calling for a temporary cap of 10% on credit card interest rates for a period of one year.

The proposal, which was shared on social media and is set to go into effect on January 20, 2026, is part of a larger effort by the administration to address what it calls the "affordability" issues that U.S. households face, especially as consumer debt continues to rise. For one year, the proposal would prohibit credit card issuers from charging annual percentage rates (APRs) higher than 10%.

This would be a significant departure from the current situation, in which the typical interest rate on a credit card is between 20 and 30 percent, with some store cards frequently charging more than this. These high rates, according to critics of today's credit markets, burden working-class families, resulting in approximately $160 billion in annual interest payments and credit card debt totaling $1.23 trillion. Trump framed the idea as a direct attack on what he called credit card companies' predatory practices. He wrote on Truth Social, "We will no longer let the American public be ripped off by credit card companies charging interest rates of 20 to 30 percent."

According to research, an interest ceiling could reduce the annual interest costs of U.S. households by approximately $100 billion. He suggested that the cap would result in substantial savings for consumers. However, the proposal immediately drew resistance from banks, credit card issuers, and financial industry groups — many of which have historically aligned with Trump’s political agenda.

An all-encompassing cap has been criticized by major institutions and advocacy groups as having the potential to exclude borrowers with poor or limited credit histories from the mainstream financial system. In their view, lenders would likely tighten underwriting standards, reduce credit limits, cancel cards, or abandon certain products altogether if they are legally barred from pricing risk accurately.

The American Bankers Association and other affiliated organizations argued in a statement that a cap imposed by the government could lead consumers to choose "less regulated, more expensive alternatives" like payday loans or pawnshops, which would defeat the policy's stated goal of improving affordability.

In addition, talent chiefs from credit unions and industry coalitions noted that imposing a uniform 10% rate does not significantly increase access to credit; rather, it renders it unattainable for many typical Americans, particularly those with lower credit scores. Even among conservative allies, the private sector has responded in a variety of ways.

During the 2024 election, billionaire investor Bill Ackman, a Trump supporter, called the proposal a "mistake." Ackman acknowledged that lowering interest rates on credit cards is a worthwhile objective, but he also warned that imposing a strict 10% limit could cause millions of accounts to be closed and harm consumers whose cash flow management relies on revolving credit. He argued that lenders will stop providing credit to riskier borrowers if they are unable to price for losses and adequate returns, possibly leading them to unregulated, predatory lending markets.

Later, Ackman said that while he supports efforts to lower borrowing costs, he thinks that rather than imposing blunt caps, it would be more effective to increase competition and reform regulatory frameworks to encourage innovation in the credit market. Trump's proposal to cap interest rates has an impact on political debates about economic policy, consumer protection, and regulation that go beyond the financial markets.

Even though Trump said that the idea might be put into action soon, important details are still a mystery. It is unclear whether the president believes he has authority to enforce such a cap through executive action, or if Congress would need to pass legislation to formally authorize it.

Although legislative success is far from guaranteed, some Republican lawmakers have expressed support and indicated that they might introduce bills that are in line with the president's vision. In point of fact, senators from both parties had previously proposed bipartisan legislation that sought a multi-year cap on credit card interest rates.

However, this measure has stalled due to opposition from banking interests. The issue of balancing consumer affordability and financial access without undermining the risk-based pricing mechanisms that support credit markets is one of the deeper tensions in U.S. economic policy that is highlighted by the debate over a 10% interest cap.

With significant repercussions for borrowers, lenders, and the economy as a whole, advocates and opponents of the proposal will continue to present their arguments to legislators and the general public as the proposal moves forward.