Trump's 10% Credit Card Gamble: A Populist Cap in a High-Rate Era

Donald Trump has proposed a one-year cap of 10% on credit card interest rates, arguing Americans are being overcharged amid record household debt. With balances near $1.23 trillion and rates above 20%, the move could save consumers billions. 

A Populist Cap in a High-Rate Era

President Donald Trump has revived a campaign pledge that cuts straight into the financial lives of millions of Americans: a one-year cap of 10 percent on credit card interest rates. In a late-night post on Truth Social, Trump declared that the public should no longer be “ripped off” by card companies charging 20 to 30 percent. He said he hopes the cap will take effect on January 20, one year after he took office, though it remains unclear whether he intends to pursue the move through executive action or legislation.

The proposal lands in a country drowning in revolving debt. About 195 million Americans held credit cards in 2024 and were charged roughly $160 billion in interest, according to the Consumer Financial Protection Bureau. Total credit card balances now stand near $1.23 trillion, a record. Average interest rates hover between 19.6 and 21.5 percent, close to the highest levels since regulators began tracking them in the mid-1990s and far above the roughly 12 percent norm of a decade ago. Against that backdrop, Trump’s framing resonates. This is not an abstract policy debate but a kitchen-table issue.

Researchers who studied Trump’s earlier version of this pledge estimated that a 10 percent cap would save Americans around $100 billion a year in interest. Even for a single year, the policy would represent one of the largest consumer-side transfers in modern financial history. That money would stay in household budgets, easing pressure on families already stretched by housing, health care, and food costs.

What banking industry says

The banking industry’s response has been swift and familiar. Lower rates, it argues, would force lenders to reduce access to credit, especially for high-risk borrowers, pushing them toward payday lenders, pawnshops, or other high-cost alternatives. There is precedent for partial retrenchment. When Congress capped debit card interchange fees, banks eliminated rewards and perks, which only slowly returned years later. Credit card issuers would almost certainly respond in similar fashion by shrinking rewards programs, tightening underwriting, and trimming ancillary benefits.

But the more dire warnings deserve scrutiny. Credit card companies earn revenue from three main streams: fees charged to merchants, fees charged to customers, and interest on balances. The claim that a one-year cap would trigger widespread account closures rests less on empirical evidence than on bargaining power. The industry has long used access to credit as a political shield.

The United States already accepts interest-rate ceilings in targeted contexts. The Military Lending Act caps rates for active-duty service members. Federal regulators impose limits on credit union cards. These policies have not collapsed credit markets. They demonstrate that rate caps are not radical departures from American financial norms. They are selective consumer protections.

The real economic question is not whether banks would feel pain. They would. It is whether the system could absorb that pain without harming the people the policy is meant to help. The available research suggests it could. A one-year cap is not a permanent restructuring of consumer finance. It is a pressure valve in an era of historically high household debt. Even if lenders tightened at the margins, the scale of potential savings, tens of billions of dollars, would materially improve financial stability for millions of families.

Politically, the proposal is striking because it breaks from Trump’s otherwise industry-friendly posture. His administration has been accommodating to large financial institutions, approving major consolidation and sidelining the Consumer Financial Protection Bureau. The cap pits a populist instinct against Wall Street allies who helped bankroll his return to office, which may explain the ambiguity over how he intends to implement it.

Economically, the proposal forces a long-avoided question into the open: should everyday credit in the world’s richest economy routinely carry rates that rival subprime products? A temporary 10 percent cap will not fix America’s debt culture. But it would challenge the assumption that 20-plus-percent interest is the natural order. In a period when households are stretched thin, that challenge may be worth the disruption.

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