Could Trump’s Credit Card Rate Cap Save Consumers Billions?

The debate over credit card interest rates is heating up again, and this time it’s drawing in big names from both sides of the aisle. President Donald Trump recently proposed a bold idea: capping credit card interest rates at 10% for one year. His aim? To prevent consumers from being “ripped off” by high rates, which have soared to an average of nearly 24%. But while this plan could save consumers billions, it also raises some serious concerns for those with lower credit scores. Let’s dive deeper into what this could mean for American consumers.

What’s the Proposal About?

Trump’s proposal has garnered unexpected backing from some Democrats, notably Senator Elizabeth Warren from Massachusetts. The timing couldn’t be more crucial. With credit cards being a key piece of many financial lives, especially for those who might not have robust savings, the stakes couldn’t be higher. According to LendingTree, individuals with poor credit can face interest rates as steep as 36%. A 10% cap could drastically change that landscape.

A recent analysis by Vanderbilt University suggests that implementing this cap could save consumers around $100 billion annually in reduced interest payments. Picture a cardholder with a $5,000 balance. At 10%, they’d pay roughly $42 a month in interest. At 24%, that jumps to about $100—definitely a more stressful reality at the end of the month.

The Trade-Offs at Play

While the potential savings sound appealing, experts warn of hidden consequences. The concern is that banks may start tightening their lending criteria, especially for lower-income consumers or those with shaky credit scores. Ted Rossman, a senior analyst at Bankrate, puts it bluntly: “They would find it dramatically more difficult to access credit.”

Why does this matter? Because consumer spending is a massive engine driving economic growth. According to Morgan Stanley analysts, tighter credit could mean a reduction in overall consumer spending by about 5%. And given that credit card spending makes up 30% to 40% of total annual consumer spending, this shift could potentially slow economic growth just as much as any savings from lower interest rates.

The American Bankers Association echoes these concerns, suggesting that a 10% cap would push consumers towards less regulated alternatives like payday loans or “buy now, pay later” schemes, which often come with their own sets of traps.

The Potential Ripple Effect on Rewards and Perks

Another angle of concern comes from the world of credit card rewards. Tiffany Funk, co-founder of point.me, suggests that capping rates at 10% could lead banks to raise annual fees or reduce the value of points and rewards programs, traditionally designed to entice consumers. This might seem a small price to pay for lower-interest loans, but the reality is that many consumers rely on these benefits to maximize their financial choices.

Conversely, some analysts see the potential for credit card companies to maintain access to credit, even for those considered high-risk, by reducing rewards rather than cutting off access completely. “The credit card business is massively profitable,” noted one expert in a recent interview. They argue that banks could absorb some of the loss from interest rate caps and still keep consumers involved.

Why Are Credit Card Rates So High Anyway?

Understanding the roots of these interest rates helps clarify why the situation feels so urgent. Rossman explains that credit card APRs are considerably higher than other loans, like auto loans or mortgages, because the debt is unsecured. There’s no tangible asset linked to the funds lent, which makes the lenders wary—hence the hefty interest rates.

Historically, banks have been hesitant to lower rates because that would mean shrinking their profit margins. The Credit Card Accountability Responsibility and Disclosure Act of 2009 limited how aggressively card issuers could increase rates, but it didn’t place a cap on what they could charge upfront.

Can Trump Actually Impose This Rate Cap?

Reality check: even with a bold proposal, questions loom large over whether Trump has the authority to implement such a cap unilaterally. Experts have pointed out that Congress would likely need to get involved, and any proposed caps would undergo intensive scrutiny. Jaret Seiberg, an analyst at TD Cowen, suggests that while lawmakers might rally around a higher cap, a blanket 10% could face stiff opposition.

The more achievable goal, according to some analysts, might be extending the existing 36% cap on military lending to all consumers. This could pave the way for more legislative backing in the future.

Interestingly, a bipartisan bill called the “Percent Credit Card Interest Rate Cap Act,” introduced by Senator Bernie Sanders in 2025, could find a path forward with enough political support. “It’s not going to happen through executive action,” Shearer, an industry expert, clarifies. However, if Trump can rally the Senate majority leader and speaker, a vote could eventually move the bill forward.

A Closer Look at the Stakes

The conversation around controlling credit card interest rates is more than just a financial issue; it’s a human one. For many American families, high-interest credit cards are an unfortunate norm. While a proposed cap could provide relief, especially for struggling families, the potential fallout could place others in a bind.

Financial education and access to responsible credit alternatives have never been more critical. If lawmakers are considering capping rates, they also need to weigh how this impacts everyone—not just those who are financially stable. Lower-income consumers could face a lose-lose situation: either burdened by high interest or cut off altogether from credit.

Why This Matters

Navigating consumer credit is complex, and while a cap at 10% can provide immediate relief for some, it also opens the door to further discussions about the accessibility of credit and the responsible lending practices that should govern it.

In a world where many are living paycheck to paycheck, the outcomes of such legislative measures could play a vital role in shaping financial futures. It reminds us that money isn’t just numbers on a bank statement; it directly impacts lives, dreams, and day-to-day survival.

As this conversation develops, we have to ask ourselves: how can we balance the need for lower interest rates without potentially hurting the very consumers we’re trying to help? Finding that balance is crucial not just for consumers, but for our economy as a whole. The stakes are high, literally and figuratively.