Banks push back against Trump’s 10 per cent credit card rate cap, warning it could restrict credit and hurt the economy
Banks and lenders were left rattled after the US President Donald Trump floated the idea of a one-year cap of 10 per cent on credit card interest rates in a late-night social media post on Friday.
The proposal struck at one of the industry’s most reliable profit engines. For decades, card issuers have fought off repeated attempts by lawmakers to rein in interest charges, arguing that caps would restrict credit and squeeze margins.
The US banks are not backing down from Trump’s call to sharply cut credit card interest rates, setting the stage for a clash just as he prepares to step onto the global spotlight at Davos next week.
Executives warn of account closures
Executives at JPMorgan Chase and Citigroup said this week that, rather than offering credit cards at a 10 per cent interest rate as Trump wants by January 20, they would likely shut down many customer accounts instead.
“An interest rate cap is not something that we would or could support,” Citigroup Chief Financial Officer Mark Mason told reporters on Wednesday, adding that such a move would limit access to credit for people who need it most and could ultimately hurt the broader economy.
Credit cards sit at the heart of US consumer finance, offering households easy access to borrowing but often at steep interest rates. For banks and card issuers those rates are a key driver of profits.
“It would be very bad for consumers, very bad for the economy,” JPMorgan Chief Financial Officer Jeremy Barnum told reporters on Tuesday’s earnings call, adding that the bank would have to cut back the amount of credit it offers.
“Our belief is that actually this will have the exact opposite consequence to what the administration wants,” said Barnum.
Data from the Consumer Financial Protection Bureau show that credit card rates climbed sharply in 2024, reaching their highest levels since 2015. Average APRs rose to 25.2 per cent for general-purpose cards and 31.3 per cent for private-label cards, driven largely, though not entirely, by higher benchmark interest rates.
APR stands for Annual Percentage Rate. It is the yearly cost of borrowing money, expressed as a percentage.
According to the data, strain on consumers is also evident. The share of cardholders making only the minimum payment last year was the highest in nearly a decade.
Trump targets banks ahead of midterms
Trump, eager to tap into voter frustration over high living costs ahead of this year’s midterm elections, launched his attack on banks with a late-Friday social media post accusing the industry of exploiting credit card borrowers. He has since repeated the message in media interviews and follow-up posts, while also backing a separate bill aimed at the swipe fees merchants pay on card transactions.
Days after Trump’s initial announcement, bankers and lobbyists told CNBC they had received no formal or written guidance from the administration on the proposed policy, the network reported Wednesday.
No clear path for enforcement
The president’s suggestion appears to amount more to a trial balloon than an imminent policy shift. There is no clear path for his administration to impose an interest rate cap on its own, and Congress has shown little appetite for taking up the idea.
With inputs from agencies.
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