President Donald Trump’s call for putting a one-year, 10% cap on credit card rates certainly catches the eye — and no surprise, has caught the wrath of bankers.
Consumers are fed up with the outrageously high interest rates being charged on their credit cards. Banking experts say 10% is way too low to keep lending to riskier consumers with weak credit histories.
In his speech to the Detroit Economic Club on Tuesday, Jan. 13, at the MotorCity Casino Hotel, Trump called “affordability” a fake word that Democrats like to use. He said many prices, such as gas prices, already have come down to help consumers.
At the same time, though, Trump noted in his Detroit speech that he soon will provide a slew of proposals to lower consumer costs, including his effort to drive credit card companies to cap interest rates at 10% for one year.
“The rates are way too high,” Trump said at the Detroit Economic Club. Trump indicated that he would outline his agenda during a speech at the World Economic Forum’s annual meeting in Davos, Switzerland, next week.
Trump posted Friday, Jan. 9, on Truth Social that “we will no longer let the American Public be ‘ripped off’ by Credit Card Companies that are charging Interest Rates of 20 to 30%, and even more.” He stated that he wants the cap to start as of Jan. 20.
Trump knows he has hit a sore spot.
The average rate being offered on credit cards now is 19.65% — which is down slightly from 20.18% a year ago and up sizably from 17.35% in early January in 2020, according to data from Bankrate.com.
Roughly 61% of cardholders with credit card balances have been in debt for at least a year, up from 53% in late 2024, according to a Bankrate survey.
And, according to the survey, 47% of credit cardholders report carrying a credit card balance and being charged interest. About 1 in 5 debtors don’t think they’ll ever pay it off.
The last thing you want to do is charge anything on your credit card — and not pay the bill in full each month — at these absurdly high rates. Reason: You’re losing a ton of money to interest alone.
Take a charge of $1,000 on a credit card with an annual rate of 20%.
You ultimately could be in debt for 40 months and pay nearly $370 in interest with a 20% rate if you only make a minimum payment, assuming the credit card issuer requires that you pay at least $35 a month.
If the rate drops to 10% on $1,000 in credit card debt, you’d be in debt for 33 months and pay $147 in total interest. Yet, remember, the Trump proposal right now calls for the cap to last one year. Your interest rate likely would be higher once that cap is removed.
Either way, spending $1,000 on an iPhone ultimately could end up costing you way more than you’d imagine if you only made the required minimum payment.
Either way, I’d argue credit card debt is a great way to waste of a lot of money.
Many items you buy on a credit card — think shirts, socks, shoes, sweaters, soup — decline in value over time. You’re not investing for the long haul, as you might be when taking on a mortgage or student loan debt.
Ted Rossman, senior industry analyst for Bankrate.com, gave another example: If you make minimum payments toward the average credit card balance of $6,523 at 20%, you’re in debt for 219 months and your total interest expense is $9,448.
At 10%, that’s 196 months and $4,492 in interest. Again, it is questionable how long you’d benefit from a 10% rate since the Trump proposal is calling for a one-year cap.
Many have not seen 10% in quite some time
A 10% annual rate isn’t something many consumers have seen for years on their credit cards.
You’d have to go back to late January 2009 when the average rate that credit card issuers were marketing was 10.63%, according to Bankrate.com, which has been tracking credit card rates since 1985. The average rate was around 18.88% for much of December 1985.
Right now, Rossman said, most people would have a tough time finding a 10% credit card offer.
Rossman said some credit unions offer low-rate cards, typically only for the most creditworthy borrowers. As an example, he noted that Lake Michigan Credit Union has a Visa card with an annual percentage rate that can range between 9.75% and 18%, depending on your credit history. No annual fee.
Sure, plenty of 0% balance transfer promotions exist. In general, 0% offers are for a limited time, maybe 15 months or 21 months. After that, the rate will jump to 20%, 25% or more. Rossman said the 0% balance transfer can be worth it, if you qualify, and pay down your debt while the rate is 0%.
Credit card caps would be something new
Trump is talking about something that has never been done.
We’ve never had a federal limit on credit card rates. A 1978 U.S. Supreme Court ruling enabled banks to set up shop in states with no caps or very high caps, such as South Dakota, Delaware, and Utah.
The Military Lending Act has a 36% APR cap for service members, Rossman noted, which essentially serves as an unofficial ceiling for all. Federally chartered credit unions currently have an 18% APR cap on credit card rates.
The main argument from bankers is that a 10% cap would end up restricting credit to consumers and small business owners, possibly cutting some off entirely.
“If enacted, this cap would only drive consumers toward less regulated, more costly alternatives,” according to a joint statement from the American Bankers Association, Bank Policy Institute, Consumer Bankers Association, Financial Services Forum and Independent Community Bankers of America on Jan. 9.
The bankers said the industry shares Trump’s “goal of helping Americans access more affordable credit.”
Bankers argue that the proposal for a cap on rates is often framed as consumer‑friendly, but consumers could face reduced access to affordable credit with, perhaps, millions of Americans suddenly losing their ability to borrow on credit cards.
Another joint statement was issued Jan. 13 after Trump expressed support for the proposed Durbin-Marshall Credit Card Mandate, calling it “one surefire way to make life less affordable for Americans.”
The groups to come out against the plan included the Consumer Bankers Association, American Bankers Association, America’s Credit Unions, Electronic Payments Coalition, Independent Community Bankers of America and National Bankers Association.
Pushback is expected.
Credit card issuers fought hard to stop an $8 limit on what could be charged for late fees, which was proposed by the Consumer Financial Protection Bureau in 2023. The Trump administration sided with the banking industry, which claimed that cap was illegal, and ultimately the Biden administration crackdown on junk fees was put to rest.
As with earlier fights, bankers are pushing hard on the point that a 10% cap on rates could have unintended consequences, hurting many consumers.
Ruth Susswein, director of consumer protection at Consumer Action, agrees that some consumers would end up with fewer credit card options, lower credit limits, and possibly more fees.
“But,” she said, “the argument that charging exorbitant interest rates is necessary to keep the credit door open seems overblown.”
Adam Levitin, Carmack Waterhouse professor of law and finance at the Georgetown University Law Center, dubbed a proposed 10% cap on credit card rates as a “terrible idea.”
“While it might sound great to get cheap credit, there’s no free lunch here,” Levitin wrote in in a essay on the Credit Slips website, a blog written by academics that covers credit, finance, insolvency, bankruptcy, and other related topics.
Levitin pointed out that he has a long record of being critical of the credit card industry. He supported the Credit Card Accountability Responsibility and Disclosure (CARD) Act of 2009, which was designed to clean up abusive practices by banning unfair rate hikes, requiring clear disclosures, and setting other limits.
He acknowledges that much remains unknown about the details of Trump’s 10% cap and how it would work. But he points out that the only way to cap credit card interest rates is through legislation in Congress.
Trump’s proposal, he said, is a reworking of a bill proposed in 2025 by Bernie Sanders and Josh Hawley in the Senate and Alexandria Ocasio-Cortez and Anna Paulina Luna in the House.
Yet, Levitin said it’s a bad idea no matter who is backing it. Lenders, he said, cannot operate profitably at 10%, and they’d be likely to stop lending and cut off existing credit lines.
What if you could borrow at 10% for a limited time? Well, you might borrow more. Maybe, I’d argue you’d keep borrowing if you lost a job and thought you could quickly find another. And maybe, you’d dig yourself into a deep hole in the process.
In some scenarios, it’s possible that a 10% cap could be inflationary — perhaps driving people to buy more when the 10% cap was in place, much like COVID-19 relief payments gave consumers a sugar high.
Who might benefit? Not the family that is desperate to borrow to pay for a $4,000 furnace and cannot find access to a credit card.
Levitin said there likely would be “some migration to other types of credit, like ‘marketplace lenders,’ meaning that a 10% rate cap would benefit nonbank fintechs at the expense of banks.”
Other — less headline grabbing — ideas could be more effective at forcing banks to offer lower rates on credit cards, Levitin said, including getting Congress to amend the National Bank Act to limit “interest rate exportation by banks.”
“The rise of massive credit card debt was enabled by a Supreme Court decision in 1978 that allowed national banks to export the interest rate allowed in the state in which they are based to the borrower’s state, without regard for the borrower’s state’s usury laws,” he wrote.
And, he explained, that’s why credit card lenders have flocked to states like Delaware, South Dakota, and Utah, with lax usury laws.
Unfortunately, consumers aren’t likely to discover that all of a sudden they’re now having an easier time paying their bills — and life is suddenly more affordable.
The affordability issue is top of mind for consumers — and politicians. Trump also recently announced a move to ban institutional investors from buying single-family homes, and we’re expected to hear more details in his speech in Switzerland next week.
Sure, everyone wants a quick fix to build wealth, as much as they’d like one for losing weight in January.
Sometimes, you need more. Maybe, more construction of reasonably priced homes, manufacturing of more budget-conscious cars with less sticker shock, more efforts to lower the cost of college tuition, better wage gains for everyday families.
Interest rates overall have been trending down, including for rates for credit cards and car loans.
The average rate on a new car loan was 8.88% in December for cars bought then, according to data from Cox Automotive’s Dealertrack. That’s down from 9.32% in January 2025 but up slightly from 8.68% in December 2024.
While Trump hasn’t proposed setting a limit on car loan rates, any cap on car loan rates would likely be unwelcome by lenders, too.
Jonathan Gregory, senior analyst on Cox Automotive’s Economic and Industry Insights team, noted that roughly 1 in 9 new vehicle loans were structured with interest rates above 10% in December.
While subprime borrowers have had more access to credit in the past year, a concern remains that lenders could reject more at-risk borrowers if they were forced to price a new car loan at 10% or below.
Car loan rates offered to individuals, like credit card rates, take into account a borrower’s credit history and risk profile.
Cox Automotive experts note that access to credit is a big driver of a healthy auto market. It has been improving recently, which is what the industry wants. A cap on car loan rates — which, mind you, has not been proposed by the White House — would change the dynamics as lenders consider how to manage risk, as would be the case with the proposed 10% cap on credit card rates.
Credit card interest rates, of course, are way out of whack. Bankers shouldn’t be surprised that now Trump — who fears that Republicans could suffer in midterm elections in 2026 — would try to regain a bit of populist popularity with a 10% cap on credit card rates.
Unfortunately, consumers shouldn’t bank on much relief here — too many could be squeezed out of the picture when it comes to borrowing on plastic.
(This story has been updated to correct a reference to car loan interest rates.)
Contact personal finance columnist Susan Tompor: stompor@freepress.com. Follow her on X @tompor.
This article originally appeared on Detroit Free Press: Would Trump’s 10% cap on credit cards hurt more than some imagine?
Reporting by Susan Tompor, Detroit Free Press / Detroit Free Press
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