In a significant move aimed at providing financial relief, United States President Donald Trump has called for a temporary cap on credit card interest rates. The proposal, announced via a social media post on Truth Social on January 10, seeks to limit these rates to 10% for a period of one year, effective from January 20.
What is Trump's Credit Card Interest Rate Proposal?
The White House officially echoed the announcement, labelling it as "HUGE," though specific legislative details and implementation steps remain unclear. President Trump stated that this measure is intended to enhance affordability for American citizens and prevent them from being "ripped off" by credit card companies.
This date holds symbolic weight as it marks the anniversary of his second term and arrives months before the crucial US mid-term elections in November. The move also represents the fulfilment of a key campaign promise Trump made during the 2024 presidential race, a pledge for which he faced criticism for not addressing earlier in his tenure.
Massive Financial Relief for Americans: The $100 Billion Figure
The potential impact of such a cap is staggering. According to a pivotal 2025 study titled 'Capping Credit Card Rates' from Vanderbilt University, Americans could save approximately $100 billion every year if a 10% interest rate ceiling were implemented permanently.
The report's author, Brian Shearer, Director of Competition and Regulatory Policy at Vanderbilt’s Policy Accelerator, highlighted the scale of US credit card debt, which now surpasses $1.21 trillion. He noted that credit card businesses are highly profitable, generating around $120 billion in interest and $162 billion in fees annually, with nearly 30% being pure profit.
The study concluded that profit margins across all credit score (FICO) tiers are substantial enough to absorb a significant reduction in interest from a federal usury rate. It found that even a 15% cap would save customers at least $48 billion yearly while still allowing banks returns above the Federal Funds Rate.
Bipartisan Support and Previous Legislative Efforts
President Trump's proposal is not an isolated idea in US politics. Over the years, lawmakers from both major parties have expressed concern over exorbitant credit card rates. The Reuters report cited in the original news mentions several bipartisan efforts.
For instance, Democratic Senator Bernie Sanders and Republican Senator Josh Hawley previously introduced legislation for a five-year 10% cap. Similarly, Democratic Representative Alexandria Ocasio-Cortez and Republican Congresswoman Anna Paulina Luna proposed a similar cap through a House bill. However, no such law has been enacted to date.
Criticism and Concerns Over the Proposed Cap
Despite the potential savings, the proposal has not been met with universal acclaim. Democratic Senator Elizabeth Warren, a member of the Senate Banking Committee, dismissed the social media call as "meaningless" without a formal congressional bill to enact it. She challenged Trump to work on passing actual legislation.
From the financial world, billionaire investor Bill Ackman publicly criticised the move on X, calling it a "mistake." He argued that without the ability to charge rates that cover losses and provide adequate returns, lenders would cancel cards for millions of consumers, potentially forcing them towards predatory lenders.
Ackman suggested that fostering more innovation and competition among credit card lenders, aided by regulatory changes for new entrants, would be a better solution to reduce rates. Major banks and card issuers like American Express, Bank of America, and JPMorgan had no immediate comment following Trump's announcement.
The Net Gain for Consumers
The Vanderbilt University study addressed potential bank responses, noting that to maintain profitability under a 10% cap, banks might need to reduce rewards programmes for customers with FICO scores below 760 by about $27 billion. However, the net benefit for consumers remains overwhelmingly positive.
On a collective basis, consumers would still save a net $73 billion annually. The report emphasised that in every credit tier, the money saved from lower interest would exceed the value of any lost rewards by at least three times. Customers with excellent credit (scores above 760) would retain their rewards and still receive a portion of the savings, estimated at $16 billion.
While acknowledging that more competition could help, the study's conclusions argued that it would not fundamentally solve the high-interest rate problem for consumers, making a congressional mandate for a reasonable standardised rate a necessary step.
