Former US President Donald Trump's recent proposal to impose a strict limit on credit card interest rates has sent shockwaves through the American financial sector, with major banking associations warning of severe unintended consequences for consumers and businesses.
Trump's Bold Proposal: A 10% Cap to Ease Burden
In a post on his Truth Social platform on Saturday, President Trump announced a plan to cap annual percentage rates (APRs) on credit cards at 10% for one year, starting from January 20, 2026. He framed the move as a necessary intervention to protect Americans from exorbitant charges.
"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," Trump stated. The proposal aims to alleviate the financial strain on households grappling with high borrowing costs, a significant issue as credit card reliance has grown.
Banking Industry Pushback: A Threat to Credit Access
The reaction from the US banking industry was swift and critical. Five powerful financial associations issued a joint statement late on Friday, expressing deep concern over the potential fallout from such a cap.
The group, which includes the American Bankers Association, Bank Policy Institute, Consumer Bankers Association, Financial Services Forum, and Independent Community Bankers of America, argued that while they support affordable credit, a 10% cap would backfire. They warned it would drastically reduce the availability of credit, particularly for subprime borrowers and small businesses.
"If enacted, this cap would only drive consumers toward less regulated, more costly alternatives," the statement cautioned, suggesting it could push people towards predatory lenders and loan sharks.
Billionaire Investor and Mounting Debt Add to Concerns
Prominent hedge fund manager Bill Ackman amplified these warnings in a detailed post on X (formerly Twitter). He predicted that a mandatory 10% rate would lead to mass cancellations of credit cards as lenders could no longer profitably manage risk for millions of customers.
"My concern about capping rates at 10% is that doing so will inevitably cause millions of Americans to have their cards cancelled," Ackman wrote. He painted a grim picture of the alternative, where consumers denied bank credit might turn to illegal lenders. "Loan sharks can charge multiples of these rates, and the cost of default can be physical harm or worse," he added.
The debate unfolds against a backdrop of record-high credit card debt in the United States. According to the latest Federal Reserve data cited in the AFP report, total outstanding credit card debt surpassed $1.23 trillion at the end of September, making it the fourth-largest component of household debt.
This debt burden has swelled as more Americans use credit not just for discretionary spending but also for essential needs. The Fed notes that while typical rates are at least 21%, they can soar to 38% or higher for riskier borrowers, highlighting the wide gap between current market rates and Trump's proposed cap.
The proposal sets the stage for a major policy clash, pitting the goal of consumer relief against the banking industry's warnings of a credit crunch and the potential rise of dangerous, unregulated lending.
