Americans holding credit card debt might have briefly cheered at President Donald Trump’s recent call for a one-year cap of 10% on credit card interest rates. However, Wall Street and financial experts have immediately thrown cold water on not just the legality and likelihood of the cap being enacted, but the negative downstream effects it would have on consumer lending and the financial sector.
The president last Friday posted on Truth Social that he will order America’s credit card companies to cap the annual percentage rate (APR) they charge consumers at 10% for one year. It’s a pledge in line with his second-term campaign pledge to provide relief to Americans, who at the time were holding record credit card debt of $1.1 trillion that has since surpassed $1.2 trillion.
If enacted, that would represent a roughly halving of the industry’s current average APR, which sits just above 20%.
For context on the potential consumer savings, a cardholder with $5,000 in debt at a 20% APR making minimum $100 monthly payments would need 109 months (~9 years) to clear that balance and pay $5,878 in interest along the way. At 10%, they’d pay the sum off in 65 months (about 5 and a half years) and pay just $1,496 in interest—a savings of nearly $4,400.
Of course, the savings and reduction in payoff time would be less if the cap were limited to just a year.
A Path to Passage Is Unclear
Much of the skepticism around a rate cap on credit cards gravitates around a legal pathway to passage.
“President Trump did not indicate in his comments how he hoped to implement the interest rate cap, which could in theory include legislation in Congress, executive action, or voluntary moves by banks,” a Goldman Sachs research team wrote in a Monday note. “We are not aware of any provision under current laws that regulators could use to cap interest rates generally (there is a cap on rates for military personnel specifically and the CARD Act of 2009 imposes limits on credit card fees, but not interest rates).”
That’s not to say there wouldn’t be some level of support in Congress. Back in February 2025, Sens. Bernie Sanders and Josh Hawley introduced a bipartisan bill mandating the same temporary 10% cap, but for a period of five years. Regardless, Citi researchers still see the legislature putting up resistance.
“We doubt the regulators have authority to impose any type of fee cap and Congress would need to act,” Citi Managing Director Keith Horowitz says. “Although this idea has some bipartisan support, we think it would be opposed by most members of the House Financial Services Committee and Senate Banking committees including both committee chairman.”
Indeed, the bipartisan bill hasn’t made its way out of Congress, in part because of widespread outcry from the banking sector, but also because of the potential for such a bill to slam credit access shut on millions of Americans.
Do you want to get serious about saving and planning for retirement? Sign up for Retire With Riley, Young and the Invested’s free retirement planning newsletter.
Credit Card Companies, Big Banks at Significant Risk
“This is likely to serve as a near-term overhang for the credit card issuers and large banks who control the majority of the market,” Goldman Sachs’ team writes.
“Credit card interest rates average over 15% across the 7 largest issuers (ranging from low-teens to low twenties) but include promo balances and transactors, implying that loans on revolving balances are likely north of 20%. Therefore, any cap would have a meaningful impact on credit card profitability.”
Indeed, the financial sector as a whole was solidly down as of midday Monday, with more credit card-focused names—including Capital One Financial (COF, -6.5%), American Express (AXP, -4%), and Citi (C, -3.5%)—sustaining deeper losses.
Analysts from Keefe, Bruyette & Woods see deep potential pain on the horizon, suggesting credit card issuers could see their 2026 earnings per share (EPS) slashed by 25% to 50%, portfolio yields cut by 30% to 50%, and loan growth drop to 0% for the year.
And they warn an extension of the cap could result in meaningful, permanent changes to the industry.
“In a scenario where the one-year move sets the stage for a longer-term impact, this will require some meaningful re-calibrations to the credit card model as we know it (e.g. slashing rewards and other card value props, potential subscription fees, lower RSAs etc.),” they say.
Disruption might not be limited to the financial sector, either. KBW adds that industries like airlines and retail rely heavily on card-related revenues, “which if curtailed, will have to look to make up these lost revenues by potentially raising prices on other products.”
How a 10% Cap Could Close Off Consumer Credit
While Americans currently saddled by credit card debt would clearly and immediately benefit from any cap, card issuers could be forced into wholesale changes to how they issue new debt.
“It would also restrict the amount of credit available given the hit to profitability,” Goldman’s team writes. “Issuers would look to focus on profitable customers, which are likely to skew towards prime / super-prime.”
That could mean millions of Americans with lower credit scores or no credit history suddenly facing the prospects of not being able to access new credit, and/or having current accounts closed. Those who do qualify might have to deal with lower credit limits, shorter promotional-APR periods, and increases to annual card fees.
“Additionally, as credit availability is curtailed, consumers will have to rely on alternate sources of consumer lending (e.g. neobanks, payday lenders etc.), which are also significantly more expensive to consumers than APRs charged by credit card lenders,” KBW adds.
Within the industry, SoFi Technologies (SOFI) CEO Anthony Noto acknowledged the change would slam card providers and push people toward personal loans—a potential boon for his company.
“If this is enacted—and that’s a big if, though part of me hopes it is—we would likely see a significant contraction in industry credit card lending. Credit card issuers simply won’t be able to sustain profitability at a 10% rate cap,” Noto wrote in an X post on Saturday. “Consumers, however, will still need access to credit. That creates a large void—one that @SoFi personal loans are well positioned to fill.”
That said, milder relief still might be in the cards. Several analysts made the case that banks and credit card issuers might voluntarily offer some lesser form of relief as a way to fend off the cap.
“It’s possible that banks could take voluntary action to: 1) pause any further rate increases or bring down rates in certain areas, or 2) provide further relief for struggling customers (such as additional payment holidays and flexibility around rates charged),” Goldman’s team writes.
Want to talk more about your financial goals or concerns? Our services include comprehensive financial planning, investment management, estate planning, taxes, and more! Schedule a call with Riley to discuss what you need, and what we can do for you.
