The Impact of a 10% Credit Card Interest Rate Cap
President Trump’s proposal to mandate a temporary, one-year 10% cap on credit card interest rates (effective January 20, 2026) represents a dramatic shift in consumer finance policy.
Potential Benefits for Your Wallet
The primary goal of the cap is to increase affordability by slashing the cost of carrying debt.
Direct Savings: With the current national average APR hovering around 21–24%, a drop to 10% would save the average household (with a balance of roughly $11,000) about $1,100 per year in interest alone.
Faster Repayment: Lower interest charges mean a larger portion of monthly payments goes toward the principal balance, potentially shortening the "debt trap" by years.
Economic Stimulus: Proponents argue that the billions saved in interest will be reinvested into the economy through increased consumer spending on essentials.
The Risk of Tightened Access
Industry experts warn that "capping" the rate doesn't just lower the price; it changes the risk math for lenders.
Structural and Legal Hurdles
While the proposal is popular among voters, its implementation faces several obstacles:
Legislative vs. Executive: Critics argue that the President lacks the authority to impose a national interest rate cap via executive order, citing the National Bank Act.
It likely requires a stalled bipartisan bill (Sanders-Hawley) to pass Congress. The "Loan Shark" Risk: There is a concern that if traditional banks stop lending to high-risk individuals, those consumers will be forced toward "less regulated, more costly alternatives" like payday lenders.
Industry Volatility: Since the announcement, shares in major issuers like American Express, Capital One, and Discover have seen significant pressure as investors price in a potential "wipeout" of card earnings for the year.
Expert Insight: Ted Rossman (Bankrate) notes that while a 10% cap sounds like relief, it could result in up to 80% of current credit card accounts being fundamentally altered or closed if banks cannot price for risk