In a January surprise that has rattled the financial sector, Donald Trump has announced a plan to limit credit card interest rates to 10% for one year. The announcement, made on Truth Social, sets an implementation date of January 20. Trump framed the decision as a necessary step to stop the “ripping off” of American consumers, citing interest rates of 20-30% as evidence of a broken system.
The move addresses a major economic pain point: record-breaking debt. American credit card balances have surged to $1.17 trillion, and high interest rates are making it harder for families to make ends meet. Trump’s proposal offers a glimmer of hope to those drowning in debt, promising a significant reduction in their monthly interest payments.
But the banking industry warns that this hope is an illusion. In a joint statement, major financial associations argued that a 10% cap would destroy the credit market for subprime borrowers. They explained that if banks cannot charge higher rates to offset the risk of default, they will simply stop issuing cards to risky borrowers. This could lead to a massive contraction in credit availability, hurting the economy as a whole.
Political reaction has been swift. Senator Bernie Sanders, who has long championed such a cap, saw his ideas co-opted by the president just hours after criticizing him. Senator Josh Hawley praised the move, aligning himself with Trump’s populist stance. Senator Elizabeth Warren, however, was dismissive, arguing that the president lacks the legal authority to enforce the cap and that his announcement is merely political theater.
Investor Bill Ackman also weighed in, warning of unintended consequences. He predicted that the cap would lead to mass cancellations of credit cards, as banks move to protect their balance sheets. As the nation prepares for the January 20 start date, the debate over the wisdom and legality of the policy is just beginning.
