President Trump wants to lower credit card interest rates to 10% for one year — and is putting pressure on credit card companies to do so by Jan. 20, according to a Jan. 9 Truth Social post.
This isn’t the first time we’ve seen a proposal to cap credit card rates at 10%. It’s a measure Trump spoke about in his presidential campaign, and as recently as last year, senators introduced a bipartisan bill that would have implemented the same 10% cap for five years.
Now, Trump says credit card companies have until Jan. 20 to comply with the rate cap, or they’ll be “in violation of the law.”
On Tuesday, JPMorgan Chase’s CFO Jeremy Barnum warned on the company’s fourth-quarter earnings call that the impact of a rate cap could result in less credit being made available, which “would be very bad for consumers, very bad for the economy.”
So far, there aren’t any details about how a rate cap would be implemented or enforced, especially without legislation from Congress. But experts are clear that a rate cap could have long-lasting effects for cardholders.
Today, the average credit card interest rate for accounts with assessed interest (cardholders who carry a balance) is 22.30%.
While credit card rates have long been high compared to some other lending options, they’ve also skyrocketed over the past decade. In mid-2016, the average credit card rate for accounts with assessed interest was a much lower 13.35%.
A major culprit is credit card margins, or the difference between credit card APRs and the prime rate. These margins have increased significantly. A 2024 analysis from the Consumer Financial Protection Bureau showed that in the decade prior, issuers that increased this margin accounted for about half of the overall increase in credit card rates, which also made revolving balances more profitable for credit card companies.
Credit card interest rates also vary by individual, though. Most issuers offer variable rates within a set APR range. If you have excellent credit, you may be more likely to qualify for the lower end of the APR range, but without a strong credit profile, you may be assigned a very high rate at the top end of the range.
Read more: What to do if you can’t make your credit card payments
Given today’s sky-high interest rates, a 10% rate cap could offer major savings for the 46% of American households with credit card debt. If you have existing debt, a lower rate may help you pay your balance more quickly, with less going toward interest and more toward principal.
But according to the president’s social media post, the 10% rate cap would be limited to one year. After that time, it’s unclear how rates would respond.
“Credit card interest rates are set by the market and based on the borrower,” Yaël Ossowski, deputy director of the Consumer Choice Center, said in an email to Yahoo Finance. “After a temporary one-year cap, rates will rebound to levels that better reflect each individual’s financial risk and creditworthiness. We’ll have to see what happens with the next Fed Chair and the economy overall.”
If you’re in high-interest credit card debt today, a lower interest rate could be a major boost to helping you pay down your balance.
Here’s an example: Let’s say you have a credit card balance of $6,000 — around the average among Americans with credit card debt — with a 22% APR. If the rate cap is implemented, that rate would drop to 10% for one year.
You would need to make monthly payments of at least $561 to pay your balance off in full within a year at your current interest rate. At the lower 10% interest rate, you could pay off the same balance with $527 monthly payments over a year.
In total, you’d save over $400 in interest with the lower rate.
However, a $527 monthly payment isn’t realistic for many cardholders. The lower rate can still be beneficial if you’re only able to make minimum payments (calculated using interest rate plus 1% of balance).
By making minimum monthly payments at your current 22% interest rate, you would pay $10,000 in added interest over nearly 25 years before your balance is paid in full.
If your rate dropped to 10% for one year, you could start with lower minimum monthly payments and, over those 12 months, reduce your balance to $5,318. If we assume your rate returns to 22% after the year ends and you continue making minimum monthly payments, you’d pay about $9,150 in total interest over the same payoff period.
The one year of lower interest could save you almost $1,000 in the long run, but making minimum payments is still a costly and time-consuming way to pay down debt.
Read more: How to find the best credit card interest rate
In the short term, a rate cap may be a useful tool for paying off your debt balances. But for the long term, experts warn, there could be negative consequences for credit access and earnings from rewards.
One of the biggest risks of a credit card interest rate cap is that many Americans could lose access to credit cards altogether.
If issuers can’t mitigate the risk of borrowers with lower credit scores by offering higher rates, and if they lose a major source of income via interest payments, they may tighten their lending standards. That would make it a lot more difficult for many Americans to qualify for credit cards to use for emergencies, everyday spending, and more.
In a joint statement released Jan. 9, banking industry groups said “a 10% interest rate cap would reduce credit availability and be devastating for millions of American families and small business owners who rely on and value their credit cards, the very consumers this proposal intends to help.”
Similarly, a statement from America’s Credit Unions, a trade organization for credit unions, said, “capping rates at 10% does not make credit more affordable, it makes it unattainable for millions of working Americans because financial institutions will not be able to offer credit cards to most consumers at a 10% rate.”
That puts some borrowers at higher risk of relying on even more dangerous and expensive borrowing options, like buy now, pay later or payday loans.
Forcing an artificially low interest rate will lead many banks to simply not offer credit at all, Ossowski said. “When those consumers are locked out from credit cards, they will find riskier credit elsewhere, such as payday lenders. Those interest rates are not capped and are extraordinarily high.”
Rewards and benefits at risk
Credit cards aren’t only useful for accessing a line of credit; many cards also come with lucrative rewards and ongoing benefits that can help you save money on your regular purchases. But some experts say limiting credit card interest rates could also lead to limited rewards options.
That could be a net-negative outcome for cardholders who pay their balances in full each month and don’t have debt, but instead, use rewards cards to earn cash-back savings or travel rewards.
“The most lucrative bank rewards programs are made possible in part by the interest fees,” said Tiffany Funk, co-founder and president of point.me. “Absent that lever and potential revenue source, we would likely see banks raise annual fees dramatically, or drastically reduce the value of their points and transfer programs.”
If a rate cap is implemented, it may be a good time to evaluate whether your rewards are working for you “on a card-by-card basis,” Funk said in an email to Yahoo Finance, though she predicts a rate cap is unlikely to come to fruition. “This is a good practice to get into every year regardless.”
“The best approach is always to try and earn points with a goal in mind, and try and redeem as you go so you aren’t sitting on a huge balance. Your rewards will never be worth more than they are currently!”
You don’t have to wait for a potential rate cap to lower interest on your credit card debt and start working toward debt payoff.
If you have a solid credit score, you can use a balance transfer credit card with an introductory 0% APR to pay down your existing balance without taking on any additional interest for several months. Today’s top balance transfer credit cards have intro periods that last from 12 to 21 months — which can be even more beneficial for debt payoff than a 10% interest rate for one year.
Using the same example as above, let’s say you have a $6,000 credit card balance today. If you open a balance transfer card with a 0% APR for 18 months and a 3% balance transfer fee, you could pay your debt off in full with $343 monthly payments over the intro period.
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