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Americans are carrying $1.23 trillion in credit card debt, the highest level ever recorded. The average household with credit card debt owes $10,563. President Donald Trump just announced he wants to cap credit card interest rates at 10 percent for one year. The average rate Americans pay right now? 22.3 percent. Some people with lower credit scores are paying close to 30 percent.
Within hours, the banking industry fired back with warnings that sounded almost apocalyptic: millions of Americans would lose access to borrowing entirely. They’d be forced toward payday lenders and loan sharks. The whole consumer lending system might collapse.
The Numbers Behind the Proposal
These aren’t people splurging on luxuries—92 percent of Americans cut spending in 2025, including on groceries and healthcare.
Interest rates have gone up dramatically over the past decade. In late 2013, the average card APR was 12.9 percent. Today it’s 22.3 percent. For new card offers, it’s even higher: 23.79 percent.
The proposed 10 percent cap would represent a roughly 55 percent reduction from current levels for the most heavily indebted borrowers. That would completely change how credit card companies do business.
The Banking Industry’s Counterargument
The banking lobby‘s response came fast and coordinated. Five major trade groups issued a joint statement. The American Bankers Association, Bank Policy Institute, Consumer Bankers Association, Financial Services Forum, and Independent Community Bankers of America warned that the cap would “reduce availability and be devastating for millions of American families.”
Their argument is that they need to charge different rates based on risk. Banks charge higher rates to people more likely to default. Someone with excellent credit might pay 18 percent. Someone with fair credit might pay 25 percent. Someone with poor credit or limited history could face 30 percent or more.
If you cap rates at 10 percent, banks say they simply won’t issue cards to anyone they consider risky. The Bank Policy Institute claims more than 14 million American households could lose access to cards entirely.
Scott Simpson, CEO of America’s Credit Unions, put it bluntly. “The plain truth is that capping rates at 10% does not make borrowing more affordable,” he said. “It makes it unattainable for millions of working Americans.”
If banks can’t charge enough to cover their losses on risky borrowers, they won’t lend to risky borrowers.
But banks can borrow from the Federal Reserve at around 4 percent. A 10 percent cap still leaves a 6 percent profit margin.
Where People Would Turn Instead
The industry’s darkest warning is about what happens to people who lose access to cards. They don’t stop borrowing—they turn to worse options.
Payday lenders charge APRs that can exceed 400 percent. Auto title lenders will take your car if you miss a payment. Pawn shops offer pennies on the dollar. And then there are the unregulated lenders operating illegally or without regulation online.
Bill Ackman, who supported the president in 2024, called the cap a “mistake.” He warned that borrowers would end up with loan sharks charging higher rates than they previously paid.
Cards offer certain protections. You can dispute charges, get fraud protection, and have regulated billing. Loan sharks offer none of that.
The Legal Question
The president announced this cap on Truth Social. He didn’t specify how he plans to implement it.
Executive order? Regulatory action through the Consumer Financial Protection Bureau? Congressional legislation? Voluntary cooperation from card companies?
Legal experts aren’t sure the president has authority to impose caps on his own. There’s no clear legal permission from Congress. The CFPB has broad authority over unfair practices, but legal experts disagree about whether the CFPB can set hard caps.
Richard Nixon imposed wage and price controls in 1971. Congress had explicitly authorized that through a law passed in 1970 that gave the president power to control prices. No comparable law exists for lending.
Congress has imposed caps before—the Military Lending Act caps many loans to active-duty service members at 36 percent. But that required legislation. The president couldn’t order it on his own.
The administration has spent considerable energy trying to weaken the CFPB, the agency that would need to enforce this cap. The White House has suggested the agency shouldn’t exist and has slashed its funding. Now it needs the CFPB to implement a major protection initiative.
Bipartisan Support
Senator Bernie Sanders and Republican Senator Josh Hawley introduced similar legislation last year proposing a 10 percent cap for five years. Representative Alexandria Ocasio-Cortez and Republican Representative Anna Paulina Luna introduced a companion bill in the House.
Representative Luna has been particularly vocal: “For too long, card companies have abused working-class families with absurd rates, trapping them in an almost insurmountable amount of debt.”
Senator Hawley responded to the announcement on X: “Fantastic idea. Can’t wait to vote for this.”
Congress might pass legislation on this beyond the initial announcement.
What the Research Shows
A study by Vanderbilt University’s Policy Accelerator found that card companies are charging much more than it costs them to lend.
Their findings: a 15 percent cap would save borrowers $48 billion annually with no real reduction in available borrowing. A 10 percent cap would save about $100 billion but would reduce some debt availability for people with scores under 600 because banks would stop issuing cards to the riskiest borrowers.
Capital One, the nation’s largest card-issuing bank, reported net income of $3.2 billion in the third quarter of last year—an annualized level of more than $12 billion.
A 10 percent cap would reduce their profits, but the industry wouldn’t be destroyed.
Australia caps card APRs at roughly 20 percent, and people there maintain broad access to borrowing. Canada has no federal cap but provincial regulations limit certain fees, and the market functions without the catastrophic outcomes banks predict.
The Broader Economic Context
To understand why this proposal resonates, consider the financial stress households are experiencing.
The University of Michigan’s consumer sentiment index plunged to 54 in early January 2026, down from 74 in December 2025. That’s approximately a 27 percent drop in one month. This score is near the lowest point ever recorded of 50 in June 2022 at the peak of pandemic-era inflation.
Nearly half of survey respondents spontaneously mentioned high prices as dragging down their personal finances. Prices have gone up roughly 25 percent over the past five years combined and continue to weigh on household decision-making.
Bank of America data shows higher-income households with spending growth of 2.6 percent year-over-year in November 2025, while lower-income households showed growth of only 0.6 percent. Wage growth has diverged even more sharply: 4 percent for higher-income workers, 1.4 percent for lower-income workers—the largest gap in roughly a decade.
A Resume Now survey found that 49 percent of Americans have dipped into savings to get by. Only 12 percent of workers report that their wages have kept pace with inflation.
People are struggling. Debt is at record levels. Borrowing costs are high. A proposal to cap rates at 10 percent sounds like direct relief.
Consumers now expect inflation of 3.3 percent over the next year, up from 2.8 percent in December 2025. Long-term expectations jumped to 3.3 percent from 3.0 percent. When people expect higher prices, they demand higher wages, which causes prices to go up.
The Rewards Program Problem
Card rewards programs would likely disappear.
Those cashback bonuses, travel points, and airline miles are financed partly by interest payments from people who carry balances. If interest income gets cut in half, credit card companies couldn’t afford to offer rewards anymore.
This creates an unfair result. Higher-income borrowers who pay off their balances in full get free loans while earning rewards on their spending. Those rewards are subsidized by interest payments from lower-income borrowers who carry balances. People with less money end up paying for benefits for people with more money.
Credit card rewards have become much more common and valuable over the past decade. Americans redeemed $35 billion in rewards in 2024, up from $20 billion in 2019. Much of that value flows to higher-income households who use cards for convenience rather than necessity.
What Happens Next
The president specified the cap should take effect January 20, 2026—the one-year anniversary of his second inauguration. There’s no indication the cap has gone into effect.
If implementation happens through executive order, expect banks to sue immediately and probably win in court. The lawsuits could take years to resolve.
If Congress is pushed to pass legislation, a massive industry lobbying campaign will follow. The bipartisan support suggests legislation might be possible.
A third option: pressure on card companies to lower their interest rates on their own. The industry’s immediate and forceful response suggests they’re not inclined to cooperate.
The government would need to use the Consumer Financial Protection Bureau to enforce this. But the administration has actively tried to weaken the CFPB, creating a contradiction: implementing the cap requires a strong, well-funded CFPB, but the administration opposes both.
The Core Trade-Off
This proposal forces a genuine policy question: should we accept that some people won’t be able to get credit cards in order to reduce costs for those who retain access?
The industry argues that charging different rates based on risk allows banks to lend to riskier borrowers. Without the ability to charge higher rates to riskier borrowers, banks simply won’t lend to them.
Advocates argue that 22 to 30 percent APRs aren’t risk-based pricing—they’re exploitation. Banks can still make substantial profits at 10 percent, especially when they’re borrowing from the Fed at 4 percent.
Congress could set different caps for different types of borrowers: 10 percent for lower-risk borrowers, 15 or 18 percent for higher-risk borrowers. This would require congressional legislation rather than unilateral presidential action. Everyone would benefit from somewhat lower costs, though not equally.
The Shift in Political Thinking
The announcement signals a shift in how politicians think about lending.
For decades, the prevailing view has been that markets should set rates. Lenders assess risk and price accordingly. Government intervention distorts markets and creates unintended consequences.
When Bernie Sanders and Josh Hawley agree that card costs are too high, when a Republican president calls for caps, when 61 percent of Americans say current policies have worsened economic conditions, something fundamental has changed.
Everyone now agrees government should regulate lending markets. The question is how.
There have also been announcements about plans to buy $200 million in mortgage bonds to drive down mortgage costs and ban institutional investors from purchasing single-family homes. These actions show that politicians now care about making things cheaper beyond typical left-vs-right politics.
Congressional legislation is likely. State-level action is possible. The industry will resist, but the political pressure is real.
For people carrying debt—tens of millions of people—the announcement offers hope that government might address what feels like an unfair financial burden. For those who rely on access to borrowing because they lack savings or alternatives, the announcement raises legitimate concerns about losing access entirely.
How this gets resolved will change how credit cards work for years and test whether our government can solve real economic problems in ways that help ordinary people rather than protecting established industries.
The $1.23 trillion in debt represents real families making real trade-offs between paying interest fees and paying for groceries. Whether a 10 percent cap is the right solution remains contested. But the problem it aims to address is undeniably real.
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