Trump floated a 10% credit card interest rate cap. Here's what that could mean for consumers.
President Trump's proposal to cap credit card interest rates at 10% for one year could save consumers billions of dollars but hurt Americans with lower credit scores, according to financial experts.
The idea, which drew rare support on Monday from Democrats such as Sen. Elizabeth Warren of Massachusetts, would prevent Americans from being "ripped off" by card issuers, Mr. Trump said last week in calling for the rate ceiling. By contrast, the cap has drawn pushback from the banking industry.
The average interest rate on credit cards is now nearly 24%, according LendingTree. People with poor credit scores, meanwhile, can pay rates of up to 36%.
Here's how experts say a 10% cap could affect consumers.
Potential tradeoffs
A September 2025 analysis from researchers at Vanderbilt University found that a 10% cap on credit card rates would save consumers $100 billion per year in reduced interest payments.
With rates at 10%, a cardholder with a $5,000 balance would pay about $42 per month in interest. At the current average rate of 24%, they would owe about $100 per month.
Some credit card analysts, along with the banking industry, contend that a 10% cap on credit card rates could lead to banks cutting off access to credit for low-income consumers and for those with low credit scores.
"They would find it dramatically more difficult to access credit," Ted Rossman, senior industry analyst at Bankrate, told CBS News.
That could take a toll on the broader economy because subprime consumers would likely pare their spending or turn to pricier types of credit. Credit card spending accounts for 30% to 40% of total annual consumer spending, so tighter credit for lower-income Americans could reduce overall consumer spending by roughly 5%, according to Morgan Stanley analysts.
For overall economic growth, that would effectively cancel out any increase in consumer spending stemming from lower credit card rates, the investment bank notes.
The American Bankers Association also said in a statement that a 10% rate cap "would only drive consumers toward less regulated, more costly alternatives," such as payday or "buy now pay later" loans.
Tiffany Funk, co-founder and president of point.me, a site that helps consumers maximize their credit card rewards, said such programs could be diminished if the cap is implemented.
"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," she told CBS News.
Yet Shearer disputes claims that capping rates would cause card companies to cut off some consumers, forcing them to turn to riskier types of loans. Rather, credit card issuers are more likely to continue serving such consumers, but could sharply reduce the value of the rewards they offer them, he said.
"The credit card business is massively profitable, so it could absorb a significant cut," he said, noting that credit card issuers have a range of revenue streams.
Issuers such as Visa, Mastercard and Capital One also make money by charging annual fees and on so-called interchange fees merchants pay to accept credit cards, which wouldn't be affected by the proposed rate cap.
"Claims from bank lobbyists that this would lead to account closures are greatly overstated, if not completely false," Shearer said.
Why are credit card rates so high?
Annual percentage rates (APR on credit cards are far higher than auto loan or mortgage rates because the debt is unsecured, Rossman explained.
"There is no underlying asset like a car or a home," he told CBS News. "The risk to lenders is they aren't going to be paid back," he added, explaining the rationale behind double-digit interest rates.
Card companies are also reluctant to reduce rates because that would mean smaller profits.
The Credit Card Accountability Responsibility and Disclosure Act of 2009 limits how much card issuers can increase rates, but does not put a cap on rates, while also reducing late payment and other fees.
Can Trump really do this?
Some experts think Trump may not have the authority to unilaterally impose a cap on credit card rates. Congress would also face challenges implementing such a cap, according to TD Cowan analyst Jaret Seiberg, although he thinks lawmakers could get behind a higher cap.
"This is where the risk rises as Democrats have sought to extend the 36% military lending cap to all consumers. It is why that could pass. Enacting a 25% cap would be harder as it could affect first-time credit card holders and subprime applicants," he said in a research note.
Shearer said that a bipartisan bill, the "Percent Credit Card Interest Rate Cap Act," introduced by Sen. Bernie Sanders of Vermont in 2025 could pass if Mr. Trump's allies rallied behind it.
"It's not going to happen through executive action," Shearer said of a cap on interest rates. "But if he can get the Senate majority leader and speaker to put it up for a vote, it's quite possible the bill would pass."