Credit card issuers generate revenue in three main ways — via interchange fees, interest charges, and annual fees. In this regard, President Trump is indicating he will significantly regulate this area, which may have both positive and negative consequences for consumers.
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Trump proposes one year limit on credit card interest rates
President Trump has utilized his Truth Social platform to advocate for credit card companies to limit their interest rates to 10% starting January 20, 2026, for a duration of one year. Here’s what he stated:
“Please be informed that we will no longer allow the American Public to be “ripped off” by Credit Card Companies charging Interest Rates between 20% to 30%, or even higher, which flourished unchecked during the Sleepy Joe Biden Administration. AFFORDABILITY! Effective January 20, 2026, I, as President of the United States, am calling for a one year limit on Credit Card Interest Rates at 10%. Coincidentally, the January 20th date will coincide with the one year anniversary of the historic and very successful Trump Administration. Thank you for your attention to this matter. MAKE AMERICA GREAT AGAIN! PRESIDENT DONALD J. TRUMP”
It remains somewhat ambiguous whether he intends to implement this through an executive action or if he merely aims to pressure credit card companies into complying voluntarily. His phrasing of “calling for” credit card companies to take this action suggests the latter might be true, but it’s uncertain.
For context, credit cards are often known for their high interest rates, currently averaging over 20%. These charges apply if the full balance isn’t paid before the due date. No interest charges accrue when you charge a purchase on a credit card and subsequently pay the balance in full.
Trump intends to limit credit card interest rates to 10%
My perspective on Trump’s credit card interest rate limit
The idea of limiting credit card interest rates tends to attract bipartisan support, so I don’t find this concept particularly radical. However, I am somewhat puzzled about the potential enforcement mechanism, as that seems to be an essential detail.
I also don’t grasp the rationale behind this only being implemented for a year. That seems strange, because if it’s sound policy, wouldn’t it make more sense to extend it beyond that? A one-year limitation appears to introduce significant market uncertainty, yet Trump isn’t typically one to shy away from that.
A limitation on credit card interest rates would be beneficial for some individuals who finance credit card charges, as they would pay substantially less in interest.
However, I wouldn’t claim it’s advantageous for everyone with financed charges — there’s no denying that capping interest at 10% might exclude many consumers with poor credit from obtaining credit cards, possibly leading to account closures, as issuers might view lending at that rate as too risky. After all, the risk of non-payment is considerable, and the financial implications differ significantly at 10% interest compared to 25%+ interest.
Moreover, if a long-term interest rate cap were implemented, it would drastically transform the credit card landscape regarding reward structures, including everything from welcome bonuses to spending rewards and additional perks.
Right or wrong, the economics of credit cards significantly depend on a cross-subsidized model. That’s why some consumers can access exceptional value. Current credit card rewards systems largely serve to return interchange fees to consumers, enabling easy earning of 2% cash back or substantial multipliers on spending.
In reality, the revenue that supports many rewards primarily originates from interest charges, which represent the highest margin revenue stream for many issuers. Therefore, we can secure substantial welcome bonuses and 5x points on certain transactions due to others incurring nearly 30% interest.
I’m not asserting that this system is favorable, but I’m merely acknowledging its reality. If interest rates are compelled to drop by more than half in the long run, it will significantly affect the structure of rewards. Perhaps this isn’t inherently negative, but it is inevitable.
Furthermore, it would also substantially impact airlines, which increasingly rely on credit card revenue to maintain profitability, negatively affecting their margins in that sector.
Significant spending multipliers are financed by interest charges
Bottom line
President Trump is “calling for” credit card companies to limit interest charges to 10% for a specific duration.