United States President Donald Trump on 10 January called for capping credit card interest rates at 10% for a year, effective from January 20, in a social media post. The same was also announced by The White House. However, the fine print and next steps remain unclear.
Amid this announcement, we take a look at how much an effective cap on credit card interest rates could save Americans. According to a 2025 study by Vanderbilt University on Capping Credit Card Rates, a massive $100 billion annually!
What has Donald Trump proposed?
In a post on Truth Social, the US President called for a one-year cap on credit card interest rates of 10% from January 20, saying that his administration will no longer let the American Public be “ripped off” by credit card companies.
While he did not give out specifics, Donald Trump said the move is aimed at improving “affordability” for Americans. The White House official account on X, also did not offer details, but called the announcement “HUGE”.
Notably, the date marks the anniversary of his second term as US president and comes months ahead of the US mid-term elections scheduled for November this year. This also completes one of Donald Trump’s key campaign promises in the run-up to the US Presidential elections in late 2024. He had received criticism for not fulfilling the campaign pledge for most of his first term.
What other proposals have been floated?
Over the years, bi-partisan concerns have been raised over high credit card interest rates by US lawmakers. But, despite various proposals, there is no law as yet, according to a Reuters report.
Among those who made proposals include Democratic Senator Bernie Sanders and Republican Senator Josh Hawley, who introduced a bipartisan legislation capping credit card interest rates at 10% for five years, it added.
Similarly, Democratic US Representative Alexandria Ocasio-Cortez and Republican Congresswoman Anna Paulina Luna also introduced a House bill proposing a 10% cap, it said.
How much could Americans save due to credit card interest rate cap?
According to the ‘Capping Credit Card Rates’ report published by Vanderbilt University, Americans could save up a massive $100 billion annually if the 10% cap is implemented without end-date.
The study has been authored by Brian Shearer, Director of Competition and Regulatory Policy at Vanderbilt University’s Policy Accelerator for Political Economy and Regulation. He previously served as the Assistant Director of Policy Planning and Strategy at the Consumer Financial Protection Bureau.
Shearer noted that credit card debt in the US now exceeds $1.21 trillion as Americans use the method for everything from daily purchases to source of capital for small business. Overall, he estimates the businesses are highly profitable, minting around $120 billion in interest and $162 billion in processing fees — “almost 30% of that is pure profit”, he points.
The report stated that results of the study were clear: Profit margins at every FICO tier (your creditworthiness score), is “thick enough to absorb a very significant reduction in interest caused by a new federal usury rate”.
Shearer’s report noted that at a 15% cap, “nearly every FICO tier would produce higher returns for the bank than the Federal Funds Rate (FFR) without needing material adjustments to rewards or advertising budgets or customer distribution” and “would lead to at least $48 billion in annual customer savings”.
What about the proposed 10% cap? The savings are even bigger! A 10% cap would save much more—a massive $100 billion per year.
There is however a caveat. To maintain profitability, banks would need to reduce rewards to those customers with FICO scores below 760, by as much as $27 billion.
Overall, it is still a gain. The report noted, “On net, consumers would collectively save $73 billion. And in every tier, the money saved by customers in the form of lower interest would far exceed the value of any rewards lost (by at least three times). Customers with FICO scores above 760 would not see a reduction in their rewards but they would receive some of the savings — about $16 billion worth.”
Is there criticism to Donald Trump’s move? Elizabeth Warren, Bill Ackman say…
Among politicians and lawmakers, US Democratic Senator Elizabeth Warren, who is also in the Senate Banking Committee, dubbed the call meaningless without an official bill passed by Congress to back it. “Begging credit card companies to play nice is a joke. I said a year ago if Trump was serious, I’d work to pass a bill to cap rates,” she said, as per the Reuters report.
As per the Reuters report, immediately after Donald Trump’s announcement, when reached out, no major American banks or credit card issuers had a response. This included banner names such as American Express, Bank of America, Capital One Financial Corp, Citigroup and JPMorgan.
However, billionaire investor Bill Ackman took to X and called the move a “mistake”, adding: “Without being able to charge rates adequate enough to cover losses and to earn an adequate return on equity, credit card lenders will cancel cards for millions of consumers who will have to turn to loan sharks for credit at rates higher than and on terms inferior to what they previously paid.”
He also offered possible alternative solutions: “In order to bring down credit card rates, we need more innovation and competition among credit card lenders. Regulatory changes that enable new entrants could lead to a reduction in rates,” he added.
However, conclusions in the Vanderbilt University study noted that while more competition could be helpful, it cannot resolve the fundamental problems. “More competition is likely to affect salient terms like annual fees and rewards, but unlikely to reach interest rates. For that reason, it is time for Congress to standardize interest rates by mandating a reasonable rate,” it suggested.