Four key questions about Trump’s call for a 10% credit card interest rate cap

By Tod Gordon, Andy Kampf, Frank Mastrangelo, and David Simon

Americans are carrying $1.233 trillion in credit card debt as of the third quarter of 2025, up from $1.209 trillion in Q2 2025 and the most since the New York Fed began tracking the data in 1999. Credit card payments are a burden for many American consumers, which is why calls for limits or caps in some form have come from voices on the left as well as the right. Well-meaning policy initiatives can have unexpected downstream impacts that result in significant dislocation in business models - for example, caps on overdraft fees led to a huge impact on how banks offer checking accounts to young and lower-income consumers. Capping interest at 10% would severely challenge how banks and fintechs generate revenue, particularly if interchange and fees are also capped.

Is it economically viable? 

Credit card loans are unsecured, which means issuers need to find a profitable return on assets. A 10% rate cap makes that virtually impossible, even for average customers: a 10% cap would quickly be exceeded by funding costs (4-5%), credit losses (around 4%), fraud, and operating expenses - it’s the equivalent of capping gasoline prices at $1.50 per gallon. A 10% cap would fundamentally change the credit card market, making it look like every other underwritten unsecured loan product; it would also drastically reduce the market size and increase credit processing times, required documentation, and ongoing credit monitoring. It’s not clear whether the proposed cap or existing legislation addresses the possibility that banks will offset lower interest rates by increasing fees. High credit score transactors (not revolvers) would be less affected by credit tightening. But those customers would likely be affected by devalued, more expensive credit card rewards programs, and near-prime customers could easily get swept up in the tightening. 

Would it help or harm consumers?

The credit card market is uniquely accessible, and a cap would harm both the middle market and lower-income consumers. This type of executive action could create perverse incentives, as the Durbin amendment did for debit card rewards. The cap could be devastating for the large segment of Americans who use credit cards to manage short-term liquidity challenges (not just large purchases). There’s also the potential for consumer payment shock at the end of the temporary one-year cap, as customers may be lured to run up balances resulting from artificially lowered minimum payments over the coming year. The rapid increase in mortgage loan defaults resulting from payment shock during the Great Financial Crisis is a lesson to be heeded. Industry reaction, represented by JPMC’s CFO and others, suggested that a 10% cap would reduce access to credit, particularly for higher-risk customers, driving them to less-regulated, more costly alternatives like payday lending. 

Could it happen? 

While many legal experts doubt it can be implemented through executive action and believe that legislation would be required, the current administration may enforce compliance, including through regulatory pressure on banks.

What’s the takeaway?

Clients should consider their business resiliency against the flood of unexpected ideas coming out of Washington and have processes in place to evaluate and react.

If you want to chat credit card interest rate caps or other challenges, reach us at hello@klarosgroup.com.