President Donald Trump has called for a one‑year 10% cap on credit card interest, saying card companies have “truly exploited the public” with rates that recently averaged more than 22%, according to Federal Reserve data cited by NPR.
Bank groups, analysts, and nonbank lenders are lining up to argue that cutting card APRs roughly in half overnight would force lenders to reprice risk in other ways, reshape card programs, and in many cases just stop extending credit to anyone outside the safest tiers.
The “credit freeze” that worries big banks and William Stern
“It’s basic economics: Price controls create shortages,” Cardiff founder William Stern told TheStreet.
“If you cap credit card rates at 10%, banks aren’t going to just smile and take the hit. They’re going to stop issuing cards to anyone who looks even remotely risky. The intention might be to help the working class, but the reality is it’s going to cut off their access to credit entirely. We’re going to see a massive credit freeze where you’re trading ‘expensive’ money for no money.”
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A coalition including the Bank Policy Institute and the American Bankers Association warned that a 10% ceiling “would diminish credit availability and be detrimental” for millions of families and small business owners who depend on their cards, according to CNN’s recap of the joint statement.
The real‑world impact would be that “people will lose access to credit, on a very, very extensive and broad basis, especially the people who need it,” JPMorgan Chase Chief Financial Officer Jeremy Barnum said during the bank’s fourth‑quarter earnings call, according to my earlier report.
A 10% cap would not simply mean card companies keep lending as usual with lower rates, but would “tighten lending standards, shutting out borrowers with lower credit scores,” Jefferies analyst John Hecht told MarketWatch. A cap could also weigh on retail sales and GDP.
Main Street heavily relies on business credit
For many small businesses, the plastic in the owner’s wallet is not optional. It represents working capital.
“People forget that for Main Street, the business credit card is the working capital loan,” Stern added. “A plumber or a contractor lives on that float to buy materials. If this cap goes through, issuers are going to slash credit limits overnight to protect their downside. A business owner relying on a $20,000 limit might wake up to find it cut to $5,000. It’s going to pull the rug out from under millions of small businesses that rely on that liquidity to keep the doors open.”
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Main Street is already dealing with slower bank approvals and a heavier reliance on alternative financing, creating what the company calls a “speed to capital” gap between traditional lenders and fintechs, according to Cardiff’s own small‑business lending research.
A trade group representing credit unions told Yahoo Finance that a strict cap would be “devastating” for many members because they could not profitably offer cards at 10%, especially for riskier borrowers, leaving those customers with fewer options and less flexibility.
Related: 4 Ways to Safely Build Credit When You Have None
What a rate cap on credit cards could mean for small-business owners:
- Your card limit could be cut sharply as banks re‑underwrite higher‑risk lines to fit a 10% economics model.
- If traditional card lines dry up, you might be pushed toward more expensive or opaque options, such as merchant cash advances or revenue‑based financing .
The shell game: Banks will create other revenue streams if interest payments drop
Even where credit lines survive, few people in the industry believe a cap simply hands you a no‑strings discount.
“You can’t legislate the price of risk,” Stern explained. “If the government caps the interest rate, the banks are just going to move the cost somewhere else. We’ll see the end of cash‑back rewards, the end of airline points, and the return of massive annual fees. The consumer isn’t actually saving money; the bank is just changing how they bill for it. It’s a political shell game, not an economic solution.”
The Bank Policy Institute’s analysis suggested that under a 10% cap, lenders could respond by adding or raising annual fees, cutting rewards, lifting minimum payments, and charging more for balance transfers and cash advances, according to Bloomberg’s summary of the report cited by Yahoo Finance.
Related: White House teases big move that could shake up your credit cards
A cap might provide “short‑term relief” to heavily indebted cardholders, but banks would “adjust rewards and promotional offers” to offset lost interest income, leaving many consumers with leaner perks and higher non‑rate costs once the dust settles, WalletHub CEO Odysseas Papadimitriou told CNBC.
Wells Fargo analyst Mike Mayo told clients that a one‑year 10% cap could shave 5% to 18% off big‑bank pretax earnings and potentially “wipe out earnings” at pure‑play card lenders, according to Yahoo Finance. This makes it even more likely banks will aggressively rethink pricing, rewards, and who gets approved.
What consumers can do before a credit-card rate cap takes effect
You do not control whether this cap ever becomes law, but you do control how exposed your day‑to‑day finances are if a credit squeeze hits.
Average credit card APRs recently sat above 20%, more than 8 percentage points higher than a decade ago, according to Federal Reserve figures cited by NPR and Al Jazeera, so even without a cap, you are paying a steep premium if you revolve a balance.
Here are a few practical steps to protect yourself while Washington and Wall Street fight over the future of plastic:
- Use today’s limits as a bridge to a bigger cash buffer. This way, a surprise cut to your available credit will not instantly blow up your budget.
- Line up at least one non‑card option. If your credit allows, lean on a personal loan, home‑equity line, or SBA‑backed product, so you are not wholly dependent on card issuers’ risk models.
- Audit your reliance on business credit cards. If you are a business owner, audit how much of your operations run on revolving card floats and start exploring bank lines or reputable fintech lenders before any cap forces terms to change quickly.
I look at the president’s 10% cap idea as a reminder that there is no “free lunch” in credit markets. When politicians squeeze one lever on the price of risk, lenders almost always pull another, and that second‑order move is usually where households and small businesses feel the real pain.
Related: Big bank pushback is brewing over Trump credit card plan
