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U.S. President Donald Trump urged American credit card companies on Friday to temporarily cap interest rates at 10%, citing affordability as the rationale. According to the President, American citizens are being ripped off by credit card interest rates ranging from 20 to 30%.
Trump suggested that the cap be imposed by 20th January, coinciding with his first anniversary in office. He called for U.S. credit card firms to impose a temporary one-year cap, but did not specify how. It’s not yet clear whether he is calling for voluntary participation or looking for a government policy to enforce the proposal.
Americans’ credit card debt surpasses $1.23 trillion
According to a post on the Truth Social app, U.S. President Donald Trump blamed his predecessor, President Joe Biden, for the rising cost of living across the U.S. and for high credit card fees imposed by U.S. credit card companies. Trump called for a one-year cap on credit card fees at 10%, effective as of January 20, coinciding with his first anniversary since returning to office. The President, however, has not yet revealed the mechanism for implementing the proposal.
The proposal contradicts the President’s previous stance, as his administration scrapped the $8 cap last year, which was imposed by the Biden administration. The Biden’s $8 cap would have saved American citizens roughly $10 billion in annual fees, cutting the rate from roughly $32, according to the Financial Protection Bureau. A Texas federal Judge initially blocked the Bidens’ proposal until Trump later joined in to block the initiative through the Consumer Financial Protection Bureau.
Senator Elizabeth Warren has called the proposal a joke, noting that Trump doesn’t care about affordability.
“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. Since then, he’s done nothing but try to shut down the CFPB. Trump doesn’t care about affordability.”
According to the Federal Reserve Bank of New York, Americans owed over $1.23 trillion in credit card debt as of the third quarter of last year. An average U.S. household with a credit card owed roughly $10,563, based on another study by NerdWallet. Contrary to the Consumer Financial Protection Bureau’s action to bar Biden’s $8 cap, the institution noted that credit debt had far exceeded the cost of offering credit by 2023.
Trump’s idea faces backlash from the banking sector
Senator Bernie Sanders has criticized Trump’s proposal, citing the President’s previous campaign promise to cap interest rates. He accused Trump of deregulating big banks and charging up to 30% interest on credit cards, noting that JPMorgan CEO Jamie Dimon made $770 million off that.
Trump’s idea has previously received support from several politicians, including Democratic Rep. Alexandria Ocasio-Cortez of New York and Republican Rep. Anna Paulina Luna of Florida. Luna noted that credit companies have abused working-class Americans by charging high interest rates, trapping them in almost insurmountable debt. Supporters of the idea have argued that credit card companies can afford to cut their rates and help Americans who are currently struggling with mountains of credit card debt.
The banking industry has criticized Trump’s idea, noting that it would harm consumers and small businesses. According to the Bank Policy Institute, the American Bankers Association, the Consumer Bankers Association, the Financial Services Forum, and the Independent Community Bankers of America, the 10% cap would reduce credit availability and drive consumers toward less-regulated, more costly alternatives.
Billionaire Bill Ackman echoed the bankers’ associations, saying that Trump’s idea is a mistake. If lenders don’t charge rates enough to cover losses and earn an adequate return, they will be forced to cut credit support for millions, who will eventually turn to sharks for support.
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