Trump’s New Credit Interest Rate Cap: What Can We Predict?

Parker Rodgers

New York City, USA

Image of Trump Attribution: Library of Congress from Unsplash

As of 2025-2026, Americans are currently in interest debt of 1.23 trillion dollars.Interest rates are the price a bank charges to loan money, usually represented by a percentage. For example, if someone were to borrow 10,000 dollars at a 15% annual interest rate and were able to pay it off in one year, it would cost them 11,500 dollars. However, interests compound  as the years go on and people fail to pay back the loan in a timely manner.

Americans have been facing large credit interest rate debts for years, as piling and postponing continues with insufficient funds. These rates are meant to provide a profit for banks, making large amounts of money over time in exchange for loans. Currently, the average interest rate is 24%, with the highest being 36%. In addition, if a payment is late for over a certain amount of days, the interest rate can be raised even higher and penalties will be enforced.

As of late 2025 and early 2026, President Donald Trump is in the process of passing a 10% interest credit card rate cap, known as the 10 Percent Cap Credit Card Interest Rate Cap Act. Senators Bernie Sanders (Democratic) and Josh Hawley (Republican) also introduced a similar, bipartisan bill, recognizing the proposal’s apparent benefits.

Caps are used to protect customers from large payment shocks. They limit how much a price can spike and make costs more predictable, protecting consumers from rising interest rates. They also promote transparency, as banks are required to disclose how high the rate and payment can be.

Trump criticizes the current rates as usurious, referencing the current debt crisis as well as other economic difficulties. He states that the cap would free millions of Americans economically and save billions, promoting financial recovery. He also references the banks' large profit margins, which currently exceed 50%, as justification for his decision

Despite the seemingly well-intentioned benefits of this bill, there are also drawbacks as money remains the key player in all schemes.

Bank Protest

Banks make around 22-23% of their profits from credit interest rates. Capital One alone generated $22 billion from interest rates in 2024. All bankers combined made over $160 billion in that same year. This thoroughly explains their upset in the potential interest rate cap.

With credit caps, banks' income would be drastically cut as they would no longer be allowed to charge the same high prices.

Experts claim that banks would find untrustworthy ways to make up for the resulting hole in their income. They could increase late or annual charges, slash credit limits, deny subprime applications, persuade vulnerable users to take payday or unregulated loans, pack loans  with unneeded insurance or push consumers to higher fee loans. All tactics either exclude or exploit consumers to make up for the lost profits.

So far, the bill continues to be met with major backlash from banking executives as they threaten to instead erode a consumer's access to credit. That they will close accounts and deny new credit to people with low credit scores or poor credit history is likely, if not inevitable. JPMorgan’s CEO, Jamie Dimon, explains that the cap would force banks to cut credit card operations, with 80% of Americans left with limited options. He argues that if banks are to survive consumers must suffer.

Potential Impacts on Consumers

Although the purpose of this interest rate cap is to protect consumers, it can both help or harm them. It could help reduce financial burdens and provide more predictability, but might also create threats of exclusion, raised prices and underhanded business.

The purpose of the cap is to benefit customers. Trump specifically argues that it will save millions of Americans in mortgage payments as well as help them recover financially. With this cap implemented, it could save each American around $900 individually and up to $100 billion for the country as a whole. In addition, since the legislation decreases the rate, consumers would pay less and therefore be able to pay back banks in a quicker amount of time, saving more money in a multitude of ways.

In terms of clarity and avoiding shady business practices, this cap would require banks to become more transparent in their interactions with customers. The act forces banks to disclose the total cost of credit (which includes interest fees) as one number. Therefore customers can avoid unpredictable interest rates as well as any overcharging.

However, this cap could also be an issue, as banks threaten to respond with consequences in their mandatory cost cuts. According to America’s Credit Union, banks claim with a 10% cap, they would deny cards to up to 88% of people with revolving balances. As a result, this would impact up to 47 million Americans with a low credit score (under 660). This would also be especially harmful to individuals such as teachers or military families as they rely on loans for emergencies or large expenses.

In addition to excluding customers from maintaining a credit card, banks also threaten to increase annual fees and other charges as well as discontinue rewards programs. With an increase in other banking fees, it could impact people who actually pay back banks on time as they face consequences despite their timely payments. Removing rewards, which used to be compensation for timely payments, would force consumers to lose up to $800 per year, according to Beacon Payments.

Solutions

Although the bill is currently still being considered, it's critical to acknowledge beneficial tactics that can be implemented with or without the cap.

One strategy is increasing or encouraging financial literacy education. In America today, 40% of the population is not financially literate, meaning they have not been educated to manage money in a productive way. Abol Jalivand, the Department Chair and Professor of Finance at Loyola University, explains, “If you spend money on providing financial literacy education, then their [customers’] credit worthiness will increase. I like to propose that credit companies actually offer access to literacy education for their consumers.” He illustrates the necessity of financial literacy and how it can actually save money for banks as people learn how to manage their money efficiently. He even pushes for literacy education to be provided for consumers as a resource for smart loaning.

In addition, banks could also find more ethical ways to source and save their money whether or not the bill is passed. This can include dealing with lower amounts, relocating money from unnecessary funds, or even incorporating AI. 

The cap of 10% is meant to keep banks surviving while still helping customers. While some additional charges could be raised minimally, banks are expected to be able to handle a 10% cap. However, in adjusting, they could save money by relocating it from expensive perks (such as private jets or corporate memberships) or cutting back on marketing (such as expenses ads or endorsements), instead using that money for critical departments. In addition, banks could also incorporate AI to perform the work that would have previously required an employee, cutting costs. For example, AI chatbots can be programmed to handle basic questions, balance checks, or conduct any other direct tasks.

Overall, the question remains whether or not the 10 Percent Cap Credit Card Interest Rate Cap Act would actually benefit Americans, or force banks to find other ways to drain money from consumers.