Trump’s call for 10% credit-card cap aims at banks’ crown jewels

Core Viewpoint - The banking industry is facing pressure from lawmakers and the public regarding high credit card interest rates, with proposals for a cap on rates potentially impacting credit availability for consumers and profitability for banks [3][4][6]. Group 1: Interest Rates and Consumer Impact - The average credit card interest rate was around 21% at the end of the previous year, leading to significant interest costs for consumers carrying balances, such as over $3,500 in interest for a $10,000 balance paid over three years [2]. - A proposed 10% interest rate cap could severely limit credit availability, affecting approximately 14.3 million people and families, particularly those with riskier credit profiles [8]. - Industry groups warn that a cap could lead to reduced credit lines, increased fees, and higher minimum payments for consumers, ultimately pushing them towards more expensive alternatives like payday lenders [4][11]. Group 2: Industry Response and Legislative Context - The banking industry, represented by groups like the Bank Policy Institute and Consumer Bankers Association, has expressed concerns that a 10% cap would be detrimental to credit access for many consumers, despite the intention to help them [3][4]. - Historical attempts to regulate credit card interest rates have faced significant resistance from banks, which have strong lobbying power in Congress [16][17]. - Previous legislative efforts to impose rate caps, such as those proposed by Senator Bernie Sanders and Representative Alexandria Ocasio-Cortez, have stalled, indicating the complexity of enacting such changes [14][15]. Group 3: Financial Performance and Market Reaction - Card lending has become a lucrative business for banks, with JPMorgan reporting a net yield of 9.73% on over $200 billion in card loans, contributing significantly to its revenue [6]. - The KBW Bank Index, which tracks major lenders, has seen a nearly 40% increase since the election victory of President Trump, reflecting positive market sentiment towards the banking sector [13]. - The abrupt demand for a rate cap may create uncertainty for bank shareholders, as it contrasts with the industry's recent profitability trends driven by deregulation [12].