Why Trump's idea for a 10% cap on credit card rates could backfire, according to UBS

Core Viewpoint - President Trump's proposal to cap credit card interest rates at 10% could lead to significant negative consequences for both consumers and the financial industry, despite its intention to alleviate high borrowing costs [1][2]. Financial Industry Impact - Major financial stocks, including Capital One, Synchrony Financial, JPMorgan, and Citigroup, experienced a sell-off following the announcement of the proposed rate cap [1]. - UBS analysts predict that the plan would likely reduce credit availability, particularly for middle- and lower-income Americans, rather than simply making credit cheaper [3]. Consumer Spending and Economic Growth - The proposed cap could lead to a reduction in consumer spending, which accounts for approximately 70% of US GDP, potentially compromising overall economic growth [4]. - According to Boston Fed data, a significant portion of credit card spending, particularly from lower-income households, would be at risk, indicating a major economic impact [4]. Expert Opinions - Other financial experts, including billionaire investor Bill Ackman, have echoed concerns that the credit card rate cap could backfire, potentially resulting in millions of credit card cancellations [5].