Four-Fifths of Credit Card Accounts Could Vanish Under Trump's Rate Cap, Experts Say

Core Viewpoint - President Trump's proposal to cap credit card interest rates at 10% aims to provide relief to consumers facing high rates, but industry analyses indicate that such a cap could lead to the disappearance of up to 80% of credit card accounts, potentially harming the very borrowers it intends to help [1][12]. Group 1: Proposal Details - Trump has called for the cap to take effect on January 20, stating that the American public should no longer be "ripped off" by credit card companies charging rates of 20% to 30% [2][10]. - The average credit card APR has risen to 21%, nearly double the rate from a decade ago, with Americans currently owing a record $1.23 trillion on credit cards [4][6]. Group 2: Industry Response - Consumer advocates recognize the frustration behind the proposal, but banks and credit unions warn that a hard cap could limit access to credit for those without excellent credit scores, resulting in fewer options rather than cheaper ones [2][12]. - Experts suggest that many consumers could lose access to rewards and benefits as banks adjust to lower interest revenues [2][15]. Group 3: Legal and Legislative Context - Interest rate caps are determined at the state level, and a nationwide cap would require an act of Congress, as established by a 1978 Supreme Court decision allowing nationally chartered banks to charge their home state's rates [8][9]. - Bipartisan support exists for the idea, with Senators Bernie Sanders and Josh Hawley having introduced similar legislation [4][9]. Group 4: Financial Implications - A household with an average credit card debt of $11,019 at a 21% APR could save approximately $1,100 annually if the cap is implemented [15]. - However, the Vanderbilt Policy Accelerator estimates that Americans could lose $27 billion in rewards, with the average borrower saving about $3 in interest for every $1 lost in rewards [15][16]. Group 5: Consumer Impact - Most borrowers with credit scores below 740 are likely to see their credit cards canceled or limits reduced under a 10% cap, affecting primarily working-class and middle-class consumers [16]. - The proposal could potentially save American consumers $100 billion annually in interest payments, but it may also cut off access for borrowers with scores below 600 [16].