What Trump’s 10% cap on interest rates would mean for credit cardholders

Core Viewpoint - President Trump is advocating for a temporary cap on credit card interest rates at 10% for one year, pressuring credit card companies to comply by January 20, 2024, which could significantly impact consumers and the credit market [1][2]. Group 1: Current Credit Card Rates - The average credit card interest rate for accounts with assessed interest is currently 22.30%, a significant increase from 13.35% in mid-2016 [3]. - Credit card margins, the difference between credit card APRs and the prime rate, have increased, contributing to the rise in credit card rates [4]. Group 2: Potential Impact of the Rate Cap - A 10% interest rate cap could provide substantial savings for the 46% of American households with credit card debt, allowing them to pay down balances more quickly [5][10]. - For example, a $6,000 balance at a 22% APR would require monthly payments of $561 to pay off in a year, while at a 10% rate, payments would drop to $527, saving over $400 in interest [10]. Group 3: Long-term Consequences - Experts warn that a rate cap could lead to reduced credit availability, as issuers may tighten lending standards if they cannot charge higher rates to mitigate risk [15][14]. - A joint statement from banking industry groups indicates that a 10% cap could be devastating for many consumers who rely on credit cards [15]. Group 4: Rewards and Benefits - Limiting credit card interest rates may also lead to reduced rewards and benefits associated with credit cards, as these programs are often funded by interest fees [17][18]. - Experts suggest that banks may raise annual fees or reduce the value of rewards programs if a rate cap is implemented [18]. Group 5: Alternatives for Debt Management - Consumers are encouraged to explore balance transfer credit cards with introductory 0% APR offers as a more effective way to manage credit card debt than waiting for a potential rate cap [20][21].