U.S. banks are confronting a significant political and operational challenge following President Donald Trump’s call to cap credit card interest rates, leaving the financial sector scrambling for clarity on how to respond. The announcement, made on 10 January, proposed a one-year interest rate ceiling of 10%, effective 20 January. While the pronouncement caused immediate volatility in bank share prices, the White House has yet to provide specific details regarding implementation or enforcement mechanisms.
Analysts caution that such a cap could not be enacted solely through executive authority or regulatory action, instead requiring Congressional legislation—a route that has repeatedly failed in previous attempts. Regulatory experts have noted that the absence of formal guidance has created uncertainty for banks, which are unsure how to proceed in practice.
White House economic adviser Kevin Hassett suggested the idea of voluntary “Trump cards” that banks could offer, rather than a legally mandated rate reduction. This concept was discussed on Fox Business Network’s Mornings with Maria, with Bloomberg reporting that the administration was considering an executive action as a possible route.
Industry insiders confirm that banks have been actively seeking clarity from the administration. “Despite the confusion, lenders are taking the directive seriously,” said one source close to credit card operations. In response, some banks have prepared executives for potential contact from White House officials regarding compliance.
Historically, banks have opposed Congressional proposals to cap credit card rates, arguing that such measures restrict access to credit and reduce consumer choice. Many industry representatives expect to escalate advocacy campaigns to counter Trump’s initiative.
Potential Implications and Industry Responses
| Aspect | Details |
|---|---|
| Proposed Rate Cap | 10% annual interest on credit cards |
| Effective Date | 20 January 2026 |
| Duration | One year |
| Enforcement | Unclear; legislation likely required |
| Industry Position | Historically opposed; concerned about credit access and profitability |
| Potential Bank Response | Voluntary low-rate cards, limited benefits, reduced credit lines |
Experts note that credit cards are highly profitable for banks, and a cap could depress earnings expectations for major institutions. Some banks may respond with voluntary low-rate or no-frills cards, similar to current offerings by institutions like Bank of America. “Banks could offer either a new card or a line to a customer at roughly 10%, though features would be limited,” explained Moshe Orenbuch, managing director at TD Cowen.
The White House has emphasised that the directive is both an expectation and a demand, signalling a desire to address voter concerns about rising living costs ahead of the midterm elections. The administration is reportedly exploring all available tools to tackle what it describes as an affordability crisis exacerbated under the Biden administration.
Market analysts warn that ongoing policy ambiguity is likely to generate continued volatility in bank stocks until a definitive path is established for both lenders and regulators.