Trump Credit-Card Cap Plan Hits Bank Stocks
Key Points
- Trump is calling for a one-year 10% cap on credit-card interest rates starting Jan. 20, 2026
- Major US and UK banks and card issuers saw shares fall sharply on Monday
- Analysts warn a 10% cap could slash bank earnings and tighten credit access
- Uncertainty looms over how the cap could be legally implemented or enforced
Trump revives 10% credit-card rate cap proposal
President Donald Trump has reignited the debate over credit-card borrowing costs by calling for a temporary 10% cap on interest rates for one year. In a Truth Social post on Friday, he said the cap should take effect on 20 January 2026, coinciding with the first anniversary of his second inauguration. Trump argued that Americans are being "ripped off" by card rates in the 20% to 30% range and said, "Effective January 20, 2026, I, as President of the United States, am calling for a one year cap on Credit Card Interest Rates of 10%." Speaking to reporters on Air Force One on Sunday, he added that credit-card companies would be "in violation of the law" if they did not comply by his deadline, although he did not explain how they would be breaking the law or how such a cap would be introduced. The proposal revives an idea he floated during his 2024 presidential campaign and comes amid concerns about rising household debt and affordability pressures.
Bank and card stocks slide on regulatory shock
The announcement triggered a broad selloff in financial stocks on Monday. In the US, shares of major credit-card lenders and banks fell in early and premarket trading. Capital One dropped between about 5% and 10% in various early readings, while Synchrony Financial slid around 7% and was cited as the biggest faller among card issuers. American Express shares were down roughly 3% to 4%, and Citigroup fell about 3% to more than 4%. Large universal banks also declined: JPMorgan Chase, Bank of America and Wells Fargo each lost between about 1% and more than 3%. Payment networks Visa and Mastercard were down around 2% to 3%. In Europe, UK bank Barclays, which has a sizeable US card business, fell as much as 4.8% in London, its biggest intraday loss since October, after earlier declines of around 3.5% were reported. Sector exchange-traded funds and broader financial indices lagged the wider market as investors priced in potential pressure on card-related earnings.
Industry pushback and legal uncertainty
Trump’s demand has not been backed by new legislation, and multiple analysts and lawmakers questioned his authority to impose a cap unilaterally. Raymond James analysts said interest-rate limits would require an act of Congress and described the legislative risk as "relatively low," though higher now that the president has publicly pushed the issue. Jefferies analysts similarly argued the White House lacks executive authority to enforce such a cap and said it was unlikely to survive Congress. US lawmakers have also weighed in, with some noting that a statutory cap would need a bill to pass. Banking trade groups, including the American Bankers Association, Bank Policy Institute, Independent Community Bankers of America and others, warned that a 10% ceiling would reduce credit availability and be "devastating" for millions of families and small businesses that rely on credit cards. In a joint statement, they said they shared the goal of more affordable credit but argued that evidence shows such a low cap would harm the very consumers it is intended to help.
Potential impact on lenders, consumers and rivals
Analysts highlighted significant potential earnings and business-model implications if a 10% cap were implemented. Wells Fargo analyst Mike Mayo estimated that a one-year cap at that level could cut large bank earnings before tax by 5% to 18% and "wipe out earnings" for lenders heavily focused on credit cards, such as Capital One and Synchrony Financial. Other analysts said forcing companies to lend at 10% would "upend the basic economics of the industry," likely prompting banks to cut credit limits, close riskier accounts, tighten credit standards and scale back rewards programmes. J.P. Morgan’s Vivek Juneja and Raymond James analysts warned that issuers might respond by pulling back from higher-risk borrowers, which could reduce access to mainstream credit and push some consumers toward more expensive or less regulated forms of borrowing. At the same time, some commentary pointed to possible benefits for alternative lenders: Mizuho’s Dan Dolev said a bank pullback from lower-FICO borrowers could have positive ramifications for buy-now-pay-later and personal loan providers such as Affirm, Upstart, SoFi, Block and PayPal, as displaced borrowers seek other financing options.
Consumer stakes and political backdrop
The proposal comes against a backdrop of elevated credit-card rates and rising balances. Recent data cited in the coverage show average US credit-card interest rates around 22% to 23%, with some borrowers paying up to 36%, and store cards often charging more than 30%. A Vanderbilt Law School analysis referenced in one report estimated that a 10% cap could save American households up to $100 billion annually in interest, though it also noted that lower rates could change repayment and spending behaviour in different ways. Banking associations countered that sharply lower rates would make it harder to price for risk on unsecured debt and could cut off credit for many households and small businesses. The issue has drawn bipartisan attention in Congress, with previous bills seeking to cap card rates at 10% for longer periods, but those efforts have not become law. For now, markets are focused on how seriously the proposal will be treated in Washington and how bank executives respond as US earnings season begins, with JPMorgan and other major lenders set to report results in the coming days.
Key Takeaways
- Trump’s 10% cap call has quickly translated into market pressure, particularly for lenders most reliant on credit-card interest income.
- Legal and legislative hurdles are central: multiple analysts say a binding cap would require congressional action rather than unilateral executive steps.
- Banks and trade groups argue a low cap could shrink credit supply and alter card economics, while some analysts see potential gains for alternative lenders.
- With earnings season starting, management commentary from major banks will be a key gauge of how seriously the industry views the policy risk.
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