A half-baked call for 10% cap on credit card rates

A few days ago, President Trump staked a claim to the “affordability” issue by demanding that banks cap their credit card interest rates at 10% for one year.

- MICHAEL HILTZIK COLUMNIST

EXPERTS say the president's demand will set back customers and merchants.

(Scott Olson Getty Images)

Actually, Trump announced that in effect he had imposed the cap, a claim that some news organizations accepted as gospel.

So let’s dispose of that misconception right off: Trump has zero power to cap interest rates on credit cards. Only Congress can do so.

More to the point, his proposal, announced via a post on his Truth Social platform, is a terrible idea. It’s half-baked at best, and harbors unintended consequences by the carload — so much, in fact, that the putative savings that ordinary households could see from the rate reduction might be diluted, or even reversed, by the drawbacks.

Still, the idea has so much consumerist appeal that it placed Trump in accord with some of his most obdurate critics, such as Sen. Elizabeth Warren (D-Mass.), who has been pressing to place limits on bank fees for years. Warren said she and Trump had a phone conversation in which they seemed to have talked companionably about the issue.

Trump's announcement did have the salutary effect of placing the issue of financial services costs on the front burner, after its having languished for years, But it obscured the immense complexities of making any such change.

“Certainly this demonstrates a populist streak on both sides of the aisle,” says Adam Rust, director of financial services at the Consumer Federation of America. “But you can’t just write a tweet and upend a huge market.”

The market for credit cards is indeed huge. As of 2024, credit card debt in the U.S. exceeded $1.21 trillion. This is the most profitable line of business for many banks, producing $120 billion in interest income and $162 billion in fees, chiefly those the card issuers impose on merchants.