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President Donald Trump's proposal to slash interest rates on credit cards has sparked concern across the US banking industry, with lenders warning that the move could have unintended consequences.
Banks say that reducing fees could make it harder for them to offer credit, which may leave some consumers and businesses with fewer borrowing options, news agency AFP reported.
Trump said on Saturday that starting 20 January 2026, the first anniversary of his administration, he was calling for a one-year cap on credit card interest rates at 10%. He said that the proposal is aimed at easing the burden on consumers facing high borrowing costs.
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“We will no longer let the American Public be ripped off by Credit Card Companies that are charging Interest Rates of 20 to 30%, and even more,” President Trump posted on Truth Social.
Trump's proposal receives pushback from US banks
Five associations representing US banks responded to the proposal, saying that even though they shared the president's goal of helping Americans access “more affordable credit,” implementing the plan may come with its own drawbacks.
“At the same time, evidence shows that a 10 percent interest rate cap would reduce credit availability and be devastating for millions of American families and small business owners who rely on and value their credit cards,” the associations said in a joint statement late Friday.
“If enacted, this cap would only drive consumers toward less regulated, more costly alternatives,” it said.
The statement was collectively issued by the American Bankers Association, Bank Policy Institute, Consumer Bankers Association, Financial Services Forum and Independent Community Bankers of America.
Bill Ackman responds to Trump's plan
Meanwhile, the billionaire hedge fund manager Bill Ackman responded to Trump's proposal, adding his own views in a detailed X (formerly Twitter) post.
“My concern about capping rates at 10% is that doing so will inevitably cause millions of Americans to have their cards cancelled as credit card companies lose the ability to adequately price subprime credit risk,” he said on X.
He also warned that if banks stop issuing credit cards, many consumers could be forced to turn to loan sharks whose rates and terms will be vastly worse for borrowers. “While 20% or more is a high rate, loan sharks can charge multiples of these rates, and the cost of default can be physical harm or worse,” he added.
Credit card debt in the US
Credit cards are the primary source of borrowing money for Americans. In recent years, both interest costs and outstanding balances have jumped as more people have leaned on credit cards to maintain spending, and in may cases, even to cover basic necessities, AFP reported.
According to data from the Federal Reserve, the total outstanding credit card debt exceeded $1.23 trillion at the end of September , which is the fourth-largest source of household debt, after mortgages, student loans and auto loans.
Credit cards typically charge interest rates of at least 21%, however the figure can reach as high as 38% for higher risk borrowers, according to the Fed.
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