Rate Caps & Credit Access: What You Need to Know

Credit Card Rate Cap Faces Opposition from Banking Industry and Citigroup CEO

A proposed 10% cap on credit card interest rates, championed by former President Donald Trump, is unlikely to gain traction in Congress, according to Citigroup Chair and CEO Jane Fraser. The banking industry is bracing for potential conflict should the proposal move forward, with leaders signaling a willingness to defend their business models.

Fraser expressed her skepticism during a Tuesday, January 20, interview with CNBC, stating, “There is a very keen understanding that this would have the opposite impact of what the actual intent would be, and that there are better ways to go about it, and we’re very happy and continue to work on providing them.”

Did you know? – The average credit card interest rate in the U.S. currently hovers around 22%, according to Bankrate.com data from January 2024. A 10% cap would represent a meaningful shift.

Trump’s Proposal and Concerns Over Affordability

On January 9, Trump called for a one-year cap on credit card interest rates, decrying rates of 20% to 30% or higher as a “rip off” to the American public in a post on Truth Social. The proposal resurfaced during the 2024 presidential campaign,having been previously floated as an idea,as reported by PYMNTS at the time.

While acknowledging Trump’s focus on affordability, Fraser argued that banks already offer accessible credit options. “Banks already offer ‘low-cost, no-frill’ products that provide consumers with access to credit,” she said.

Potential Economic Repercussions of a Rate Cap

A mandated cap on credit card rates would have detrimental effects on the economy, Fraser warned. She explained that restricting access to credit would disproportionately harm those who need it most, effectively limiting access to only the wealthiest individuals.

Furthermore, Fraser highlighted the potential for significant “worrying” macro effects. She stated that curtailed spending, resulting from limited credit availability, would negatively impact key sectors reliant on credit card transactions, including:

• airlines
• Retailers
• Hotels
• Restaurants

These industries would face both decreased consumer spending and a loss of profitability from credit card partnership programs. “Let’s make sure that we extend access to credit, we don’t restrict it,” Fraser emphasized.

Pro tip – Consumers can explore balance transfers or personal loans to possibly secure lower interest rates on existing debt, but fees and credit score requirements apply.

JPMorgan Chase Signals Potential Legal Challenge

The potential for a broader industry response was also signaled by JPMorgan Chase Chief Financial Officer Jeremy Barnum on January 13. Barnum indicated that if the Trump management were to implement “weakly supported directives to radically change our business that aren’t justified,” the bank would be prepared to challenge them. “We owe that to shareholders,” he stated during an earnings call with reporters.

“If you wind up with weakly supported directives to radically change our business that aren’t justified, you have to assume that everything’s on the table,” Barnum stated during an earnings call with reporters. “We owe that to shareholders.”

The combined opposition from industry leaders suggests a challenging path forward for trump’s proposal, despite its appeal to concerns about consumer financial burdens.

Reader question – Do you think a cap on credit card rates would ultimately help or hurt consumers? Share your thoughts!

Here’s a breakdown answering the “Why, Who, What, and How” questions, transforming the article into a substantive news report:

What: Former President Donald Trump proposed a one-year cap of 10% on credit card interest rates.

Who: The proposal is championed by Donald Trump, but faces opposition from key industry leaders, including