Trump Proposes 10% Cap on Credit Card Interest, Markets React Sharply

US president Donald Trump has announced plans to impose a 10% cap on credit card interest rates for a period of one year, a proposal that immediately rattled financial markets and drew sharp political and industry responses.

In a post published Friday night on his Truth Social platform, Trump said the interest rate restriction would take effect on 20 January. However, he did not outline the legal mechanism for implementing the cap or how compliance by credit card issuers would be enforced.

“Please be informed that 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,” Trump wrote, blaming high borrowing costs on policies under the Biden administration.

The proposal was met with skepticism from lawmakers, including Senator Elizabeth Warren, who questioned whether Trump could enact such a measure without Congressional approval. Warren argued that meaningful reform would require legislation and criticised Trump’s past efforts to weaken the Consumer Financial Protection Bureau (CFPB).

Industry groups also pushed back strongly. In a joint statement, leading financial lobby organisations — including the American Bankers Association, Bank Policy Institute and Consumer Bankers Association — warned that a 10% interest rate cap would significantly reduce access to credit. They argued it could push consumers toward less regulated and potentially more expensive lending alternatives, harming the very households and small businesses the policy aims to protect.

Markets reacted swiftly to the announcement. Shares in major financial institutions fell sharply, reflecting investor concern over potential revenue and risk impacts. Barclays’ stock dropped more than 4.5%, while US-listed card issuers saw steep declines ahead of market open. Synchrony Financial fell by around 9%, Capital One slid nearly 9%, and American Express dropped over 4%. Large banks were also affected, with Citigroup and JPMorgan Chase both posting notable losses.

The announcement has reignited debate around consumer protection, political feasibility, and the broader consequences of interest rate caps in modern credit markets.

Reference: Finextra