President Donald Trump announced plans to cap credit card interest rates at 10% for one year beginning January 20, blaming the Biden administration for rates that “charged 20% to 30% interest” and saying “we will no longer let the American public be ‘ripped off’ by Credit Card Companies.” The announcement, made on Truth Social and timed to coincide with his second-term anniversary, comes as Trump positions himself as addressing affordability concerns around housing prices and inflation that continues outpacing wages. But the president didn’t specify how the cap would be implemented, raising immediate questions about whether he has legal authority to impose such restrictions, how credit card companies would respond, and what unintended consequences might follow from government intervention in consumer credit markets.
The mechanics of implementing a nationwide credit card interest rate cap are complicated by the fact that presidents don’t have unilateral authority to set interest rates on private financial products. Credit card rates are determined by individual banks and credit card issuers based on risk assessments, market conditions, and regulatory frameworks established by Congress. The president can propose legislation that Congress would need to pass, or potentially use executive authority through financial regulators like the Consumer Financial Protection Bureau or Federal Reserve, but direct presidential imposition of rate caps would likely face legal challenges based on separation of powers.
Trump’s framing blames the Biden administration for high interest rates, but credit card rates have remained elevated for years across multiple administrations as a function of how credit card companies assess risk and the competitive dynamics of the consumer credit market. The average credit card interest rate currently sits around 20% to 24% for consumers with average credit, with rates climbing higher for those with poor credit scores and dropping lower for those with excellent credit. Those rates reflect the unsecured nature of credit card debt, where lenders have no collateral to seize if borrowers default, unlike mortgages backed by homes or auto loans backed by vehicles.
For Seattle residents carrying credit card debt, a 10% cap would represent significant relief if implemented. Someone carrying $10,000 in credit card debt at 22% APR pays roughly $2,200 in annual interest if they only make minimum payments. At 10% APR, that drops to $1,000, a savings of $1,200 annually. Multiply that across millions of Americans carrying credit card balances, and the aggregate savings would be substantial. But those savings assume credit card companies continue offering credit at the same levels and to the same borrowers under the new rate structure, which isn’t guaranteed.
The economic reality is that credit card companies price interest rates to cover several costs: the risk of default, the cost of capital they borrow to fund credit lines, operational expenses, and profit margins. When a significant percentage of borrowers default, the interest charged to paying customers must cover those losses. If rates are capped at 10%, credit card companies might respond by tightening lending standards, reducing credit limits, eliminating rewards programs, adding new fees, or simply declining to issue cards to riskier borrowers who previously qualified.
That potential tightening of credit access would disproportionately affect people with lower credit scores who rely on credit cards for emergency expenses or to smooth income volatility. Someone with a 650 credit score who currently qualifies for a credit card at 28% APR might not qualify at all if companies decide that 10% doesn’t adequately compensate for default risk. That person then loses access to credit entirely, potentially pushing them toward payday lenders or other high-cost alternatives that might not be covered by the rate cap.
The one-year timeframe Trump specified raises additional questions. Is this a temporary measure meant to provide immediate relief while longer-term solutions are developed? If so, what happens after one year when rates potentially jump back to previous levels? Do consumers who accumulated larger balances during the capped period suddenly face much higher interest charges when the cap expires? Or is the one-year period intended to be extended or made permanent after seeing results?
Trump’s announcement also mentioned encouraging Fannie Mae and Freddie Mac to buy $200 billion in mortgage bonds to help with housing affordability. That connection between credit card rates and housing policy reflects his broader positioning around affordability issues, but the two problems have different underlying causes. High credit card rates stem from risk-based pricing in consumer credit markets. High housing costs in Seattle and other cities stem from supply constraints, zoning regulations, construction costs, and demand driven by population growth and economic conditions. Addressing them requires different policy tools, and bundling the announcements suggests political messaging around “affordability” rather than targeted solutions to specific market failures.
The floating of 50-year mortgages, also mentioned in coverage of Trump’s affordability initiatives, represents another example of proposals that sound helpful but carry significant complications. A 50-year mortgage would reduce monthly payments compared to traditional 30-year or 15-year loans, making homes appear more affordable month-to-month. But borrowers would pay vastly more interest over the life of the loan and build equity much more slowly, potentially trapping people in decades of debt while paying multiples of the home’s purchase price in total interest. Whether that trade-off actually helps borrowers or primarily benefits lenders depends on individual circumstances and how aggressively borrowers pay down principal beyond minimum payments.
For credit card companies, Trump’s announcement likely triggered emergency meetings with legal teams and lobbyists to determine response strategies. Do they immediately begin preparing for compliance with a rate cap, even though implementation mechanisms aren’t specified? Do they lobby Congress to prevent any legislation from passing? Do they prepare legal challenges arguing that executive implementation exceeds presidential authority? Do they begin adjusting their business models preemptively by tightening credit standards or adding fees? Each response carries risks and costs, but waiting to see what actually happens means potentially being caught unprepared if caps are implemented quickly.
The timing of the announcement, coinciding with Trump’s second-term anniversary, suggests this is partly political theater meant to demonstrate action on issues voters care about. Affordability, broadly defined, was a major concern in the 2024 election. Voters experiencing stagnant wages while facing higher costs for housing, food, and other necessities wanted to see their government address those concerns. Announcing a credit card rate cap, regardless of implementation details or feasibility, creates the appearance of bold action on behalf of consumers against corporate interests.
But appearance and reality often diverge in economic policy. History provides examples of price controls and rate caps producing unintended consequences that harm the people they’re meant to help. Rent control in cities like San Francisco and New York has reduced housing availability by discouraging new construction while protecting existing tenants. Interest rate caps on payday loans have reduced access to short-term credit without addressing why people need such credit. Credit card rate caps could similarly reduce credit access without addressing underlying reasons Americans carry high credit card balances, like stagnant wages, rising costs, medical debt, or inadequate emergency savings.
The more fundamental question is why so many Americans carry credit card debt at high interest rates in the first place. For some, it’s poor financial literacy or irresponsible spending. But for many, it’s because wages haven’t kept pace with living costs, emergency expenses arise without adequate savings, or medical bills create debt that gets transferred to credit cards. A rate cap addresses the symptom, expensive debt service, without addressing causes like wage stagnation, lack of universal healthcare, or insufficient social safety nets for financial emergencies.
For Seattle’s economy, where tech workers often carry no credit card debt while service workers struggle with thousands of dollars of high-interest balances, a rate cap would create winners and losers. People carrying balances would benefit immediately if the cap is implemented and credit access remains stable. People with no debt but poor credit who might have accessed credit cards in emergencies would lose that option if lending standards tighten. Banks headquartered elsewhere but operating in Seattle would adjust their business models in ways that affect local employment and lending practices.
Whether Trump can actually implement this cap, through what mechanism, and what effects it produces will become clear in coming weeks as the administration presumably releases more details. The announcement establishes a political position, Trump is fighting for consumers against credit card companies, but translating that position into effective policy requires navigating legal constraints, economic realities, and the risk of unintended consequences that leave some consumers worse off than before.
For now, Americans carrying credit card debt should continue managing it as they currently do, paying down balances aggressively when possible and avoiding accumulating new debt, because whether a rate cap actually materializes and what form it takes remains uncertain. The announcement creates hope for relief but no guarantee that relief will arrive or that it won’t come with trade-offs that reduce credit access or increase other costs. That uncertainty is typical of policy announced via social media without accompanying implementation details or legislative proposals that would clarify how ambitious promises translate into actual changes affecting people’s financial lives.
