President Donald Trump recently called for a cap on credit card interest rates. Trump announced that, effective January 20th, 2026, credit card interest rates should be capped at a rate of 10%. This effectively means that beginning on January 20th, credit card issuers are being instructed to refrain from charging interest rates above 10%. The exact details of how this plan will be implemented are unclear, and it is also uncertain whether this proposal applies to new or existing balances, or both.

The ramifications of this proposal going into effect are significant. A recent report shows that about 175 million consumers have credit cards, and roughly 60% of credit card users have revolving debt. This means that 60% of credit card users pay interest on the balances they carry monthly.

According to another report, the average credit card interest rate in the United States is 23.79%. If the proposal becomes effective, the average credit card user will receive significant relief from accruing interest. A lower interest rate of 10% allows credit card users to pay off their debt in less time, and also lowers the overall amount of interest paid.

While this sounds promising, there are significant drawbacks that may also impact consumers. It is expected that the financial industry will fight against this proposal, as the American Bankers Association, along with other associations, stated that an 10% interest rate cap would reduce overall credit availability and be “devastating” for millions of people and small business owners.

Experts believe that an 10% interest rate cap will help consumers who carry debt in the short term by allowing them to eliminate their debt, but will also significantly restrain the ability to obtain credit in the future. In other words, consumers with lower credit scores may deal with even more barriers than before to obtain credit. It is expected that if a 10% interest rate cap is enforced, banks will reduce overall credit availability, add or increase fees, and change repayment structures to make up for any loss in revenue. Additionally, reward programs are also expected to be negatively impacted.

As it currently stands, the proposal is not effective, but it is certainly worth monitoring as the year progresses.