Banks Warn That Trump’s Credit Card Rate Cap Would Harm Borrowers and the Economy

Key Takeaways

• President Trump proposed a one-year 10% cap on credit card interest rates, to take effect on Jan. 20.
• Banks warn that this cap would slash credit access for risky borrowers, reducing spending across the economy.
• The proposed cap is also raising concerns about diminished profits across the industry, as bank stocks have already fallen.

Banks and card issuers are sounding the alarm about US President Donald Trump’s proposed cap on credit card fees, saying it could make it harder for some borrowers to get credit. Meanwhile, analysts say Trump’s proposal could crush profits.

The president took to social media on Friday to announce a one-year 10% cap on credit card interest rates, effective Jan. 20. While Trump has not yet implemented a policy or piece of legislation, bank stocks have already lost ground. Following the announcement, Bank of America’s BAC stock price declined 6.77% as of Wednesday afternoon, while Citigroup C fell 7.12%.

The lending industry warns that this cap would hurt the same consumers whom Trump says he aims to protect. “If you bring the caps down, you’re going to get strict credit, meaning less people will get credit cards, and the balance available to them on those credit cards will also be restricted,” said Bank of America CEO Bryan Moynihan during the firm’s earnings call on Wednesday.

During Citigroup’s earnings call on Wednesday morning, CEO Jane Nind Fraser said the rate cap is “not something we can support” and warned of negative consequences beyond Wall Street: “The impact to us and other banks would just be dwarfed by the severe impact on access to credit and on consumer spending across the country. These things just don’t work out as intended.”

Morningstar DBRS analysts say the proposal is unlikely to be implemented, but that “credit card companies’ interest revenue could substantially decline.”

If enacted, a cap “would have dire consequences for credit card profitability,” writes Morningstar analyst Michael Miller.

Credit Access Cuts for Risky Borrowers, with Macro Impacts

A chief concern for banks is the implications for borrowers with subprime credit scores. Industry leaders warn that a rate cap would lead card issuers to cut credit availability to such consumers. Fraser said this could incentivize risky borrowers to pursue “predatory alternatives” for credit. “You’d only be left with the wealthy having access to credit cards, and nobody wants that.”

Morningstar DBRS analysts say card issuers may respond to a rate cap by increasing annual fees for riskier cardholders or altered rewards offerings. Such measures reduce overall consumer spending, creating a negative impact on the economy at large.

Reduced Profits Within Banking Sector

A rate cap would also be a major blow to banking profits. “We expect any potential cap on credit card interest rates would have adverse ramifications on card issuers’ profitability over the near term,” writes Yanni Koulouriotis, senior vice president of Global Non-Bank Financial Institutions. “We expect these consequences particularly for card issuers with higher exposures to riskier segments of the credit spectrum that typically have higher effective interest rates and revolve more.”

A cap would compound the reduced earnings and stock prices some card issuers are already facing. Wells Fargo WFC, for instance, missed its 2025 fourth-quarter profit estimates, according to its Wednesday earnings release. The fourth-largest lender in the United States, the bank saw its share prices fall 7.09% between Trump’s Friday announcement and Wednesday afternoon.

Echoing other industry executives, Wells Fargo CFO Michael Santomassimo said the proposed cap would cause banks to restrict lending. But during the earnings call, Santomassimo said the bank is open to engaging with the Trump administration’s affordability push: “We’re very much aligned with trying to find solutions to help as many as we can and just do it in a way that doesn’t have adverse impact.”