Trump calls for a maximum credit card interest rate cap of 10%. Why does this lead to the gradual disappearance of consumer rewards?

US President Trump recently announced that within a year, the maximum annual interest rate on domestic credit cards will be set at 10%, attempting to address the issue of record-high American household debt. However, this seemingly straightforward “interest rate reduction” policy has sparked strong skepticism within the financial industry and Congress, fearing it may lead to tighter consumer rewards and a shift of consumers toward other borrowing options.

Trump Sets Credit Card Interest Rate Cap at 10%, Effective January 20, 2026

On Saturday, Trump announced via social media that to prevent banks from long-term exploitation of consumers, the government will limit credit card interest rates to no more than 10%, with the restriction taking effect on January 20, 2026. However, the announcement did not specify the implementation details, including whether legislation by Congress is required, which agency will oversee enforcement, and how financial institutions will be compelled to comply.

Data shows that US credit card debt reached an astonishing $1.17 trillion in Q3 2024, higher than the $770 billion in Q1 2021, highlighting the urgency of the issue.

Even before Trump’s statement, Senators Bernie Sanders and Josh Hawley proposed a bipartisan bill in early 2025 advocating for a five-year plan to set credit card interest rates at 10%:

When large banks charge interest rates exceeding 25% on credit cards, they are not merely providing credit but engaging in extortion and usury.

However, due to opposition from banking associations and financial lobbying groups, the bill has yet to advance in Congress.

Financial Industry Pushback: High Rates Sustain the Entire Credit Ecosystem

Following Trump’s announcement, banking associations and several investors voiced opposition. Hedge fund manager Bill Ackman and economist Peter Schiff pointed out that without risk-adjusted interest rates, card issuers might choose to cancel credit lines for high-risk users, potentially leaving some consumers without formal financial channels.

Meanwhile, multiple banking groups, including the Bank Policy Institute (BPI) and the American Bankers Association (ABA), emphasized that the interest rate cap would weaken risk pricing mechanisms, impact bank profits, and undermine credit card rewards, installment plans, and financial accessibility for low- and middle-credit groups.

(Visa and Mastercard will lower swipe fees, and high-reward credit cards may face rejection from merchants)

Will Credit Card Rewards Disappear? Analyzing the Policy’s Three Impacts

Amanda Orson, founder and CEO of AI real estate trading platform Galleon, explained why this policy “is not a good policy,” emphasizing that credit cards are a highly “cross-subsidized” system: users who do not pay their balances in full or pay high interest rates actually support benefits like reward points, lounge access, and cash back, so removing one part can cause systemic imbalance.

Removing one leg of a stool doesn’t make the system fairer; it causes a rebalancing that ultimately impacts consumers most directly.

For example, high-end cards like the American Express Platinum (AMEX Platinum) could see benefits shrink or annual fees increase if overall interest margins are compressed; similarly, subsidy-based reward programs on various cards may gradually disappear.

Finally, for subprime credit cards serving consumers with weaker credit conditions, a 10% interest rate cap could mathematically make their survival difficult under high default rates and fixed costs, pushing users toward higher-risk, less regulated, and more expensive borrowing options.

Protecting Consumers or Striking a Blow to Finance? Credit Card Interest Rates Become a New Dilemma

On one hand, supporters believe setting a rate cap can help reduce debt burdens; on the other hand, opponents argue that credit will become scarce and rewards will diminish as a result.

Orson worries that without supporting measures, the market may accelerate shifting toward charge cards, buy now pay later (BNPL), or non-bank lending options, weakening the original consumer protections and credit-building functions of credit cards.

Today, is the 10% interest rate cap a solution for consumers drowning in debt, or a blow to the existing credit financial system? The answer remains to be seen through legislative progress and market reactions.

This article “Trump Calls for a Credit Card Interest Rate Cap of 10%, Why Does It Lead to Disappearing Rewards?” first appeared on Chain News ABMedia.