## Credit Card Market Faces Potential Disruption: Trump's 10% Rate Cap Could Reshape Banking Profitability

### The Policy Shock

A proposal to cap credit card interest rates at 10% represents one of the most significant threats to banking sector profitability in recent years. President Donald Trump's announcement has sent ripples through financial markets, challenging what has become one of banks' most lucrative revenue streams.

The timing is striking: while Trump's deregulatory stance has pushed bank stocks up nearly 40% since November 2024, this credit card proposal introduces regulatory uncertainty that contradicts market expectations. Industry giants like JPMorgan Chase, Citigroup, and Capital One—which have structured their business models around high-margin credit card operations—now face potential revenue compression.

### The Economics Behind Current Rates

Understanding why this proposal matters requires examining the numbers. The Federal Reserve data shows average credit card rates hovering near 21%, substantially higher than the 6% average for 30-year mortgages. A $10,000 credit card balance repaid over three years generates approximately $3,500 in interest charges under current conditions.

Banks justify these rates by pointing to unsecured lending risk. Credit card charge-offs historically exceed 10%, compared to home loan defaults below 3%. This risk premium has historically supported rate maintenance, even as regulatory scrutiny increases.

### The Profit Machine at Risk

The profitability stakes are enormous. JPMorgan Chase's card lending operation generated a net yield of 9.73% on a $200 billion portfolio, driving the majority of its $25.5 billion revenue from card and auto services divisions. Even accounting for $7 billion in card-related losses, the business remains extraordinarily profitable.

If a 10% cap becomes reality, these margins evaporate completely. This isn't theoretical—banks would face hard choices: reducing credit lines for riskier customers, raising annual fees, eliminating rewards programs, or scaling back promotional offers like zero-interest periods.

### Cascading Industry Effects

Specialized lenders would bear the heaviest burden. Companies like Capital One, Synchrony Financial, and Bread Financial—which primarily serve lower-income consumers—would find lending economics unworkable at 10% rates. Bloomberg Intelligence analysis suggests that implementing such a cap would have reduced credit lines for over 14 million households based on 2019 Federal Reserve data.

Credit unions have warned that a 10% rate makes consumer credit card products financially unfeasible for most customer segments. The banking sector's coordinated response through organizations like the Bank Policy Institute emphasizes this point: accessibility would collapse before rates could reach 10%.

### Market Uncertainty and Investor Response

The proposal has created significant uncertainty for bank investors. While the KBW Bank Index's 40% surge reflects confidence in deregulation and relaxed capital requirements, this credit card proposal contradicts that narrative. Professional investors and market analysts are recalibrating expectations around banking sector stability.

The challenge for Trump's administration lies in enforcement mechanisms. Previous legislative attempts—including the 2019 Sanders-Ocasio-Cortez 15% cap proposal and the 2024 Sanders-Hawley 10% cap bill—have foundered despite bipartisan discussion. Recent efforts to attach rate caps to the Genius Act (stablecoin regulation) failed in the final legislative version.

### Historical Context and Lobbying Reality

Interest rate limitations have long prompted regulatory arbitrage: banks strategically headquarter operations in permissive states like Delaware and South Dakota to circumvent stricter state-level caps. The banking industry's political infrastructure mobilized quickly in response to previous cap proposals, with trade groups warning of credit access reduction.

The contrast is instructive: when payday lenders operate with annual rates exceeding 300%, the 21% credit card alternative appears comparatively reasonable to policymakers. Yet this comparison—and the threat of vulnerable populations turning to predatory lending—forms the core of banking industry lobbying arguments.

### What Comes Next

Whether Trump can execute rapid rate reduction remains unclear. Legislative pathways exist but face entrenched banking sector opposition. Financial markets continue pricing in baseline deregulation while hedging against this policy wild card. For consumers, investors, and the banking sector itself, this proposal represents a rare moment where political will might override industry lobbying—or might not.