Credit Card Rate Cap Could Cut 80% of Accounts, Experts Warn

President Donald Trump’s proposal to cap credit card interest rates at 10% APR is framed as relief for millions of Americans currently paying double or more. Yet financial industry analyses caution that such a sweeping policy could wipe out up to 80% of existing credit card accounts, leaving many borrowers without the very access to credit the plan aims to protect.

Consumer advocates acknowledge the frustration fueling calls for lower interest rates, but banks and credit unions argue that a strict cap would push lenders to retreat from customers without top-tier credit scores. This could mean fewer borrowing options rather than cheaper ones. Experts also warn that millions could lose access to popular rewards programs and benefits as issuers cut back to offset lost interest revenue.

Looking ahead, Trump has pledged that the cap would take effect Jan. 20, declaring that Americans should no longer be “ripped off” by credit card companies charging 20 30% interest. The coming weeks will determine whether the proposal gains traction and how it might reshape household finances across the country.

Obstacles to Trump’s Proposal

The average U.S. credit card APR has surged to 21%, nearly double the rate from a decade ago, with Americans now carrying a record $1.23 trillion in credit card debt. This mounting burden underscores why a proposed 10% cap on interest rates is drawing attention, but it also highlights the scale of disruption such a policy could cause for lenders and borrowers alike.

While the idea of capping credit card rates has gained some bipartisan traction, with Senators Bernie Sanders and Josh Hawley introducing similar legislation last year, industry experts warn that the practical challenges remain steep. Financial institutions argue that a hard cap could destabilize lending models, limit access for higher-risk borrowers, and force banks to rethink rewards programs and credit availability.

President Trump’s push to enforce a nationwide 10% APR cap on credit cards faces serious legal hurdles. Analysts note that the executive branch may lack the authority to mandate such sweeping financial regulation without congressional approval, raising doubts about whether the proposal could ever be implemented.

Meanwhile, lenders argue that the economics of offering credit cards at a 10% APR simply don’t add up. Banks and credit unions warn that widespread issuance under such a cap would be unsustainable, forcing them to restrict access to only the most creditworthy borrowers. This would undermine the policy’s stated goal of expanding affordability, leaving millions without viable credit options.

The Legal Situation

Interest‑rate caps in the U.S. are currently determined at the state level, but a 1978 Supreme Court ruling allows nationally chartered banks to apply their home state’s interest rates across the country. This precedent means there is no existing nationwide ceiling on credit card APRs, and implementing one such as the 10% cap proposed by Trump would require congressional action, according to the Congressional Research Service.

Senator Josh Hawley, a Missouri Republican, praised Trump’s proposal as a “fantastic idea” on X, yet emphasized in a statement that Congress should move forward with his bipartisan bill to establish a cap and deliver immediate relief. Still, experts caution that the legislative and judicial process would be lengthy. Legal challenges are inevitable, making it unlikely that such a sweeping cap could take effect by Jan. 20, with implementation potentially stretching over years.

What Would Happen to Your Credit Cards?

Few Americans currently enjoy credit card APRs as low as 10%. A Vanderbilt Policy Accelerator analysis shows that even consumers with perfect 850 FICO scores face average APRs above 12%, underscoring how rare such low rates are in today’s market.

Research from the Electronic Payments Coalition suggests that more than 80% of credit card accounts could be eliminated under a 10% cap, particularly for borrowers with credit scores below 740. With 37% of consumers falling into subprime or near‑prime categories scores under 660 according to VantageScore’s November 2025 data millions could be shut out as issuers deem capped lending too risky.

Still, banks may not abandon the market entirely. Analyst Rust notes that interchange fees, penalties, and other charges keep credit card lending highly profitable, with returns on assets more than four times the banking industry average, according to a Federal Reserve Bank of New York study.

Rust also argues that issuers could reduce available credit without severely impacting consumers, since Americans hold far more unused credit than revolving debt. “There’s plenty of room for a slight pullback in credit availability without compromising the amount of credit people want to use,” he explained.

The Savings a 10% APR Could Provide

For households able to retain their credit cards under a 10% APR cap, the financial relief could be significant. A family carrying the national average balance of $11,019 at today’s 21% APR would save roughly $1,100 annually if rates were reduced to 10%. Analysts at the Vanderbilt Policy Accelerator estimate that while Americans could lose $27 billion in rewards programs cash back, points, and travel miles the average borrower would still save about $3 in interest for every $1 lost in rewards.

Yet the borrowers who stand to benefit most are also the ones most likely to lose access. Industry projections suggest that consumers with credit scores below 740 could see their cards canceled or limits reduced, with 37% of Americans falling into subprime or near‑prime categories. Rust notes that caps would primarily affect working‑class and middle‑class households carrying balances month to month, while higher‑income consumers often pay in full and avoid interest charges.

The Vanderbilt study estimates that a 10% cap could save U.S. consumers $100 billion annually in interest payments but would likely exclude borrowers with scores under 600. A 15% cap, however, might strike a balance delivering meaningful savings without cutting off as many households. Rust emphasized that “the rate doesn’t have to be 10% to make a difference,” suggesting that a slightly higher but reasonable cap could still provide broad benefits.

For those who lose access, alternatives may be far more costly. Industry representatives warn that borrowers could be pushed toward payday lenders charging 400% APR, pawn shops, or unregulated online lenders options that could worsen financial strain rather than ease it.

Trump’s proposed 10% APR cap on credit cards promises major savings for households carrying debt, with estimates of $100 billion in annual interest relief. Yet the same policy could eliminate up to 80% of accounts, disproportionately affecting borrowers with lower credit scores and reducing access to rewards programs. Legal hurdles, congressional approval, and lender resistance make swift implementation unlikely, and even if enacted, the cap could push many consumers toward riskier alternatives like payday loans.