Trump's Credit Card Cap: Winners and Losers
What the internet and Wall Street get wrong
A 10% cap on credit card interest rates sounds like an obvious win for consumers.
It isn’t.
In fact, it could destabilize the whole market.
President Trump recently posted on Truth Social1 that he was going to cap interest rates on credit cards at 10%. There has since been much debate with misconceptions on all sides, about:
Can he do this?
Who are the winners and losers?
What are the implications to the financial system?
A bipartisan dream
The idea to cap credit card interest at 10% is not new; there’s currently a bipartisan bill (S.381 – 10 Percent Credit Card Interest Rate Cap Act), being pushed by Senators Bernie Sanders and Josh Hawley. This is a mid-term election year, and I believe most Americans hate paying high credit card interest rates. This post from the president is likely a show of support for the bill. But at the same time, the president has no authority to cap interest rates.
Under the National Bank Act, interest rates are governed by the states where banks are headquartered, and the Dodd-Frank Act specifically bars the CFPB from setting usury limits without a new law from Congress. But knowing President Trump, he can (and will) exert pressure on Congress and the credit card companies to get it done, especially if there’s bipartisan support. Whether he succeeds or not, nobody knows. But certainly nothing will legally happen on January 20th, 2026.
The credit card ecosystem
Making a purchase with a credit card might look simple, but in reality, there are many steps happening within seconds in the background involving about half a dozen companies.
Below is a simplified diagram of the payment ecosystem2.
We won’t be looking in detail at how it works today since we want to focus on the interest rate cap. But we need to talk about some of the players.
Issuers — These are the banks and financial institutions that issue the credit card.
Since a credit card is an unsecured loan, these banks are assuming most of the risk. They are lending you money, and you pay them interest. The biggest players in the US are the big banks such as JPMorgan Chase (JPM 0.00%↑) and Bank of America (BAC 0.00%↑).
In the last few decades, U.S. credit card debt has ballooned to roughly $1.2 trillion, while average interest rates have climbed above 20%. A simple, back-of-the-envelope calculation puts gross interest income from credit cards at around $240 billion a year.
This is the revenue pool a 10% cap would target. All else equal, halving the interest rate roughly halves gross interest income to about $120 billion. If we then subtract a rough funding cost of around 4% (what banks might pay to borrow), net interest income falls from roughly $190 billion to about $70 billion—a decline of more than 60%.
These are not precise figures. They ignore fees, charge-offs, rewards, hedging, and behavioral changes. But they’re good enough to make the point: a 10% cap isn’t a marginal tweak. It meaningfully compresses the economics of credit card lending.
The card networks — the rails on which the transaction takes place
When we think of credit cards, we think of Visa (V 0.00%↑), or Mastercard (MA 0.00%↑), or American Express (AXP 0.00%↑). These are the card networks on which the transactions take place. They connect the different players together. Visa and Mastercard do not issue any debt themselves. They only take a fee for each transaction. American Express is different since they also issue debt.
Other players (Processors, acquirers, gateways, Independent Sales Organizations (ISOs) and Member Service Providers (MSPs))
Other players operate behind the scenes. Processors handle card terminals. Gateways like Stripe handle online payments. For our purposes, we can group these together with the card networks as transaction enablers. They make payments work—but they don’t take credit risk. They only take a cut of the transaction.
It might seem that capping interest rates only affects the issuers (the banks) but in reality, everyone in the ecosystem is affected. If people use fewer credit cards, it means fewer transactions.
Winners and losers
It is clear that neither issuers nor transaction enablers are winners but some of them will lose more than others. For instance, American Express and Capital One, given that they are both issuers and transaction enablers.
But the consumer should be a winner, right?
Actually, no.
If interest rates are capped, it doesn’t mean that the banks will start issuing debt at lower rates. They are just going to be more choosy about whom they will issue a credit card. This means that subprime borrowers with poor credit scores will lose access to credit cards.
As per a 2019 Survey of Consumer Finances, 67% of American families with revolving balances are at risk of being excluded from credit cards, if they are capped at 10%. Now with even higher interest rates, the number of people excluded will be significantly higher.
Does this mean that they will consume less? No. They are just going to get the loan from somewhere else such as Buy Now Pay Later (BNPL) and payday loan providers. These are potential winners.
What about the consumers who always pay their credit cards on time? Surely, they are not affected. These people usually benefit from credit card rewards such as cash back, discounts, airline points. There’s no such thing as a free lunch. These benefits are paid by the subprime borrowers through the high interest rates.
Systemic Risk
If consumers consume less, this is bad for the economy. If subprime borrowers have to borrow at even higher rates, this is also bad for the economy. But the biggest risk would be to the financial system, which is more interconnected than ever. It is not such a simple matter that a bank can just stop issuing credit cards to its subprime customers. They also have to update their balance sheet. They shrink loan books, lose interest income, alter risk-weighted assets, and change capital ratios.
For example, Capital One ( COF 0.00%↑), recently became the 5th largest bank in the US after the acquisition of Discover Financial, one of the issuers/networks. Now the bank has 65% of its loan as credit card loans with 73% of revenues from credit cards.
How quickly can such a bank rebalance its balance sheet? At what cost? And how does that ripple through funding, capital planning, and competition?
We don’t know the answers yet. And that’s precisely the point. Credit markets are complex, adaptive systems. When you cap the price of risk, behavior shifts in ways that are hard to model in advance. The real hope is not that nothing changes but that any change comes gradually, without stressing a system built on confidence and credit availability.
I studied the credit card ecosystem a few months ago and I have many of the banks in my watchlist. Feel free to join my Investment Community to read my analyses.
https://truthsocial.com/@realDonaldTrump/posts/115868132990949589
https://bytebytego.com/guides/the-payments-ecosystem/