Trump’s credit card interest cap could backfire, experts say

Former President Donald Trump has made headlines over the past week with yet another surprise economic policy announcement. After promising free in vitro fertilization treatments for women, no federal income tax on tips, tax-free overtime pay and no income tax on Social Security benefits, Trump now says that if he is elected president in November, he will cap credit card interest rates at around 10%.

“While working Americans catch up, we’re going to put a temporary cap on credit card interest rates,” the Republican presidential nominee said at a rally in New York on Wednesday. “We can’t let them make 25% and 30%.”

Trump’s promise falls in the home stretch of an extremely close presidential race between him and the surprise Democratic nominee, Vice President Kamala Harris. It’s also a moment in which credit card debt is heavily burdening many U.S. households.

The average credit card balance was $6,329 in the second quarter of 2024, compared with $4,828 during the same period in 2021, according to TransUnion. The current delinquency rate of more than 3% is the highest since 2011, Federal Reserve data shows.

Trump’s proposed rate cap, if enacted, would have a huge impact on both consumers and on the financial industry.

The average interest rate on credit cards is currently over 20%, with some cards charging as much as 36% APR, said Ted Rossman, a senior industry analyst at Bankrate.

“A 10% cap would completely upend the credit card market,” Rossman told CNBC.

While the Trump campaign has yet to provide details of how the proposed cap would work, campaign spokesperson Karoline Leavitt said the intent was to “provide temporary and immediate relief for hardworking Americans,” including those “who are struggling to make ends meet and cannot afford hefty interest payments on top of the skyrocketing costs of mortgages, rent, groceries and gas.”

Harris hasn’t specifically proposed capping the interest on credit cards. However, she has focused on the burden of debt on Americans, with a vow to wipe away medical debt for millions of households. The vice president has also repeatedly touted her work in the Biden administration to get billions of dollars in federal student loans forgiven.

The Biden administration has worked to reduce the so-called junk fees consumers pay, including steep charges for late payments on credit cards. In February, the Consumer Financial Protection Bureau conducted an analysis of the interest rates on credit cards, concluding that, by some measures, the cards have never been so expensive and that issuers are profiting hugely as a result.