Banks Really Hate Trump’s Credit Card Proposal

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1:02Bloomberg Audio Studios. Podcasts. Radio. News. President Donald Trump was front and center at the World Economic Forum at Davos this week with an unprecedented and winding speech on Greenland, Europe and NATO. It's great to be back in beautiful Davos, Switzerland. If you haven't heard it, we've linked our episode on Trump's case for why the U.S. should take over Greenland and NATO and Europe's response in our show notes. Trump's speech also included a nod to a key issue for many Americans, affordability. One of the biggest barriers to saving for a down payment has been surging credit card debt.

1:46And a return to an idea from his presidential campaign, capping interest rates on credit cards. The profit margin for credit card companies now exceeds 50 percent, one of the biggest. And they charge Americans interest rates of 28 percent, 30 percent, 31 percent, 32 percent. He went on to announce he's asking Congress to cap credit card interest rates at 10 percent for one year. This directive from Trump is targeting banks' crown jewels. And that really is what credit cards are to a lot of these really profitable banks in the U.S. Claire Ballantyne is a finance reporter for Bloomberg News. We just had bank earnings season and the banks have spoken out against it.

2:31And we've even seen certain bank CEOs say that, you know, it could potentially even cause a recession if Trump imposes this executive order. The lack of credit would result in greatly reduced consumer spending and would likely bring on a recession. That was the Capital One CEO said that this week. So banks really hate it. But yeah, I mean, credit card debt is a huge issue for a lot of Americans.

3:03I'm Sarah Holder, and this is The Big Take from Bloomberg News. Today on the show, what Trump's proposed cap on credit card interest rates could mean for banks. And would it help or hurt borrowers?

3:21A lot of Americans have credit card debt. The reason that a lot of credit card debt is so harmful for Americans is the high interest rates that come with carrying a balance. According to the Federal Reserve, the average credit card interest rate was around 21 % last year. If you pay your card off every month, you don't have a balance. But if you do, there's a really high interest rate for it. The Card Act, which was passed in 2009, protects cardholders from sudden rate hikes and hidden fees. But as it stands, there's no federal law limiting the rates lenders can charge. Usury laws, which exist at the state level, can cap interest rates.

4:01But they vary greatly. And since they often apply to where banks are headquartered and not where cardholders live, consumers might still end up paying a rate higher than their state's cap. The result is a patchwork system of protections, and a mounting debt burden on American consumers. In the third quarter of 2025, U.S. borrowers were carrying a record$1.23 trillion in credit card debt. That's according to the New York Federal Reserve. And it's really easy for this kind of thing to spiral with interest rate payments. And there's one study from Vanderbilt that says that capping interest rates at 10 percent could reduce consumer interest payments by more than$100 billion a year.

4:45Right now, credit card issuers, which are tied to banks, set the interest rates on their cards. JPMorgan Chase, Citi, and Capital One account for nearly 80 % of the U.S. credit card market by credit and charge volume. And Claire says collecting interest is a fundamental part of their business, and a very profitable one. That's why proponents of capping interest rates think there's room to lower rates and still allow the banks to make money. Banks see things differently. So the reason that credit card interest rates are so high, banks would argue, is because you're borrowing money when you're carrying a balance on a credit card.

5:25That's not your money, but you're supposed to pay it back. And unlike with a loan, you know, say like a house or a car, where if you don't pay it, banks can repossess it. You can have a car taken away, a home taken away with credit cards and putting money on credit cards. There's no way for them to do that. So that's why banks argue that the rates have to be as high as they are. Various stakeholders can argue with how high it is, if they really need to be that high. You know, if banks could still make a profit with a slightly lower interest rate, that is all really in the zeitgeist of conversation right now.

6:06But in general, it's a big part of banks' business model. And for consumers that have these fancy credit cards that give them perks like airline access and things like that, these high interest rates on cards are a lot of the ways that those things are able to be offered. Some of these CEOs have come out and said that doing this and hurting banks' profitability and potentially reducing credit access to consumers could be a real negative for the economy. J.P. Morgan Chase, for instance, said its credit card interest rates drove the bulk of the bank's$25.5 billion of revenue for its card services and auto unit in 2024.

6:47A 10 percent cap, the bank said, could significantly change its card business and be bad for consumers. It would be an economic disaster. And I'm not making up because our business, you know, we would survive it. That's J.P. Morgan Chase CEO Jamie Dimon at Davos earlier this week. In the worst case, you'd have to have a drastic reduction of the credit card business. I mean drastic. I mean like 10 percent. I mean like 80 percent. It would remove credit from 80 percent of Americans, and that is their backup credit. A trade group for banks puts the number of people who could be impacted much lower, though it's still significant.

7:22The Bank Policy Institute estimates around 14 million people and families could have their credit lines eliminated or reduced if a 10 percent cap is introduced. This all goes back to this idea that banks aren't going to lend unprofitably and not being able to charge these fees has led a lot of experts to say that if they can't charge these high interest rates, they're going to pull back on allowing some of the riskiest borrowers to have credit access. A lot of people don't realize that, that the cap wouldn't just mean suddenly they aren't being charged as much interest on their card balances. It would mean that people wouldn't be able to get credit cards and wouldn't be able to borrow money in the way that they are right now.

8:09Borrowers with lower credit scores might not be able to get credit cards if the interest rate was capped. and that could theoretically push them into much riskier credit products. Products like payday loans, which can have even higher interest rates than credit cards. Coming up, capping credit card interest rates is an idea that's historically had bipartisan support for the relief it could bring borrowers who fall behind on payments. Could it go from proposal to policy?

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9:23Trump's initial social media post about capping credit card interest rates set a January 20th deadline for banks to comply. But that deadline has come and gone. Bloomberg's Claire Ballantyne says there's essentially two ways this could move forward. Trump signs an executive order where Congress passes a law. An executive order might be subject to legal challenges. But Congress has been interested in this idea before. I think that's something that perhaps, you know, Trump and other lawmakers are kind of banking on, is that there has been support for this from both sides of the aisle. In 2019, Senator Bernie Sanders and Representative Alexandria Ocasio-Cortez, both Democrats, proposed a 15 percent cap.

10:11And just last year, Sanders and Republican Senator Josh Hawley teamed up on a bipartisan bill proposing a 10 percent limit. Talk is cheap, but if he's really ready to put up and get something done, then let's do it. On CNBC last week, Democratic Senator Elizabeth Warren said she'd work with Trump if he's serious about addressing affordability, including making credit card caps a reality. There have been really broad bipartisan support over the years. You know, that's very different, though than actually passing something. Why haven't we seen a credit card interest rate cap before? One, lawmakers can't really agree on the exact specifics of it.

10:52And two, there's really powerful lobbying from banks and from the financial services industry that is saying that we need to have these high interest rates. And then if not, then that could have negative effects for consumers. So it's almost a messaging question. And the big banks in the U.S. are really powerful. They make a ton of money. They employ a lot of people. And so there's really strong pushback from the financial industry. But Claire says some banks may be considering responding to Trump's idea with their own counteroffers. Bilt, a firm known for offering rewards on rent and mortgage payments, is unveiling three new cards that will have rates capped at 10 % for a year.

11:38Bloomberg has also reported that Bank of America and Citigroup, according to people familiar with the matter who asked not to be identified citing private information, are both separately considering offering cards with a 10 % rate. Representatives for Bank of America and Citigroup declined to comment. But a selection of cards with lower rates isn't the same as a universal cap. And I think, you know, right now, this started out with Trump coming out with this broad proposal that would be really bad for banks. And now banks are sort of trying to say, how could we appease the president? They're not offering those because they think they're going to make the exact same amount of money they are from their products that have higher interest rates.

12:20But I think they are trying to figure out how they can, you know, maybe appease Trump and get him to back off of this broader thread. This is The Big Take from Bloomberg News. I'm Sarah Holder. The show is hosted by me, David Gura and Juan Ha. The show is made by Aaron Edwards, David Fox, Eleanor Harrison Dengate, Patty Hirsch, Rachel Lewis-Kriske, Naomi Ng, Julia Press, Tracy Samuelson, Naomi Shaven, Alex Sugiura, Julia Weaver, Yang Yang, and Taka Yasuzawa. To get more from The Big Take and unlimited access to all of Bloomberg.com, subscribe today at Bloomberg.com slash podcast offer. Thanks for listening.

13:06We'll be back on Monday.