Former President Donald Trump recently declared victory over one of these unwelcome regulations by pledging to scrap a new rule capping credit card late fees at $8. That regulation is set to go into effect in April 2025. This regulation was brought forth by the Biden Administration. It is all under the umbrella of a larger effort by the Biden administration to crack down on what they term “junk fees.” In a recent Truth Social post, Trump proposed capping credit card interest rates at 10%. His plan is to implement this amendment temporarily, beginning on January 20.
The average interest rate for credit cards in the United States is 20 percent. This extreme rate has a tremendous adverse economic impact on a vast majority of consumers. According to new data, U.S. households with credit card debt now carry an average balance of over $6,000. Especially with interest rates high as they are now, monthly fees can be over $100, which is a heavy burden on families’ budgets.
Trump’s proposal is part of his renewed focus on consumer financial issues as he campaigns for the 2024 presidential election. He threatened credit card companies with criminal liability should they fail to abide by his yet undefined limits on interest rates. His statement makes clear just how serious this wrong is. This call for reform has drawn attention from both parties, with Senators Bernie Sanders and Josh Hawley introducing bipartisan legislation that seeks to cap interest rates at 10% for five years.
Yet the effects of such actions have ignited discord among fiscal policy proponents and banking industry representatives. Opponents counter that capping rates will push consumers into less advantageous forms of credit. A joint statement from five U.S. banking bodies expressed concerns about the potential impact of Trump’s plan, noting that it could “reduce credit availability and be devastating for millions of American families and small businesses who rely on and value their credit cards, the very consumers this proposal intends to help.”
“of helping Americans access more affordable credit” – US banking bodies
Financial analysts have voiced similar apprehensions. Matt Britzman, a market analyst, warned that forcing companies to lower lending rates would “upend the basic economics of the industry.” He warned that these extreme reforms would push consumers into more unregulated and expensive forms of credit.
In response to Trump’s proposals, Senator Elizabeth Warren criticized the approach, stating, “Begging credit card companies to play nice is a joke.” Her comments reflect an increasing frustration across the aisle that financial institutions have an outsized effect on the welfare of consumers.
Market reactions to Trump’s announcement were swift. Stocks of bank and credit card companies tanked today. It only took investors a moment to see the dangers of what such a move could mean by limiting credit card costs. The new worm in the can is instability in the financial sector and the broader economy.
In 2022, a record high of 48% of U.S. households were paying interest on credit card debt, the Federal Reserve found. Yet any changes in credit policies will be felt acutely by these households. Here’s how Trump’s proposals would make life more affordable for consumers. Many experts warn that one of the biggest dangers may be that rising interest rates will create a tsunami of consequences to the broader economy.