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Key Highlights

• On Friday, President Trump called for a one-year cap of 10% on credit card interest rates, set to begin Jan. 20.
• Without congressional legislation, implementing a rate cap would likely be challenging.
• Card issuers with higher exposures to riskier segments would be most affected by a rate cap.

In a recent social media post, US President Donald Trump called for a one-year interest rate cap of 10% on credit cards, beginning Jan. 20. However, no further details have been disclosed. Moreover, without congressional legislation, any executive action or rulemaking initiative regarding credit card interest rates would likely be challenged in the courts by financial industry associations.

We note that credit card interest rates already follow state usury laws and federal banking laws. Previously, bipartisan legislation efforts to impose interest rate caps have failed to advance in Congress. Irrespective of implementation issues, investors have already sold off the stocks of credit card companies, as markets indicated through Monday afternoon.

We expect any potential cap on credit card interest rates would have adverse ramifications on card issuers’ profitability over the near term, particularly for issuers with higher exposures to riskier segments of the credit spectrum that typically have higher effective interest rates and revolve more.

In our coverage universe, among the top credit card issuers, Capital One COF would likely be the most affected, as its credit card portfolio has the largest overall exposure to subprime cardholders. We do not anticipate immediate pressure on credit card companies’ credit ratings, as we expect them to adjust their business models. Moreover, these companies have other business segments that provide resiliency to earnings.

Credit Cap Would Force Business Models to Adapt

Should a rate cap be implemented, to mitigate the forgone interest revenue, card issuers would likely significantly alter their underwriting standards, risk-adjusted pricing, rewards offerings, and portfolio management strategies. Card issuers are also likely to limit card issuance to riskier borrowers while proactively reducing or cancelling the existing credit lines in these segments. Additionally, we anticipate the introduction of annual fees and/or a substantial increase of annual fees to riskier cardholders, and a rise in incidental fees. Introductory balance transfer offers with teaser rates to riskier segments may be scarce, or may be presented with notably higher upfront fees.

Besides adversely impacting credit card issuer profitability, a cap would likely force these riskier borrowers to seek even more expensive access to credit or cut back on spending. Overall, any decrease in credit availability hurts the overall economy, so we will continue to monitor developments.

Credit Card Interest Rates Vary Among Risk Segments Because of Risk-Based Pricing

Given the unsecured nature of credit extension, credit card interest rates are higher than other forms of secured consumer lending. As of November 2025, interest rates on credit cards were 22.3%, which would imply the average credit card company’s interest revenue would decline by more than 50.0%, absent any mitigating actions mentioned above.

Card issuers assess higher interest rates to riskier cardholders to compensate for the inherently elevated credit losses occurring in these credit segments (i.e. risk-based pricing). Therefore, the riskier credit card portfolio segments are poised to be affected the most by the implementation of an interest rate cap.

Cap to Intensify Competition for Prime Customers

With card issuers reducing their overall exposure to subprime/near-prime credit segments, we expect them to reposition their portfolios toward prime/ultra prime and high-spender cardholders. As a result, the competition in the credit card sector is likely to intensify for these segments, while certain card issuers may divest or shrink their credit card portfolios if they fail to adapt to the evolving industry landscape.