President Trump demands credit card companies cap interest rates at 10%, but here’s why you shouldn’t wait on Washington to get relief

Despite the president’s declaration on social media, and his chastising of credit card companies he said “ripped off” Americans by “charging interest rates of 20 to 30%,” any law capping those interest rates requires approval from Congress. There’s also no indication what sort of “very severe things” are in store for institutions that don’t fall in line with the presidential threat.

Regardless, you would think that an interest rate cap might prove popular among lawmakers, and you’d be right. Senators Bernie Sanders and Josh Hawley proposed a bipartisan five-year, 10% cap on credit card interest rates last February, piggybacking on a related 2024 Trump campaign promise (2). At the time the pair released statements that called skyrocketing interest rates from financial institutions “exploitative” and akin to “loan sharking.”

But it’s unclear how much bipartisan support, or good faith, Trump’s demand would generate today. Sanders, for one, responded to Trump’s cap call by chastising the president, who he says “deregulated big banks charging up to 30% interest on credit cards” instead of living up to his campaign promise (3). Fellow Democratic Senator Elizabeth Warren added that “begging credit card companies to play nice is a joke” while accusing Trump of trying to “shut down the CFPB (Consumer Financial Protection Bureau)” rather than work toward capping interest rates (4).

Unsurprisingly, financial institutions also have no interest, so to speak, in a 10% cap (5), with a group of major banking associations and organizations releasing a joint statement claiming the move would “reduce credit availability and be devastating for millions of American families and small businesses,” driving many “toward less regulated, more costly alternatives.”

So, how bad is the credit crunch in the U.S., and would a 10% cap on interest rates help or harm American consumers?

Cap or no cap? That is the question

The U.S. holds the dubious distinction of leading the world in outstanding credit card debt, with the total hitting a staggering $1.23 trillion last year (6).

According to Lending Tree, the average annual percentage rate (APR) on a credit card in 2025 — which includes fees and interest rate — ranged from around 20.18% to 27.39%, depending on the customer’s credit (7). The average for the fourth quarter of 2025 was 20.97%, which is a big jump from the 12% to 16% range in the early 2000s (8). Experian, meanwhile, put the average American credit card debt for 2025 at $6,735 (9).

Using those numbers, the national average rate of 20.97% on a $6,735 credit card bill works out to $1,412 owed in interest. The 27.39% rate results in $1,845 in interest owed. The 10% cap, meanwhile, would drop the interest owed to about $674.

While the numbers don’t lie, experts warn that they also don’t show the whole picture (10). Economic strategist Brian Jacobsen told Bloomberg that “when companies can’t price the risk properly, they’ll just reduce credit lines or cut off access to credit entirely. Buy now pay later firms and payday lenders might love this proposal.”

The World Bank came to a similar conclusion (11), finding that “while some forms of interest rate caps can indeed reduce lending rates and help to limit predatory practices by formal lenders,” they come with “unintended side-effects” including “increases in non-interest fees and commissions, reduced price transparency, [and] lower credit supply and loan approval rates for small and risky borrowers.”

It’s true, however, that other developed nations institute interest caps. Japan’s credit interest rates, for example, are capped at between 15%-20%, while many European nations employ usury laws to cap rates and tie them to those established by central banks.

Deloitte also highlighted nations like the Czech Republic, Italy and Israel (12), where consumers use “account-based controls via an app to split the outstanding balance or an individual transaction into installments, setting the desired terms for repayment of the debt.” While not a specific cap, Deloitte reported that “revolving interest revenues may be cannibalized, but a number of issuers have made a clear and compelling business case for this service.” That includes more overall customers going back to using, or taking out, credit.

Still, perhaps the clearest picture of the balance between positives and negatives of a credit card interest cap comes via a study from the Vanderbilt Policy Accelerator, which showed that a 10% cap could save consumers $100 billion a year (13). That said, it found that customers with FICO scores below 760 would likely lose up to $27 billion in rewards as banks make cuts to retain profitability. FICO says that the average American credit score slipped to 715 in 2025 (14).

How you can get out of credit card debt now

Regardless of where you sit on the 10% cap debate, your best strategy for eliminating credit card debt remains taking action yourself. After all, there’s no telling how long it could take for a presidential social media declaration to become law — if ever.