Presumably a lot of credit cards would be closed if this was brought in:
US President Donald Trump’s proposal to cap credit card costs would be “an economic disaster”, the boss of one of the world’s biggest banks has warned.**
JPMorgan Chase chief executive Jamie Dimon said the plan would remove credit from the majority of Americans and hit restaurants, retailers, travel firms and schools.
Trump this month wrote on Truth Social that interest rates on credit cards should be limited to 10% for one year from 20 January.
Of course this is part of the affordability program. Those with good credit ratings will pay less in interest. Those without good credit ratings won’t be able to get credit cards. But they will still have debit cards.
Capping credit card interest rates would be a disaster for our economy. Like many of the proposed “fixes”, this is short-sighted and demonstrates a special ed kindergartner level of governance.
"President Trump has said he wants to cap interest rates on credit cards at 10%, but as many expertshave alreadypointed out, there would be severe unintended consequences from such a move, namely that credit card companies would issue fewer credit cards, significantly lower credit limits, or shift credit card balances into installment loans, all of which would drive consumers towards other, less desirable and even financially harmful options.
A 10% cap would likely push consumers towards vastly more expensive options in the alternative financial services market, like payday loans, which had a national average interest rate of 391% in 2025, or high-cost installment loans, which regularly come with triple-digit interest rates. The average credit card interest rate this month in the U.S. is 23.79%. If a 10% cap goes into effect, the Electronic Payments Coalition predicts over 80% of accounts could be cut off or have limits slashed. Without access to the credit we have today, consumer spending would plummet, constricting the economy."
There are solutions that make more sense. Some past efforts are being reversed by this administration.
Furthermore, the administration’s 10% cap is a stark reversal from their decision to ask the court to overturn the Biden administration’s rule capping credit card late fees, which was a strong affordability reform that would have benefited consumers. If the President really wants to help consumers and start to tackle the affordability crisis, he should work with Congress to limit junk fees and limit what predatory lenders can charge by passing a nationwide across-the-board consumer loan rate cap, or at least a margin-based cap that would fluctuate with inflation.
What do debit cards have to do with this discussion? We might as well say “they can still pay with cash”.
Credit cards are a convenient source of credit. But no one would deny there are other sources of credit even for those with poor credit ratings. Payday loans, car title loans, pawn shops are well known. And the poor probably know of at least a few more.
However, ponder this. What would happen if the real interest rate approached 8%?
If the 10% cap is enacted, credit would dry up so fast our heads would spin. Why take a 2% chance on anyone but the absolute best credit risks if the US government is offering 8%?
The plan SHOULD be SOMETHING + LIBOR or equivalent.
As is currently the condition of unsecured consumer debt, LIBOR rates are very important as a reference.
If your objective is reducing interest paid by the weaker sections of economy, then driving them to payday loans defeats the purpose. Separately, credit cards offer much higher amounts as credit. Payday loans, pawn shops cannot fill the credit card void. Credit cards are the engine for small business, mom-and-pop stores, many individual professionals, and lower middle class families. If you are going to go to payday loans for buying school supplies to paying utilities, that is the surest way to crash the economy.
The funny part is administration and republicans call themselves as fiscally smart people.
Currently Citi has 5% ~ 6% of their card income is charged as write off because of default. If you cap the rate at 10%, they will essentially shut down all of their retail services and non-prime cards. Because at 10% they will be essentially losing money. This is same for JPM, BAC, COF.
The administration thinks they can twist the arms of these card issuers and make them eat losses for his political agenda. If that happens it will be a disaster.
You can say, Jane (Citi CEO) is also talking her book… Here are her views on the rate cap…
And to your point, a rate cap is not something that we can support. And I think the reception from from the Hill also seemed less enthusiastic from what we could tell. And just to be clear, the impact to us and other banks would just be dwarfed by the severe impact on access to credit and on consumer spending across the country. These things just don’t work out as intended. And think back when the Carter administration put credit controls in place to reduce costs, the impact was so severe they were very swiftly rescinded within two months.
And I think it’s helpful to have a few pieces of data. For context, U.S. consumers spend $6 trillion on their credit cards every year, and outstanding U.S. credit card balances are over $1.2 trillion. They grow about $80 billion a year and there’s over $4 trillion in untapped capacity at risk. So if you make these products unprofitable, that spending will be drastically reduced, and that’s British understatement. And we’ve seen this as other countries have experienced when they’ve tried this and also the studies in the U.S. have shown a vast majority of consumers and businesses will lose access to credit cards. They’d be forced to pursue more predatory alternatives. And you’d only be left with the wealthy having access to credit cards and nobody wants that.
If this administration was REALLY concerned about affordability, they would not have spent all of last year trying to reduce various student loan forgiveness programs.
Generally, no. There was a big-box grocery chain (in the west) that didn’t used to accept anything but cash/debit. No credit cards, coupons, or anything else. Since most people didn’t/don’t carry cash, their store was fairly empty. We learned that they started accepting credit cards, so now we go occasionally. I very seldom have more than $20 on me, except when I travel.
It’s been three or four years since I saw someone pay with a check…and everyone in line behind that person was impatiently sighing like “seriously…you still use checks” (no one said that out loud).
Credit cards rule. Easy, fast, and ours have perks (from travel protection, to cash-back, to airline miles, to cash advances -handy for traveling-). They can also get one in trouble really quickly, it’s true.
But, to return to your question, I reiterate the answer is “no”. Nobody uses cash anymore.
I saw news story that in Sweden so few use cash they are starting to remove ATMs. But now require people to have some emergency cash in case system is down due to power outages etc. Possibly that will be our future.
In St Louis we envision “the big one.” The massive earthquake that brings down our bridges on three side. Only one twolane road out of the area. Envision it packed with bumper to bumper traffic going 20 mph.
If you run out of gas, what do you do? A few stations may be equipped with generators, but cash probably becomes necessary.
They say in Japan people are advised to pack an emergency bag so you can evacuate quickly in an emergency like a major earthquake. That bag should include cash, medications, and essential documents. Not a bad idea.
Growing up with earthquakes and giant fires in Southern California I have had and been responsible for my own emergency bag since I was 9 years old (my family call it the “Go NOW bag”). When I became a troublemaking gay rights activist (I sure remember those days, although fewer and fewer do nowadays), and for awhile was wanted in Denver for “public disturbance,” my gonowbag was with me always. As I have moved and traveled I have come to see the concept as a key part of modern life. Valuable ID and other personal papers. Money and money equivalents. An indecipherable to most encoded list of account numbers, passwords, and contacts. A few tiny lightweight potent keepsakes.
In 1965 I befriended a new kid in my Jr High, who was of a family of smart Russian Jews who had had escape bags ready and packed back to the time of the pogroms under the Czars, and so were smart and ready for much longer than moderns….for horrific reasons. The opening of the door for immigration to Israel had them all gone as fast as possible.
My gonowbag also has stuff for ballast and love, still has my favorite shooter marble from long long long ago in the fifties. It’s not glass nor cats-eyed, but an ancient mottled dark brown stone carefully rounded.
Asia is one of the few developed regions that still uses cash a lot. In Japan, you can often find vendors that don’t do credit cards. None of the big stores, but little mom and pop shops usually don’t take credit. I think that’s changing. The first time we went to Japan, we were advised to expect to use cash.
You imply (by exclusion) that credit card interest rates do relate to affordability but somehow excluded car loan rates, mortgage rates, and student debt. Based on what rationale?
Two things can be true. The government can err by letting too much excess cash into the system (hint - to people like me who is anticipating his largest tax return ever) and at the same time, have things be unaffordable for those with less means.
