In a recent statement on Truth Social, U.S. President Donald Trump proposed a temporary cap on credit card interest rates, suggesting a limit of 10% for one year, effective January 20, 2026. This announcement led to declines in financial services stocks, including Capital One, Synchrony Financial, Citigroup, JPMorgan Chase, and Bank of America, which are heavily reliant on credit card revenue. Capital One shares fell by 6%, while Synchrony Financial dropped over 8%. Other banks with more diversified portfolios experienced smaller losses, with Citigroup down nearly 4%, and both JPMorgan Chase and Bank of America declining by 2%. Payment processors Visa and Mastercard also saw a decrease of approximately 2%.

The proposed cap would require Congressional approval, and there has been ongoing interest in regulating credit card fees, with bipartisan bills previously introduced to limit interest rates at 10%. Trump indicated that banks failing to comply with the proposed cap would be violating the law. However, critics have raised concerns that such a cap could lead banks to reduce lending, potentially limiting consumer access to credit and negatively impacting personal spending, which constitutes about two-thirds of economic activity. Industry insiders warn that the cap could make large segments of the credit card market unprofitable, particularly for customers with lower credit scores, which may result in banks withdrawing from offering credit to subprime borrowers and scaling back rewards programs.

As a result, consumers might either cut back on spending or seek alternative forms of unsecured debt. Initially, stocks related to buy-now-pay-later services rose on speculation that consumers would turn to these options if traditional banks limited credit access, but those gains were later reversed, with Affirm Holdings declining over 6% and PayPal falling about 1%.

Interestingly, Senator Elizabeth Warren, a progressive Democrat, has found common ground with Trump on this issue. Warren has long advocated for capping credit card interest rates and reported that Trump reached out to her to discuss the matter directly. She emphasized that Congress could pass legislation to cap credit card rates if Trump actively supports it. However, the proposal faces significant opposition from banks and credit card issuers, with industry groups like the American Bankers Association arguing that such a cap could limit access to credit for millions of Americans, particularly higher-risk borrowers. Warren also raised concerns about housing costs during her conversation with Trump, highlighting a bill aimed at expanding housing supply that has stalled in the House of Representatives.