US President Calls for 10% Credit Card Interest Cap, Banks Push Back (pbs.org)
- Reference: 0180567834
- News link: https://news.slashdot.org/story/26/01/12/152240/us-president-calls-for-10-credit-card-interest-cap-banks-push-back
- Source link: https://www.pbs.org/newshour/politics/banks-balk-as-trump-pushes-for-1-year-10-cap-on-credit-card-interest-rates
Trump posted on Truth Social that he hoped the cap would be in place by January 20, one year after he took office, though he did not specify whether it would come through executive action or legislation.
Americans currently pay between 19.65% and 21.5% interest on credit cards on average and carry roughly $1.23 trillion in credit card debt, according to the New York Federal Reserve. Researchers found that a 10% cap would save Americans roughly $100 billion in interest annually. The American Bankers Association warned that such a cap "would only drive consumers toward less regulated, more costly alternatives."
Further reading : [2]How Trump's proposed cap on credit card rates could reshape consumer lending .
[1] https://www.pbs.org/newshour/politics/banks-balk-as-trump-pushes-for-1-year-10-cap-on-credit-card-interest-rates
[2] https://www.reuters.com/business/finance/how-trumps-proposed-cap-credit-card-rates-could-reshape-consumer-lending-2026-01-12/
He'll claim this: (Score:5, Insightful)
that he solved the 'affordability crisis' by making it cheaper for people to go into perpetual debt.
Re: (Score:2)
> Zero accountability is exactly why most shut the fuck up real quick-like when bitching about what they can and cannot afford.
Zero accountability for one side of the debt, but not the other. It shouldn't be the government's job to make sure loans get repaid, but we routinely bail out lenders and set up systems where the most risky loans are not dischargeable in bankruptcy. Lenders don't have to even bother checking borrower's ability to repay, which in theory is what lenders are supposed to do in our system.
I love the poorly educated (Score:2)
> I love the poorly educated
Because you would have to be pretty naive - financially, at least - to carry credit-card debt.
With all those tariffs killing the economy... (Score:3, Insightful)
He's got to find a way to put money back in the people's pockets. And he can't go back on the tariffs or he'd have to eat crow.
Re: (Score:2)
Does taking less qualify as putting money in their pockets?
Taking less give the belief that the amount not taken is then left in their pockets to spend but anyone who carries CC debt such that this would make much of a difference will be underwater so much that it only slightly increases the distance between them and the bottom of the lake.
But it would give Donald Trump a good number to spin to his voters.
LoB
Re: (Score:2)
> He's got to find a way to put money back in the people's pockets. And he can't go back on the tariffs or he'd have to eat crow.
The plan is to take the tariffs off in time for the economy to bounce back around election time. There is no rush to appease the masses until it is time for them to vote.
I wonder what the real impacts would be. (Score:4, Insightful)
It was only literally 18mons ago that we saw rates on things like HELOCs and 30 year mortgages in the 8.5% range.
certainly it isn't going to be sustainable to have unsecured debt and secured debt in such a tight range. Clearly when prime rates are in that range it would be impossible to profitably extend unsecured credit at 10% at least on the default rates that are currently common in the credit card space.
So would we see a lot of lenders closing consumer credit card accounts, and not offering them to anyone with a less that stellar FICO score?
Re:I wonder what the real impacts would be. (Score:5, Insightful)
That is exactly what would happen. This is another Trump idea that sounds good when you say it but anyone who puts any thought into it finds very quickly it is a terrible idea. Everything he says is about getting people to like him. He says something like this so people will say "that will help me, Donald Trump is a good guy and on my side". Meanwhile, if it happens, most of those same people will have their credit cards cancelled or not be able to get a card to begin with. He can then say it is all the banks faults not his. Trump is nothing but optics, once you look past the words and actually at how things works, everything falls apart.
Re: (Score:2)
I find it laughable that a guy who has mainly extended his inherited fortune via strategic bankruptcies considers himself even remotely competent to manage the US (and world) economy.
I'd laugh if I were young. Unfortunately I'm near retirement age, and I'm seriously wondering how screwed I am thanks to the orange imbecile.
Re: (Score:2)
> Everything he says is about getting people to like him.
Not anymore. Now it is about how can he line his pockets. This is just a ploy to get the finance industry to donate more to his "campaign."
Re: (Score:2)
Considering how much credit card debt people are saddling themselves with, wouldn't having cards cancelled and/or not issued be a good thing? Do you want to be hopelessly in debt? If you're not hopelessly in debt, your credit score will reflect that, and you'll be able to continue using credit cards responsibly. What's the downside?
Price too low = no supply (Score:2)
Want a credit card? Then the bank must charge enough interest to pay for the costs associated with it and the defaults by people who don't pay back what they borrowed. If they don't, then lots of people won't have credit cards anymore.
Re: (Score:3)
> If they don't, then lots of people won't have credit cards anymore.
Which probably wouldn't be a bad thing overall.
Re: Price too low = no supply (Score:2)
> That would be an immediate drastic reduction in demand, which would crush small businesses and large alike.
You havent sold that counterpoint. Crushing existing exploitative businesses and optional purchases is the point, but it cettainly wouldnt be immediate.
Re: (Score:2)
> Which probably wouldn't be a bad thing overall.
Probably eventually, but in the shorter term we are talking about adding a lot new friction to the economy. ACH and debit would certainly replace a lot of the transaction processing but you'd be removing an easy source of credit from a population where there has been a near zero savings rate for decades.
Take the credit card away and you turn needing a new transmission into a lost job.
Re: Price too low = no supply (Score:2)
Yes lots of people who were not supposed to have credit card to begin with.
another great idea! (Score:2)
after the huge success of 50 year mortgages the administration is showing they have real solutions for today's problems :D just kidding this is going to be another tool to extort businesses to line the administration's pockets
Very short term thinking (Score:3, Insightful)
So the proposal is to cap credit card interest rates at 10% for one year. That basically rewards people who knowingly (they're adults) took on debt with an agreement to pay it back at around 20% interest. You're lessening the consequence of their actions. And all that's going to happen is you're going to encourage more of the same behavior because you're going to temporarily reduce the cost of borrowing. And then a year later you're going to jack the price back up to 20%. I think this plan has bad long term consequences.
Re: (Score:2)
Frankly, I think most of you don't really get it.
This is strictly about the midterm elections in November. Trump and the GOP know they're in trouble. Right now, Trump is coming up with stupid ideas, hoping to mollify enough of the electorate between now and November so the GOP doesn't get slaughtered in the house. There will certainly be more crazy ideas coming from him in the next month or two.
And, frankly, if none of that works (and it probably won't - the guy really isn't that bright)... I fully expect w
Price Controls (Score:3)
I was wondering how long before politicians started reaching to price controls as the solution to cost of living challenges, but this is earlier than I expected. Maybe Maduro's presence in the US is inspiring the adoption of some of his economic policies!
Re: (Score:3)
Remember we had to vote against Harris because she wanted anti-price gouging measures and those were declared un-American and Socialist (but they would have been actually voted on)
Here we get potential worse price controls and done via executive fiat because in this admin everything has to be run through the WH. I don't even think Trump considers that Congress is a thing.
Re: (Score:2)
There are price controls today on wages for H2A visa workers. The problem is that these prices are below market rate. This causes undocumented workers to demand higher wages than documented ones. This is bad for big ag, so the donor class really needs them to get documented.
Re: (Score:3)
This might not strictly constitute price controls, rather a necessary nudge of the market where very strong or monopolistic players dominate the field and misuse their advantage. Not sure about the US but in many places in Europe, banks are notorious for that. We've always had a rather large difference between interest on savings and interest on loans and mortgages (larger than in surrounding countries). And in Belgium, the government urged banks to increase interest on savings because it was rather far
Re: (Score:2)
> Call it price controls or whatever, but I think the government needs to step in when the market fails.
I don't disagree, but I'm not seeing evidence that this is actually a market failure (at least to the degree of slashing rates to 10% being a proportionate response). From what I've seen interest rates on credit cards are over 20% around the world.
I obviously can't prove that a global cabal of bankers isn't colluding to set that rate at an artificially high level internationally, but it seems more likely that it's simply the price of offering unsecured debt to the general public.
Re: (Score:2)
> Paying over 18% virtually guarantees bankruptsy.
Not true. I got a 24% interest used car loan when I was in my early 20s with no credit history. I refinanced it after a year (I had credit history then) to somewhere around 10%, and the loan for my next car was closer to 3-4%.
While I would like there to be a better way than what I went through (and I now know there is, but didn't back then), it still can work to get temporary large interest loans for very specific reasons. Keeping a 20+% interest loan for years is a recipe for disaster though.
Free market (Score:2, Funny)
Ah yes, the free market at work.
Re: (Score:2)
> Ah yes, the free market at work.
Republicans have never cared about the free market. It's only a talk point that holds zero water when looking at historical voting records and executive orders. (Fun fact: they don't care about states rights either.)
Re: (Score:2)
Their spin doctors like political convenience. And American voters appear to have very short term memories, so the behavior continues.
won't be a boon for airlines (Score:3)
The bulk of the money that airlines make today is from [1]loyalty programs and co-branded credit cards [cnn.com]. If interest rates are capped then credit card rewards will go away and airlines won't have that propping them up, anymore.
[1] https://www.cnn.com/2024/09/08/business/frequent-flyer-programs-airlines
drive them to less regulated/more costly? (Score:1)
"The American Bankers Association warned that such a cap "would only drive consumers toward less regulated, more costly alternatives."
LOL, I'm sure people would see that they now have a 10% cap on their CC interest rate and jump to one with an interest rate more than 10%.
Because that's the smart thing to do?
LoB
Re: (Score:3)
> "LOL, I'm sure people would see that they now have a 10% cap on their CC interest rate and jump to one with an interest rate more than 10%.
If you are a high risk debtor you would not end up with a 10% capped CC: you would end up without CC altogether since creditors would deem the risk not adequately covered at a 10% cap.
That's what would drive these high risk debtors to "unregulated, more costly alternatives", since I doubt they suddenly would become eligible for better forms of credit, or not need the credit altogether.
Re: (Score:3)
They would driven by the fact they want credit but now cannot get it from a major credit-card company.
Like if you can't get a car loan from your bank or a major dealer you end up at a buy-here-pay-here place which charged you 38% interest and massive penalties.
Re: (Score:2)
Sure we can bring that back but that legislation changed a lot of rates and other things as well, worth considering what else in there should be undone.
[1]Tax Reform Act of 1986 [wikipedia.org]
[1] https://en.wikipedia.org/wiki/Tax_Reform_Act_of_1986
This is a good thing (Score:2, Insightful)
If the low interest rate is legally mandated then the risk profile changes. Maybe it will result in banks not giving people with crap credit ratings credit cards if they can't monetise them and result in better spending management.
Fantastic way to throw economy into recession (Score:3)
The Orange Doofus cares not for unintended consequences. Cap credit card rates at 10%? Sure, then banks will stop extending credit to millions of people with marginal credit ratings. "Sorry, but we're canceling your credit card... we can't price your risk appropriately."
That leads to much less consumer spending, which leads to recession. Or worse, makes people who can't qualify for a credit card use less-regulated, dodgier and more expensive credit products.
queue the busy lines at credit card companies (Score:2)
Come February when tens of millions of people get credit card statements still showing 29.95% interest, those 1-800 #s will be swamped with calls about how its illegal to charge more due to Trump. Then, many will stop paying until its "corrected" causing many banks to make a decision to charge fines to Trump's supporters and enrage them and him even more, or to submit and lose control of their business.
Also, where is my "dividend" check for DOGE and the tariffs?
Re: (Score:2)
As long as people aren't talking about the Epstein files then I think Trump will think this is fine.
He'll cause a bank run (Score:2)
If everyone thinks it's their 'right' not to have to pay back the fees they have racked up, banks will have to write down all the consumer credit debt. Just watch.
Re: (Score:2)
Unsecured vs secured debt. Own a home, get a HELOC and the rate is way less.
Wait, what? (Score:1)
> My credit rating over 800 and my credit cards charge around 25% interest
If you shop around, you can get a much better deal.
Anyone with fantastic credit using a card that charges more than about 5-6% over the prime rate is either getting something out of it like a rewards card or they haven't shopped around.
As you said though, you aren't carrying a balance, so it's a "why bother to change" situation for you. Plus, having an account that's been open awhile is helping you keep your golden credit rating.
Sounds good at face value (Score:2)
It means most people aren't going to be offered credit cards. Maybe that's OK, but it sure is damn convenient to be able to put expensive car repairs on credit. Or buy your kids new shoes any day of the week instead of only Friday night, after you get paid.
Proof (Score:2)
That paying the king doesn’t result in good fortune. You just got branded as a sucker that will pay out some more.
Guitar Center's credit card (Score:2)
I was looking at their special financing just to see the terms and they are charging crazy rates - Purchase APR is 34.99%. Penalty APR 39.99%. I don't think I've ever seen rates that high, but I've never really looked for them either. My post-college debt was paid off long ago. There should be a cap on rates. 10% is probably too low, but miss a payment by one day and you're now burdened with a 40% penalty rate? In the case of Guitar Center, I think the penalty rate is retroactive on the full financed amount
what does this comment mean? (Score:1)
"The American Bankers Association warned that such a cap "would only drive consumers toward less regulated, more costly alternatives." what are the alternatives that consumers will be driven toward? and why?
Re: (Score:2)
Credit card companies base their rates on the risk that you will default. If you are too risky and they can't raise the rates, they'll just drop you and cancel your card.
Alternatives include "payday loans" (which can have APRs of around 400%) and of course your friendly neighborhood loan shark. And I'm sure the silicon valley oligarchs are ready to go with some kind of fintech crypto-usury scam.
Are we sure this guy is "far right?" (Score:2)
I haven't yet seen any activities by President Trump, which are to the right of LBJ. Another example, right here. Every fucking news item, if it isn't about his personal dishonesty and corruption, then it's about his far-left politics, which for some reason, are called far-right. WTF.
I am starting to disapprove of the Soviet Union's Communist Party renaming themselves as America's Republican Party. Why didn't the existing trademark holders object?! They should have fought back against the hostile takeover.
Re: (Score:2)
Trump has always been a populist pushing to appeal to a very conservative base rather than an actual conservative. That his occasional left wing policy goals are immediately embraced by his base is a testament to how much of a cult he's running.
I REALLY got a kick out of the idea he floated recently about eliminating corporate home ownership though. That is such an incredibly left wing proposal I have my doubts even he can push that through the rest of the party without watering it down so much it won't mak
Bribe for the midterms (Score:3)
A limit on credit card interest rates for just one year isn't going to solve any problems this country has. Clearly this is just Trump trying to boost Republican standing before the midterms using what is essentially the credit card company's money.
TDS is implacable. (Score:1)
The president obviously can't control the free market.*
People who sign up for 25% interest credit cards, fuck 'em, that's their own problem.
If those people declare bankruptcy and the cc companies lose out, fuck THEM, that was their risk they took issuing the card.
*then again, this applies to the previous president and "forgiveness of college loans" which everyone seemed to cheer?
Fee-based subprime cards (Score:1)
Your new sub-prime card will have 10% interest, an annual fee of several dollars per $100 of credit limit, and very stiff fees an immediate freezing of the card for new purchases if you are as much as a day late.
The only special perks you will get will be the opportunity to buy things at inflated prices through affiliate programs and the "opportunity" (no opt-out) to have your personal data sold to anyone willing to pay for it. Oh wait, never mind, these "perks" are already available to all customers.
Allow enforcement of state usury laws (Score:2)
There used to be reasonable limits on interest rates, but when credit card companies were allowed to violate state usury laws by setting up shop in a friendlier state, the laws became moot.
If he really wanted to bring those rates down, this could be a first significant step.
People can't figure out if he's (Score:2)
...a capitalist or socialist. Perhaps "meddle-ist" is most appropriate: he likes to stick his fingers into where whim takes them.
Re: (Score:2)
Only those who don't know what socialism is. Hint: he isn't one since he is not advocating for the workers owning the means of production.
Baffling (Score:2)
OK so the banks will make up for lost interest by charging more fees... I don't see the point of this. You shouldn't have any credit card debt to begin with, regardless of the interest rate. This isn't helping people so much as giving them more rope. There are more subtle ways of helping people get out of debt traps like this.
Hand out (Score:2, Troll)
Cheeto Benito, his hand outstretched.
Cross his palm with silver and your future will brighten.
Re: (Score:2, Interesting)
I think you nailed it. That presidential for-profit hotel - err, library - isn't going to pay for itself.
This proposal will never happen. Never. The banks will soon show up with their buckets of cash and suddenly Trump will be off invading some other country, and will have completely 'forgotten' about this.
Re: (Score:1)
Don’t forget the missing wing of the whitehouse. You know he’s going to stiff the contractors.
Re: (Score:2)
I think contractors have figured that. He wants to put the remodel on his credit card, which I assume is why he wants the 10% cap.
Re: (Score:2)
He really thinks his tweets are decrees that instantly become law. [1]https://www.thedailybeast.com/... [thedailybeast.com]
[1] https://www.thedailybeast.com/donald-trump-79-confuses-his-truth-social-rant-with-the-law/
Re: (Score:2)
Why is this different than when AOC proposed the same legislation? The US 'usury' rate caps have nearly doubled since the 1980's. The current rates would be immediately illegal and have been getting pushed higher by these companies operating at 50 percent profits.