How a 10% credit card rate cap could affect your finances

Earlier this week, credit card issuers' stocks fell after President Trump called for a temporary 10% cap on credit card interest rates. While this isn't new — a bipartisan bill was introduced in February 2025 by Sen. Bernie Sanders (I-VT) and Sen. Josh Hawley (R-Mo) — the proposal has gained renewed attention following the President's remarks.

How is credit card debt affecting Americans?

The average U.S. consumer carries $6,500 to $7,000 in credit card debt, and total outstanding balances exceed $1.2 trillion. With average rates near 24%, the cost of carrying this debt is significant!

Why is a rate cap being considered?

At current rates, it is difficult for many borrowers to pay monthly interest while reducing principal. The Federal Reserve Bank of St. Louis recently reported a 2.98% delinquency rate on commercial bank credit cards, the highest since 2012, and roughly double the delinquency rate on single-family residential mortgages. Rising delinquency rates do not bode well for many consumers.

How could a cap help?

A hypothetical borrower with a balance of $7,000 at 24% interest pays about $140 a month in interest alone. By paying only $140/month (interest only), the principal balance will never decrease! At a 10% rate, monthly interest would drop to roughly $58/month, saving about $984 per year and allowing for faster debt reduction.

How could a cap hurt?

The interest rate charged reflects borrower risk, largely driven by income and credit score. A cap could limit credit availability for higher risk borrowers. This could potentially push some consumers toward pay day loans or other less-regulated alternatives.

What should you do if a cap is implemented?

Lower interest means more of each payment goes toward principal. Here are a few tips to take advantage of the cap:

1. Increase monthly payments to pay down the balance more quickly.

2. If the cap is temporary (as currently proposed), continue making higher payments even after rates rise.

3. Reduce or pause card usage until balances are paid off.

Final thoughts

There's no one-size-fits-all solution, but lower interest rates can create an opportunity to make meaningful progress on high-interest debt. If you are unsure how to proceed, consider speaking with a trusted financial adviser.