WASHINGTON: The US banking industry is warning that President Donald Trump’s plans to lower credit card costs would make credit less available and hurt consumers and businesses.
Trump said Friday that effective January 20, the first anniversary of his administration, he was calling for a 10 percent cap on credit card interest rates.
“We will no longer let the American Public be ‘ripped off’ by Credit Card Companies that are charging Interest Rates of 20 to 30%,” he said on Truth Social.
Five associations representing US banks responded that they shared the president’s goal of helping Americans access “more affordable credit.”
“At the same time, evidence shows that a 10 percent interest rate cap would reduce credit availability and be devastating for millions of American families and small business owners who rely on and value their credit cards,” the associations said in a joint statement late Friday.
“If enacted, this cap would only drive consumers toward less regulated, more costly alternatives,” it said.
The statement was issued by the American Bankers Association, Bank Policy Institute, Consumer Bankers Association, Financial Services Forum and Independent Community Bankers of America.
Credit cards are the primary source of consumer credit in the United States. Costs and outstanding balances have soared in recent years as people increasingly rely on them to maintain spending, even for basic necessities.
According to data from the Federal Reserve, the total outstanding credit card debt exceeded $1.23 trillion at the end of September – the fourth-largest source of household debt, after mortgages, student loans and auto loans.
Interest rates on credit cards are at least 21 percent and can reach as high as 38 percent for borrowers with a higher risk profile, according to the Fed. This is up from an average of around 12 percent a decade ago.
With midterm elections due in November, Trump is under pressure to reduce the cost of living as promised during his 2024 election campaign amid stubborn inflation and consumers’ complaints that they struggle to make ends meet.
Senator Elizabeth Warren, the top Democrat on the Senate Banking Committee, voiced skepticism that Trump was serious about capping rates, noting that he has sought to shutter the Consumer Financial Protection Bureau (CFPB), a consumer watchdog.
“Begging credit card companies to play nice is a joke,” Warren said in a statement Friday. “Trump doesn’t care about affordability.
American Dollar Exchange Rate