Proposed 10% Credit Card Rate Cap: Impact Analysis

MARKET ALERT:

Major financial stocks plunged on Monday (1/12/2025) after Trump's surprise 10% credit card rate-cap proposal. Here's what CFRA's analysis reveals about why we view this announcement as more bark than bite.

President Trump has proposed capping credit card interest rates at 10%, a significant reduction from the current industry average of approximately 21%. This change would dramatically alter the consumer finance landscape. Alexander Yokum, CFA, an Equity Analyst and Senior Vice President at CFRA, evaluates the potential impact of the proposed cap. He emphasizes that Trump lacks explicit authority to implement such a measure, making congressional approval likely necessary for its enactment.

• Earnings Impact:
  We view Synchrony Financial and Capital One as most vulnerable to the proposal given their outsized exposure to credit card loans and heavy reliance on net interest income. American Express may experience an earnings decline of more than 50%, while large banks with card portfolios could face earnings pressure above 10%.
• Limited Scope:
  The cap would likely apply only to new balances and last for one year, allowing issuers to potentially recover once normal rates resume.
• Issuer Response:
  If enacted, CFRA expects tighter credit standards, reduced rewards, higher fees, and lower marketing spend, with negative implications for lower-income consumers. With these counteractions, the earnings decline could be partially offset.
• Low Probability of Passage:
  Similar proposals have failed in Congress, and recent regulatory actions suggest a pro-bank environment, limiting the chances of implementation.

Want the full analyst perspective?

Access the full video and explore CFRA’s latest insights on the U.S. credit card space.

For more, visit “The Credit Card Renaissance: Building Tomorrow’s Payment Empire,” where Yokum discusses how credit card issuers have been turning innate spending impulses into a payment empire – and which stocks could deliver outsized returns as four powerful tailwinds converge.