Credit card interest rates remain some of the highest in consumer finance, with national rates hovering around 22%. For borrowers with limited or damaged credit, rates can climb to 30% or even higher. At these levels, the snowball effect of daily compounding can make debt feel overwhelming and seemingly impossible to pay off — especially for consumers making only minimum payments.
This reality has fueled renewed debate around the idea of a credit card interest cap — a legal limit on how high credit card interest rates can go. On January 9, 2026, President Donald Trump proposed capping credit card interest rates at 10% for one year, prompting questions about how such a cap would function, who it would help, and what trade-offs it might involve.
What follows is a closer look at what a credit card interest cap is, how it works, existing limits, and the potential implications of imposing one in the U.S.
Table of Contents
- What Is an Interest Cap for a Credit Card?
- How Does a Credit Card Interest Cap Work?
- What Is the Current Cap on Credit Card Interest?
- Pros and Cons of a Credit Card Interest Cap
- Why Is the Trump Credit Card Interest Cap Being Proposed?
- Pros and Cons of the Trump Credit Card Interest Cap
- Example Scenarios
- FAQ
Key Points
• A credit card interest cap is a legal ceiling on the maximum interest rate lenders can charge.
• The U.S. currently has no federal cap on credit card interest rates for most consumers.
• Some states impose rate caps, but credit card issuers follow the laws of their home state, which are often more lenient.
• Interest caps can reduce borrowing costs but may also limit access to credit.
• Any cap would significantly reshape the credit card industry and consumer borrowing behavior.
What Is an Interest Cap for a Credit Card?
An interest cap on credit cards is a regulatory limit that sets the highest allowable annual percentage rate (APR) a lender may charge borrowers. This restricts how expensive revolving credit can become, regardless of market conditions or a borrower’s individual risk profile.
Credit card rate caps are typically intended to prevent usury — the practice of charging excessively high interest rates — and to provide relief for borrowers carrying high-interest debt. Rate caps already exist in limited circumstances, such as at the federal level for military service members and for certain financial institutions.
An interest rate cap does not eliminate interest altogether. Instead it ensures rates remain below a predefined threshold.
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How Does a Credit Card Interest Cap Work?
A credit card interest cap works by setting a maximum APR that issuers cannot exceed. If the cap is set at 15%, for example, no credit card — regardless of market conditions or borrower qualifications — could legally charge more than 15% interest on outstanding balances.
Implementation typically involves:
• Legislative action: Congress or state legislatures pass laws defining the cap.
• Regulatory oversight: Agencies monitor compliance and penalize violations.
• Market adjustment: Issuers revise pricing models, eligibility criteria, and rewards structures.
By lowering the APR, a cap reduces the portion of a borrower’s monthly payment that goes toward interest, allowing more of the payment to be applied to the principal balance. This can help borrowers pay off debt faster.
However, credit card issuers generally price interest rates based on borrower risk, funding costs, expected defaults, and profitability. When a cap limits interest income, lenders may respond by:
• Tightening approval standards
• Reducing credit limits
• Eliminating low-interest promotional offers
• Increasing fees or annual charges
What Is the Current Cap on Credit Card Interest?
There is currently no general national credit card interest rate cap for all consumers. However, several specific legal caps are in place:
• Federal credit unions: U.S. law states that federal credit unions cannot charge their members a rate higher than 18%, including all finance charges, on their unpaid balances.
• Military personnel: The Military Lending Act caps interest at 36% for active-duty members and their covered dependents. The Servicemembers Civil Relief Act further reduces interest rates to 6% on debt incurred before entering active duty.
• State level: Some states have usury laws that limit rates on certain types of loans, including credit cards. However, many issuers avoid these limits by basing their operations in states where the rate limits are high or unlimited (such as Delaware or South Dakota).
• One-year protection from rate hikes: Under the Credit Card Accountability Responsibility and Disclosure Act, issuers cannot raise interest rates during the first year an account is open. After that, issuers must provide 45 days’ notice before increasing rates. Exceptions apply, such as expiration of a 0% introductory APR or if a payment is more than 60 days late.
Pros and Cons of a Credit Card Interest Cap
Like many financial regulations, credit card interest caps come with both benefits and trade-offs.
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Pros:
• Lower borrowing costs for consumers: A cap would immediately reduce the amount of interest consumers pay, especially those carrying balances month-to-month.
• Help borrowers break the cycle of debt: Lower rates make it easier for borrowers to pay down balances instead of remaining trapped in revolving debt.
• Improves household budgeting: For families strained by inflation and rising costs, lower interest payments could free up cash for essentials or savings.
• Consumer protection for vulnerable borrowers: Caps can prevent extreme APRs that disproportionately affect people with limited financial flexibility.
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Cons:
• Reduced access to credit: Lenders may deny credit to higher-risk borrowers if they cannot charge rates that compensate for default risk.
• Potential fee increases: Issuers may offset lost interest revenue by raising annual fees, late fees, or other charges.
• Fewer rewards and perks: Cash-back programs, travel rewards, and promotional offers could shrink as issuers adjust to lower profit margins.
• Market disruption: Interest rate caps act like price controls and can limit the variety of credit offerings and discourage competition among lenders.
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Why Is the Trump Credit Card Interest Cap Being Proposed?
On January 9, 2026, President Donald Trump announced on his social media platform Truth Social that he will impose a one-year cap on credit card interest rates at 10%, effective January 20. He cited affordability concerns and criticized rates ranging from 20% to 30% during the previous administration. The proposal echoes his 2024 campaign pledge to cap credit card interest rates at 10%.
The idea of a federal credit card interest cap is not new. In February 2025, a bipartisan bill introduced by Sens. Josh Hawley of Missouri and Bernie Sanders of Vermont proposed capping card APRs at 10% for five years. That bill is currently stalled in Congress.
Recent rate-cap proposals are generally framed as a way to provide immediate financial relief after years of rising interest rates. They also carry political appeal as a clear, easy-to-understand consumer protection measure.
Pros and Cons of the Trump Credit Card Interest Cap
Trump’s specific proposal — a one-year 10% cap on credit card interest — has generated significant debate. Here’s a look at potential benefits and drawbacks of his proposal:
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Pros:
• Immediate relief for borrowers. A low cap would dramatically lower interest costs for households carrying balances. A September 2025 analysis from Vanderbilt University researchers found that a 10% cap would save consumers an estimated $100 billion per year in interest payments.
• Pressure on issuers to reform practices. The high-profile nature of the proposal has drawn attention to credit card costs. That might incentivize issuers to reduce reliance on interest revenue.
• Potential economic stimulus: Savings on interest could free up money for other spending, supporting broader economic activity.
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Cons:
• Regulatory and legal complexity: Without action from Congress to pass new legislation, implementation of a presidential credit card rate cap would likely face significant legal challenges, enforcement difficulties, and lengthy litigation.
• Shift toward alternative lenders: Consumers denied access to traditional credit cards may turn to higher-cost or less-regulated lending options, such as payday loans.
• Risk when cap expires: A temporary 10% cap could encourage borrowing that later becomes more expensive once higher rates return.
Example Scenarios
To understand how a credit card interest cap might play out in practical terms, consider the following examples.
Scenario 1: Average Borrower
Suppose you have a credit card balance of $6,500 — roughly the average among Americans with credit card debt — with a 22% APR. If the rate cap is implemented, that rate would drop to 10% for one year.
Under a 10% cap, your annual interest cost would drop from about $1,430 to $650, adding up to $780 in interest savings alone.
Scenario 2: Consumer Actively Paying Down Debt
With a $6,500 balance at 22% APR, you would have to make monthly payments of at least $608 to pay off the balance within one year. At a 10% APR, you could pay off the same balance with monthly payments of about $571. Over the year, you would save roughly $443 in interest.
Scenario 3: Consumer Who Usually Pays in Full
If you pay off your balance in full every month and rarely incur interest, the 10% cap would provide no direct benefit. However, you might be indirectly affected. Reward rates might decline, or a previously no-fee card might introduce an annual fee. While you would not save on interest, you could still bear some of the costs issuers shift elsewhere to offset capped rates.
The Takeaway
A credit card interest cap is a powerful but blunt policy tool. It offers significant protection against excessive borrowing costs and could help millions of Americans escape high-interest debt cycles. At the same time, it could reduce access to credit, reshape card benefits, and push some borrowers toward riskier financial alternatives.
The renewed attention generated by Trump’s proposal and similar efforts reflects growing dissatisfaction with current credit card pricing. Whether or not a federal interest cap is enacted, the debate raises a larger question: how to balance consumer protection with a functional and inclusive credit market.
For consumers, understanding how interest rates and potential caps work — and their possible consequences — can support smarter borrowing decisions, regardless of how future policy unfolds.
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FAQ
Why is capping credit card interest bad?
While capping credit card interest provides immediate relief to consumers, opponents argue it can negatively affect the credit market. Primary concerns include reduced access to credit for high-risk borrowers, as lenders may deny applications if they can’t charge a rate that justifies the risk of default. Issuers may also offset lost revenue by increasing fees (like annual or late fees) or reducing valuable card perks such as rewards and cash-back programs, ultimately impacting all consumers.
What is the cap on credit card interest?
The U.S. currently has no universal federal cap on credit card interest rates. However, specific limits are in place: Federal credit unions are generally capped at 18%, and the Servicemembers Civil Relief Act limits credit card rates for active-duty service members to 6% on debt incurred before entering military service. While some states enforce rate caps, many major card issuers operate from states with very high or no caps, allowing APRs well above 20%.
How does an interest cap work?
An interest cap is a legal maximum annual percentage rate (APR) lenders can charge. If a cap exists, credit card issuers must price cards at or below that rate. Caps are meant to protect consumers from excessive interest but can also reduce credit availability if lenders see capped rates as unprofitable.
Who sets credit card interest caps?
Interest caps are set by governments, usually at the state level in the U.S. through usury laws. Congress could impose a federal cap, but has yet to do so. Because lenders are permitted to “export” rates from their home state, they frequently base their operations in jurisdictions with high interest limits or no caps at all.
Is 22% interest high on a credit card?
The national average credit card interest rate is currently around 22%, according to the Federal Reserve. That means a 22% APR is considered typical for the current market. However, for consumers carrying a balance, 22% is a high rate that significantly increases the cost of debt and makes it harder to pay off. Rates for borrowers with excellent credit may be lower, while those with weaker credit can face rates as high as 30%.
What does Trump’s credit card cap mean?
President Trump has proposed a temporary 10% cap on credit card interest rates, effective January 20, 2026, to combat high borrowing costs. While the plan could save Americans an estimated $100 billion annually, it faces significant hurdles. Legal experts note that a president cannot mandate interest caps via executive order; implementation requires an act of Congress. The banking industry also warns that a rigid 10% ceiling would likely force lenders to cancel accounts for high-risk and subprime borrowers, as they could no longer price for the risk of default.
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