Shares of major US card issuers and banks, like American Express, took a hit as President Trump proposed capping credit card interest rates at 10% for a year. American Express saw a 4.28% drop to $359, while Capital One experienced a 6.4% decline, its largest in nine months. Citigroup fell by 3%, Wells Fargo by 1%, and Synchrony Financial by 8.4%.
Analysts cautioned that the proposed cap could erase billions in industry profits and restrict lending. Even payment giants Visa and Mastercard, though not card issuers, were affected due to the fees they earn from consumer transactions. President Trump has given companies until January 20 to comply with the rate reduction or face legal consequences, emphasizing the need for the 10% cap.
Trump’s move aims to address high credit card interest rates, some of which reach almost 30%, unbeknownst to many consumers. He stressed the necessity of the cap to prevent further exploitation of the public by credit card companies. While industry groups support the idea of more affordable credit, they caution that a 10% cap could hinder credit availability and harm card-dependent consumers and small businesses.
Implementing the interest rate cap would necessitate new legislation from Congress, a move deemed unlikely due to the banking sector’s strong influence in lobbying. Trump’s announcement coincides with the upcoming US midterm elections, following his discussions with Republican aides about potential impeachment if the party loses in November.
