A major overhaul may be in the offing for the credit card industry in the U.S. President Donald Trump has announced his plans to cap the interest rate on credit cards to 10% for a period of one year. This move, if implemented, could bring about a major change in the way credit cards function in the U.S.

On the surface, the concept appears to be a definite home run for consumers fed up with exorbitantly high interest rates. However, scratch a little beneath the surface, and several key implications come into play that challenge the notion of this new development.

This article will analyze what Trump is proposing, if it will be enforced, and how a limit on interest rates could completely change the credit card industry.

Credit Card Economics: How Issuers Actually Make Money

To put the significance of a 10% interest rate cap into perspective, it is important to first discuss how credit card companies make money.

In general, card issuers can be said to generate revenue from the following three sources:

1. Interchange fees that merchants pay when customers use credit cards
2. Interest charges from cardholders who carry balances
3. Annual fees for premium cards with additional benefits

Although interchange fees and annual fees are significant, interest charges can be the most lucrative source of revenue. Given that the average APR for credit cards is above 20%, the role of interest income in funding rewards and high-end credit card benefits is massive.

This is why Trump’s plan has attracted the attention of the industry.

The Announcement: A One-Year 10% Interest Rate Cap

On the evening of January 9, 2026, President Trump made a posting on his Truth Social site with the following message: “Credit card companies must limit interest rates to 10% starting January 20, 2026, for one year.”

In his message, Trump criticized credit card companies for charging interest rates of between 20% and 30%, saying that the new policy was aimed at protecting consumers.

At first, it was not clear whether this was just political pressure or an actual regulatory directive.

However, two days later, Trump went further. While addressing the media on board Air Force One, Trump said that credit card companies would be “in violation of the law” if they did not comply.

This statement has considerably escalated the stakes and triggered debate about whether the administration intends to enforce the limit through executive orders, regulatory bodies, or legislation.

Is the Interest Rate Cap Legally Enforceable?

One of the biggest questions that has yet to be answered is how this proposal will actually be enforced.

At this point, there is no clear executive order, regulatory structure, or legislative bill that has been proposed. Although Trump has indicated that there will be legal repercussions for non-compliance, the details are unclear.

This is important. The financial markets and lending community are big on predictability. The mere threat of an unexpected, temporary rate cap is enough to cause pause not just for credit card issuers, but for investors and consumers as well.

Until formal guidance is issued, it is unclear whether this proposal will become formal policy or simply a tool of pressure to shape industry practice.

Why the One-Year Timeline Raises Red Flags

If the intention is to safeguard consumers against high interest rates, having the cap restricted to one year creates complications.

A temporary cap creates a financial cliff. Consumers may feel comfortable with balances at 10%, only to see a sharp increase to 25% or higher once the cap expires.

There are also political considerations. The proposed timeline conveniently overlaps with important election cycles, which may have an impact on how the policy is received.

In terms of financial planning, it is often seen that short-term solutions can lead to long-term issues, particularly when it comes to revolving debt.

Who Might Be Affected by the Policy?

Although the proposed measure seems consumer-friendly, it may have severe implications for other sections of society.

Consumers With Lower Credit Scores

Borrowers who pose a higher risk are the ones who will be most likely to be affected in a negative way. If the issuers are only able to charge 10% interest, it is likely that many will conclude that lending to subprime borrowers just isn’t worth the risk.

This could lead to:

• Fewer approvals for new cards
• Lower credit limits
• Account closures for existing cardholders

Ironically, the consumers who are being most heavily affected by high interest rates in the current market may find themselves shut out of credit altogether.

The Hidden Cost: What Happens to Credit Card Rewards?

The group that may be most affected by the interest rate cap, in the long run, would be individuals who never pay interest on their purchases anyway reward cardholders.

The current reward programs offered by credit card companies involve a type of cross-subsidization. This can be explained in the following way:

• Some cardholders pay high interest rates
• This interest is what helps to fund rewards, bonuses, and perks for all

The interest income is what enables the issuers to offer:

• Large welcome bonuses
• High spending multipliers
• Access to airport lounge facilities
• Travel credits and elite-level benefits

If the interest revenue were to be permanently reduced, then the issuers would have to make up for the shortfall.

Likely Changes to Rewards Programs

If the 10% interest rate cap were extended past one year or made permanent, reward programs would likely change.

The possible results may include:

• Smaller sign-up bonuses
• Lower points-earning rates
• Higher annual fees
• Fewer high-end benefits

That is, the golden age of profitable rewards for credit cards may be nearing its end.

Whether this is a positive or negative development is a matter of opinion, but it is definitely a significant change in the way credit cards function in the U.S.

Ripple Effects Beyond Banks: Airlines and Hotels at Risk

Credit card partnerships are no longer secondary revenue streams for airlines and hotel companies they are now core to their profitability.

Airlines, for instance, make billions of dollars annually by selling miles to banks. If credit card rewards become less lucrative, demand for co-branded cards may decline, which will affect airlines.

This could ultimately result in:

• Higher ticket prices
• Award space reduction
• Devalued loyalty programs

What may start out as a regulation in the banking industry could potentially end up changing the face of the travel industry as a whole.

Final Thoughts: Big Promise, Bigger Consequences

President Trump’s plan to set a limit on the interest rates of credit cards at 10% for a year may be a relief to some consumers, but it also poses a number of risks.

• Borrowers with good credit may benefit in the short term
• Higher-risk consumers could lose access to credit 
• Reward programs would definitely be affected 
• The airline industry and travel loyalty programs may be affected by the ripple effects 

Until more information is available, this proposal is both fascinating and disturbing. It illustrates the fine line between consumer protection and market stability and the fact that in finance, every advantage has a drawback.