Trump Proposes Capping Credit Card Interest Rates at 10 Percent

US President Donald Trump has announced plans to cap credit card interest rates at 10 percent for one year, effective January 20. The move is part of a broader effort to address concerns over high interest rates and their impact on consumers.

According to Trump, the current interest rate of up to 30 percent is “unfair” and needs to be reduced. He stated that credit card companies have “abused the public” with these high rates. The plan would limit interest rates for one year, starting from January 20.

While there is bipartisan support in the US for reducing credit card interest rates, experts warn of potential unintended consequences. Credit card debt has been increasing, with outstanding balances reaching $1.23 trillion as of September. The average credit card debt per customer was $6,555 in November, according to TransUnion.

The cost of borrowing has also risen, with the average interest rate standing at 22.83 percent in August, up from 16.28 percent in 2020. Trump’s re-election campaign was partly attributed to public concerns over high inflation and affordability.

To implement this plan, Trump would need lawmakers in Congress to pass legislation. However, he has expressed support for existing bipartisan bills that target credit card fees and interest rates. The “Credit Card Competition Act of 2023” aims to reduce hidden “swipe fees” levied by Visa and Mastercard on both customers and merchants.

A major question mark surrounding Trump’s plan is enforcement. The proposed legislation relies on the Consumer Financial Protection Bureau (CFPB) and the Federal Trade Commission to police creditors, with violations attracting civil penalties. However, the Trump administration has been critical of these agencies, with plans to slash their budgets.

The 10 percent ceiling on credit card interest rates could save Americans $100 billion annually, according to estimates.

Source: Al Jazeera