Will Credit Cards Really Be Capped at 10% Interest?

On January 9, the President made a social media post more or less demanding that credit card interest rates be reduced to 10% by January 20, 2026.That deadline has passed and nothing really happened...yet.

Is a universal 10% interest cap on credit cards still a possibility? How might that work and why are some suggesting there could be actually be some pretty severe unintended consequences? Here's what we know so far.

Is a 10% cap on credit card interest rates really possible?

The trouble with President Trump's demand that credit card interest rates drop to 10% by January 20 is that he didn't provide any clear guidance on how that was supposed to happen. There was nothing legally compelling banks to do so. The President just wanted them to reduce credit card interest rates voluntarily. 

Perhaps unsurprisingly, to this point, none have done so.

That's not to say that an interest rate cap is off the table. On January 21, Trump asked Congress to pass legislation capping interest rates. The legislative route was probably always the most likely path to enacting credit card interest relief. Just last year, a bipartisan bill was introduced that did exactly was Trump wants: limits APRs on credit cards to 10% for five years.

Unfortunately, that bill never got the support it needed to pass. And even now, with the President's urging, a similar bill may also struggle to get enough support.

What's the argument against a 10% cap?

Obviously, capping interest rates is going to have a substantial impact to creditors, so you can see why they'd be strongly against the idea. The issue, however, is that it's not as straightforward as "lower interest rates = less profits." Keep in mind that interest rates are typically aligned with your risk as a borrower: the more trustworthy you've proven yourself to be, the lower the interest rate you can qualify for.

As MMI's Thomas Nitzsche writes, "When lenders cannot price for risk through interest rates, some may respond by tightening approvals, lowering credit limits, or reducing credit availability altogether."

Creditors are not shy about suggesting that a rate cap would ultimately lead them to cutting off millions of Americans from access to credit. An analysis from America's Credit Unions (which is an industry group representing credit unions, so consider their perspective accordingly), found that two-thirds of credit cards users with a balance would risk having their credit lines reduced or canceled, while 47 million subprime borrowers would lose access to credit, should a 10% cap be implemented.

So a 10% cap would likely save a lot of people a lot of money, while also forcing those who are already struggling the most to turn to more expensive credit options, like payday loans.

There's also the very distinct possibility that creditors will successfully block any attempts to pass legislation through Congress.

What are my options if I need a lower interest rate today?

The appeal of the 10% interest rate cap is easy to see. It's estimated that such a cap would save American consumers $100 billion each year in interest payments. When people are struggling with debt, it's usually the interest charges that make it feel like they can't ever make any progress.

Unfortunately, there's a very good chance that the proposed 10% cap never happens. But that doesn't mean you need to give up on a lower interest rate. There are three big options that could get a significantly lower interest rate today.

Balance transfer

If you qualify for a new credit card and it comes with a introductory 0% APR, you can transfer your existing balance over to the new card. The interest-free period will help you make progress on your debt without accruing additional interest charges.

• Your credit score will need to be good enough to qualify for the new card
• There may be fees for transferring the balance from one card to the other
• That 0% APR won't last forever, so you'll need a plan to make a most of the interest-free period

Consolidation loan

If you qualify, you can pay off your high interest credit cards with a lower interest personal loan, reducing your interest payments and consolidating multiple debts into one payment.

• You'll need a very good credit score and a low debt-to-income ratio to qualify for a low APR
• There are usually fees associated with opening a new loan

Debt management plan (DMP)

Work with a credit counselor to consolidate your creditors into a structured repayment plan with reduced interest rates and no credit requirements. You can be debt-free seven times faster than paying on your own.

• Average interest rates for MMI DMP accounts are below 8%
• There are no credit score requirements, so even consumers with poor credit can access the same low interest rates
• Service includes financial counseling and ongoing support to ensure success

If you're struggling today, you're better off not waiting for a universal 10% interest cap. MMI offers free financial counseling 24/7, online and over the phone. We can help you understand your options and show you how much you can save with one of our nonprofit debt relief solutions.