Bank Stocks Crash on Trump’s One Year 10% Credit Card Rate Cap
Shares in major US banks and financial services companies fell sharply on Monday after President Donald Trump called for a one year cap on credit card interest rates at 10 percent.
Stocks most exposed to credit card lending led the decline. Capital One dropped about 6 percent in midday trading, while Synchrony Financial sank more than 8 percent. Credit cards account for a large share of revenue at both lenders.
More diversified banks also moved lower. Citigroup fell nearly 4 percent, while JPMorgan Chase and Bank of America each declined around 2 percent.
Payment processors Visa and Mastercard, which do not lend directly, also slipped by about 2 percent. Other financial firms were caught in the sell off, with American Express down 4 percent and Wells Fargo lower by roughly 2 percent.
Trump renews campaign pledge
Trump said in a post on his Truth Social platform on Friday that the cap would take effect on January 20, though he did not explain how it would be implemented or enforced.
“Effective January 20, 2026, I, as President of the United States, am calling for a one year cap on Credit Card Interest Rates of 10 percent,” he wrote. “We will no longer let the American public be ripped off by credit card companies.”
Speaking to reporters on Sunday, Trump said banks that failed to comply would be “in violation of the law,” although legal experts note that any cap would require approval from Congress.
Bipartisan efforts to limit credit card interest rates have surfaced repeatedly in recent years, including bills proposing a 10 percent cap, indicating some political appetite for reform even as banking industry opposition remains strong.
Industry warns of unintended consequences
Critics of the proposal argue that a strict cap would force banks to sharply reduce lending, particularly to borrowers with weaker credit profiles. Industry executives and analysts warn this could lead to widespread card cancellations, reduced consumer spending and a broader drag on the economy, where household consumption accounts for roughly two thirds of activity.
Banking insiders say a cap at that level would make large portions of the credit card business unprofitable, prompting lenders to scale back rewards programs, tighten approval standards and exit certain customer segments altogether.
Buy now pay later stocks volatile
Shares of buy now pay later companies initially rose on expectations that consumers might turn to alternative financing if traditional credit tightens. Those gains faded after the market opened.
Read More: Trump unveils 01 year cap on credit card interest rates, sparking backlash
Affirm Holdings fell more than 6 percent after climbing in premarket trading, while PayPal slipped about 1 percent.
Klarna chief backs interest cap
Klarna chief executive Sebastian Siemiatkowski voiced support for Trump’s proposal, arguing that traditional credit card models encourage excessive borrowing at high interest rates.
“I think Trump is wise here and is proposing something that makes a lot of sense,” Siemiatkowski told CNBC. He said credit cards incentivize consumers to carry large balances, increasing losses and disproportionately harming lower income borrowers.
While critics say buy now pay later services can also promote overspending, Siemiatkowski argued Klarna focuses on smaller purchases with fixed, interest free payments and real time approval based on current spending behavior.
He added that even consumers who do not use credit cards indirectly pay more for goods because merchants raise prices to cover card fees, while wealthier shoppers recoup that cost through rewards.
“This is the most effective income redistribution program in the world,” he said.
Analysts remain cautious
Analysts at UBS and Goldman Sachs warned that a 10 percent cap could backfire, limiting access to credit for millions of Americans and pushing borrowers toward less regulated and potentially more expensive alternatives.
Markets remain sensitive to further details, with investors watching closely for any signal that the proposal could gain traction in Congress or translate into formal legislation.
