Trump Proposes 10% Credit Card Rate Cap - Traditional Finance Shakes as Crypto’s Fixed-Rate Alternatives Shine

Wall Street's credit card gravy train just hit a political speed bump. A proposed 10% interest rate cap—yes, you read that right—threatens to upend a multi-billion dollar revenue model built on consumer debt.

The Old Guard's Achilles' Heel

Traditional lenders are scrambling. Their entire profit structure leans on those punishing APRs that climb into the 20s and 30s. A hard ceiling slashes their margins overnight. It's a regulatory intervention that exposes the system's inherent fragility—when the government can cap your core product with a pen stroke, how solid is your business, really?

Decentralized Finance Doesn't Ask for Permission

Meanwhile, in crypto, smart contracts execute as coded. Fixed-rate lending protocols like Aave and Compound offer transparent terms set by code, not congressional whim. Borrowers know the rate upfront; it's immutable unless governance votes change it. No surprise legislation, no overnight caps. Just predictable, programmable finance.

The Ironic Twist

Here's the kicker: the very volatility critics attack in crypto is now mirrored in traditional policy risk. A single announcement can crater a bank's future earnings. Crypto's volatility is in the price; TradFi's is in its foundational rules. Which is riskier?

A cynical take? This is classic political theater—proposing a popular cap that will get watered down by lobbyists, leaving banks slightly bruised but still charging 24.99%. It's a reminder that in legacy finance, the house always wins, even when it pretends to lose.

The real innovation isn't just lower rates; it's rates that can't be changed by tomorrow's political winds. That's the decentralized promise—and it's looking more attractive by the headline.

Americans’ credit card debt surpasses $1.23 trillion

According to a post on the Truth Social app, U.S. President Donald Trump blamed his predecessor, President Joe Biden, for the rising cost of living across the U.S. and for high credit card fees imposed by U.S. credit card companies. Trump called for a one-year cap on credit card fees at 10%, effective as of January 20, coinciding with his first anniversary since returning to office. The President, however, has not yet revealed the mechanism for implementing the proposal. 

The proposal contradicts the President’s previous stance, as his administration scrapped the $8 cap last year, which was imposed by the Biden administration. The Biden’s $8 cap WOULD have saved American citizens roughly $10 billion in annual fees, cutting the rate from roughly $32, according to the Financial Protection Bureau. A Texas federal Judge initially blocked the Bidens’ proposal until Trump later joined in to block the initiative through the Consumer Financial Protection Bureau.

Senator Elizabeth Warren has called the proposal a joke, noting that Trump doesn’t care about affordability. 

“Begging credit card companies to play nice is a joke. I said a year ago if Trump was serious, I’d work to pass a bill to cap rates. Since then, he’s done nothing but try to shut down the CFPB. Trump doesn’t care about affordability.”

–Sen Elizabeth Warren

According to the Federal Reserve Bank of New York, Americans owed over $1.23 trillion in credit card debt as of the third quarter of last year. An average U.S. household with a credit card owed roughly $10,563, based on another study by NerdWallet. Contrary to the Consumer Financial Protection Bureau’s action to bar Biden’s $8 cap, the institution noted that credit debt had far exceeded the cost of offering credit by 2023. 

Trump’s idea faces backlash from the banking sector

Senator Bernie Sanders has criticized Trump’s proposal, citing the President’s previous campaign promise to cap interest rates. He accused Trump of deregulating big banks and charging up to 30% interest on credit cards, noting that JPMorgan CEO Jamie Dimon made $770 million off that.

Trump’s idea has previously received support from several politicians, including Democratic Rep. Alexandria Ocasio-Cortez of New York and Republican Rep. Anna Paulina Luna of Florida. Luna noted that credit companies have abused working-class Americans by charging high interest rates, trapping them in almost insurmountable debt. Supporters of the idea have argued that credit card companies can afford to cut their rates and help Americans who are currently struggling with mountains of credit card debt. 

The banking industry has criticized Trump’s idea, noting that it would harm consumers and small businesses. According to the Bank Policy Institute, the American Bankers Association, the Consumer Bankers Association, the Financial Services Forum, and the Independent Community Bankers of America, the 10% cap would reduce credit availability and drive consumers toward less-regulated, more costly alternatives. 

Billionaire Bill Ackman echoed the bankers’ associations, saying that Trump’s idea is a mistake. If lenders don’t charge rates enough to cover losses and earn an adequate return, they will be forced to cut credit support for millions, who will eventually turn to sharks for support. 

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