For consumers struggling with high-interest credit card debt, a recent proposal from the Trump administration offers potential relief: a one-year cap on credit card interest rates at 10%. Yet, experts express skepticism about its long-term impact and its chances of passing in a Congress controlled by Trump's own party.
Vivian Tu, founder and CEO of Your Rich BFF, explained who might benefit from the plan and who could be worse off. In a recent video, she used snacks as props to illustrate three main types of credit card users.
People who pay their balance in full and on time, represented by Oreos, avoid interest altogether, so a rate cap would have little impact on their finances. Those carrying debt but actively paying it down, shown with chili crisps, could see meaningful relief from lower rates. "I'm all for it. It'd be a huge benefit," Tu said.
For people deep in debt and starting to miss payments, symbolized by peanut butter and chocolate, the situation is more complex. Tu described credit cards as "a lesser of two evils" for these users, who might otherwise turn to payday loans. Credit card companies factor default risk into high interest rates.
"If credit card companies can't make up the losses through interest payments, they'll likely just cancel the credit cards of millions of 'less creditworthy' borrowers," Tu said. That could force some toward loan sharks or payday loans.
Banking industry representatives have pushed back on the proposal. Jeremy Barnum, CFO of JPMorgan Chase, warned that a cap could have ripple effects across the economy. "Specifically, people will lose access to credit — on a very, very extensive and broad basis — especially the people who need it the most, ironically," he said.
The American Bankers Association echoed concerns that a cap would drive consumers toward less regulated, more costly alternatives. However, PBS News reported that researchers found Americans could save billions in interest annually, though credit card rewards might be scaled back.
Political pushback has emerged, including from Trump's own party. House Speaker Mike Johnson told reporters that Trump and supporters "probably had not thought through" the possibility that credit card companies might stop lending. Still, the plan has surprising supporters like Sen. Elizabeth Warren, who encouraged Trump to fight for it in a private call.
Congressional approval is key, as the president lacks authority to regulate private companies' interest rates. Widespread congressional support remains uncertain.
Trump's announcement comes as Americans report growing concerns about affordability. CNN senior writer Tami Luhby noted that "experts have questioned whether his latest batch of ideas would really put a dent in the nation's affordability crisis."
Andy Laperriere of Piper Sandler expressed concerns that the cap could make it harder for Americans with lower credit scores to obtain credit cards, comparing Trump's approach to "proposing symbolic solutions."
Regardless of whether the cap becomes law, Tu said she's glad broader conversations about affordability are happening. "I'm glad we're starting to focus on consumer affordability," she said, calling for thorough research to ensure "a well-meaning decision doesn't do more harm than good."