Credit card rates in the United States are too high overall. With inflation currently about 3%, it seems outrageous that credit card interest rates are often 20% or more.
Trump's Plan
I hope Trump’s proposal to cap credit card rates at a maximum of 10% annually for a year is aimed at getting card issuers to voluntarily take steps to lower the usurious rates. An Associated Press article [1] is one of many that discuss Trump’s plan.
I feel it is a mistake if Trump plans to issue an executive order (or ask Congress to pass a law) literally requiring credit card issuers to have a maximum 10% annual interest rate.
That's the wrong approach.
Problems With Trump's Plan
A
basic principle of economics is that higher risk investments pay a higher rate
on average.
Many
credit card holders are good credit risks. A company could issue them a card
with a 10% interest rate or less and make a nice profit.
However,
other credit card holders are high risk for various reasons. If credit card
companies were forced to charge them a maximum of only 10% interest annually, the
card issuers would likely either cancel the cards or institute some other charge to compensate for the loss of interest income. Otherwise, the cards would be too risky, likely unprofitable.
If banks lose money, they can't stay in business. That's basic economics. Below is a photo of three economics textbooks I own.
In some case lenders refuse cards to persons who are poor credit risks. In other cases they compensate for the greater risk by offering cards with higher interest rates.
Unfortunately, those least able to pay the high interest are those most likely to be stuck with it.
And if their credit card is cancelled, they may be seeking payday loans or other methods of borrowing that contain higher costs than their current credit card interest rates that may be 18% to 30% or perhaps even more.
Credit Cards Are Profitable for Banks
Statistics can be interpreted different ways. Furthermore, it often takes a long time for the federal government to process and report data. Accurate current information is not available.
However, a November 2025 Federal Reserve report [1] indicated that credit card banks were more profitable in 2024 than in 2023.
Furthermore, it noted that
credit card issuing banks are generally more profitable than other banks,
because credit cards are relatively profitable for banks compared to other things.
I'm confident banks can cut rates and be profitable. But requiring a maximum rate of 10% for everyone isn't realistic.
Alternatives to High-Interest Credit Cards
Persons holding credit cards with high interest rates can seek out another card if they are a good credit risk. Search online or make phone calls to find the best deals.
But read the fine print on any card application about charges for transferring balances, interest rates increasing after an introductory period, annual fees, etc.
Persons with poor credit can seek to avoid adding new charges by cutting costs using food stamps and local food pantries, downsizing to a smaller house or apartment, getting help with medical bills, doing better preventive care, etc.
Taking on an additional part-time job to help pay down debt, doing day labor or odd jobs, and getting a debt consolidation loan are all possibilities.
Unfortunately though, those with much high-interest debt and low income often face tough choices. In many cases they also have poor health, with medical bills being a large part of their credit card debt.
Seeking help from friends, relatives, neighbors, and government benefits are some possibilities if they can't find lower interest rates or jobs to increase income.
Avoid Credit Card Interest If Reasonable
The Federal Reserve report cited earlier states that surveys indicate over 60% of credit card holders "report they nearly always" pay their balance in time to avoid paying any monthly interest charge.
Even without interest charges, banks make money on some cards by charging cardholders an annual fee.
Also, each time a credit card is used, the retailer who accepts it as payment pays the credit card company a service charge too.
I've been blessed to pay my credit card bill in full each month for many years. I'd love it if everyone could.
But I sympathize with those who can't. I remember years ago when I couldn't. Maybe this article helps in some way those facing that situation now.
[1]
Sweet, Ken and Seung Min Kim; “Trump
pushes a 1-year, 10% cap on credit card interest rates and banks balk”; Associated
Press; Updated 3:22 PM EST, January 10, 2026; webpage accessed January 11,
2026; https://apnews.com/article/trump-credit-cards-interest-rates-savings-banks-dba221f122789427c1c625ba873c9b71
[2]
“Report to Congress: Profitability of Credit Card Operations of Depository
Institutions”; Federal Reserve; November 2025; webpage accessed January 11,
2026; https://www.federalreserve.gov/publications/files/ccprofit2025.pdf
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