Credit card stocks plunge after Trump calls for interest rate cap

[Financial News]


Trump’s announcement of a forthcoming “10% cap on credit card interest rates” dealt a direct blow to U.S. credit card company stocks on the 12th.
Trump had earlier posted on social media on the night of the 9th, after markets closed, demanding that, starting on the 20th—the first anniversary of his second presidential inauguration—credit card interest rates be capped at a maximum of 10% for one year.
While the stated aim was to ease Americans’ cost-of-living burdens, the move was widely interpreted as an attempt to win over voters ahead of the November 3 midterm elections.
Credit card company shares plunged as soon as trading opened on the 12th.
Capital One Financial Corporation fell 7.3%, American Express (AmEx) dropped 5.3%, and Bread Financial Holdings sank 12%. Synchrony Financial also plummeted 8.7%.
Shares of major banks, including J.P. Morgan, the largest U.S. bank, also slid sharply a day before their quarterly earnings releases.
J.P. Morgan fell 2.1%, while Citigroup Inc. slumped 3.4%.
With J.P. Morgan set to report its quarterly results on the 13th, the New York stock market will effectively kick off the fourth-quarter earnings season.
The fallout spread across the Atlantic to the United Kingdom.
Shares of Barclays PLC, a London-listed British investment bank seeking to expand into U.S. consumer credit, also fell 2.4%.
If Trump’s proposed 10% cap on credit card interest rates becomes a binding rule, it would be a major blow to banks, effectively stripping them of a lucrative source of income.
According to the Federal Reserve Bank of St. Louis (St. Louis Fed), outstanding U.S. credit card debt currently stands at about $1.1 trillion (approximately 1,613 trillion won), with an average interest rate of around 20%. This means large banks and credit card issuers collect roughly $220 billion (about 322 trillion won) a year in credit card interest alone. Because credit card interest is often calculated as daily compounding interest, late payments can lead to extremely high interest charges.
It remains unclear what kind of enforcement measures the Trump administration could actually take to impose such a cap, or even whether the executive branch has the authority to do so without congressional approval, but the proposal has nonetheless become a major source of anxiety for credit card companies.
Adding to their unease, Trump escalated his criticism of credit card companies on the 11th.
According to the Financial Times (FT), Trump told reporters aboard Air Force One on his way back to Washington, D.C., that he could impose sanctions on credit card companies. He warned that if they do not lower their interest rates to 10% by the 20th, “that will be a violation of the law,” signaling that the administration could move to take legal action. Trump added that “some credit card companies are charging interest rates of 28%, close to 30%.”
Banks counter that if credit card interest rates are capped, they may be forced to cancel cards held by lower-credit borrowers because of the increased risk. In that case, these borrowers would lose access to formal lending channels and be pushed toward loan sharks operating in lightly regulated corners of the market.
Jaret Seiberg, an analyst at TD Cowen, warned that an interest rate cap would not only restrict credit card lending but also expose banks to greater risk, harming the economy on both fronts.
Seiberg nevertheless predicted that United States Secretary of the Treasury Scott Bessent could move to exert pressure to actually push credit card interest rates down to 10% or below, in line with the president’s wishes.

dympna@fnnews.com Song Kyung-jae Reporter