Banks and financial services stocks slid Monday after US President Donald Trump called for a 10% one year cap on credit card interest rates. Capital One shares dropped 6% in early trading and Synchrony Financial lost 7%. Credit cards account for a large share of both banks’ business models. Citigroup lost 3%, JPMorgan Chase shed more than 1% and Bank of America fell 1%.
Visa and Mastercard, credit card processors that do not put any of their capital at risk, were both down about 3% each. Other financial services names were caught in the downdraft. American Express fell 4%, while Wells Fargo and Morgan Stanley declined about 1%.
The proposed cap would come into force on January 20, according to a post on Truth Social on Friday, though Trump did not provide details on how it would work. Trump wrote that effective January 20, 2026, as President of the United States, he is calling for a one year cap on credit card interest rates of 10%, echoing a pledge he made in the 2024 presidential campaign. He added the American public will no longer be ripped off by credit card companies.
Congressional approval required
A cap would require approval from Congress. There has long been interest in curbing fees, and bipartisan bills to cap credit card interest rates at 10% have previously been introduced, highlighting potential appetite for the move. When asked about his post, Trump said Sunday to reporters that if banks do not limit rates they would be in violation of the law.
Raymond James analyst Ed Mills said Trump does not have the authority to impose such a cap by himself and that a credit card rate cap would need approval from Congress. He added the legislative risk remains relatively low but clearly higher now that the president has called for this action. Jefferies analyst John Hecht said the proposal would likely be dead on arrival in Congress, noting this kind of plan has not had strong support in the past.
Industry warns of consequences
Critics said over the weekend that Trump’s plan, if enacted, would cause banks to pull back on lending, causing many consumers to lose access to credit and dampening personal spending, which accounts for roughly two thirds of all economic activity. Bank industry insiders say the White House proposal would have unintended consequences for consumers and the American economy.
The move would make large swaths of the credit card industry unprofitable, especially tied to customers with less than ideal credit profiles, according to banks and analysts. Rather than offer unprofitable products to consumers, the industry would simply stop offering access to customers with subprime credit and make other changes in card programs, including scaling back rewards, insiders say.
Truist analyst Brian Foran said the plan could make the credit card business unprofitable, adding that renewed focus on a 10% interest rate cap for credit cards is not great. He said such a cap would hit subprime credit cards the hardest. Foran said Synchrony Financial and Bread Financial would be worst affected because they rely mostly on credit cards. He said Capital One would be next in line for damage. For big banks, Foran said Citigroup has the highest exposure to credit cards, followed by JPMorgan Chase.
Alternative lenders could benefit
Consumers would either spend less or rely on other forms of unsecured debt, analysts say. Buy now pay later stocks were higher in early trading on the notion more consumers would be forced to use those lenders if banks pulled back on extending credit, but soon gave back those gains after the market formally opened. Affirm Holdings and PayPal fell about 1% after rallying in premarket trading.
Mizuho analyst Dan Dolev said the plan could actually help buy now pay later and personal loan companies. Dolev said companies like Affirm, Upstart, SoFi, Block and PayPal could benefit if banks reduce lending to risky borrowers. He noted average US credit card interest rates are around 20% and more than half of US consumers have a FICO score below 745, which usually means higher borrowing costs.
Raymond James analysts warned that banks would likely push back hard, saying a cap could cut off credit to the same borrowers that the President is trying to help. Analysts said a key thing to watch is how leaders of the House Financial Services Committee and Senate Banking Committee respond. Markets are now watching closely to see if Trump’s credit card plan gains political support or fades away.
Disclaimer: This article is for informational purposes only and does not constitute financial advice. The author and publication are not registered investment advisors and do not provide personalized investment recommendations.