In a surprising and populist economic move, US President-elect Donald Trump called for a radical overhaul of American banking policies, demanding a cap on credit card interest rates at 10% annually. He made the announcement via his social media platform, Truth Social, specifying January 20th – the date of his official inauguration – as the starting point for this proposed change.
Details of the presidential invitation
In his post, Trump explained, “As President of the United States, I am calling for a 10% cap on credit card interest rates for one year.” He went further, adopting a more assertive tone toward financial institutions, stating, “Please be advised that we will no longer allow credit card companies to take advantage of the American people.” This statement came without any technical details regarding the legal mechanism that would be used to enforce this cap, whether through an executive order or legislation from Congress.
Economic context: Debt crisis and rising interest rates
This call comes at a time when American consumers are burdened with unprecedented debt. According to Federal Reserve data and reports from financial institutions, current interest rates on credit cards in the United States have reached record highs, averaging over 20%, and some approaching 30% for borrowers with low credit ratings. This surge is primarily due to a series of decisions by the US central bank to raise benchmark interest rates in an effort to curb inflation, which has plagued the global economy in recent years.
Expected impacts on the banking sector and consumers
From an economic standpoint, setting interest rates at 10% presents a significant challenge to the business model of banks and credit companies. Economists believe that this decision, if implemented, would lead to a sharp decline in bank revenues. As a predictable reaction, financial institutions might tighten their lending criteria, meaning that individuals with limited income or poor credit histories could find it extremely difficult to obtain new credit cards, as banks would consider the 10% return insufficient to cover the risk of lending to these groups.
Political and social dimensions
This proposal carries profound political implications, reinforcing Trump's image as a champion of the working and middle classes against the influence of Wall Street and large corporations. This approach aligns with his campaign promises to reduce the cost of living and improve the financial situation of American families. However, the most pressing question remains: how capable will the new administration be of passing this decision given the anticipated resistance from banking and financial sector lobbies, and whether this measure will be temporary, as stated (for one year), or a prelude to broader structural reforms in the American financial system?.
