By Elizabeth O'Brien
President Donald Trump's proposal to cap credit card interest rates at 10% would likely lead to a reduction in rewards, especially for consumers with less-than-stellar credit.
Trump's proposal, announced in a Truth Social post, would cap credit card rates at 10% for one year, starting on Jan. 20. Many experts believe Congress would have to pass legislation to enact the proposal, aimed at lowering borrowing costs for Americans.
Lawmakers' previous, bipartisan attempts to cap interest rates have not gotten much traction. But this time "feels a little different," says Matt Schulz, chief consumer finance analyst, LendingTree, and author of "Ask Questions, Save Money, Make More: How To Take Control Of Your Financial Life."
The stocks of credit card issuers fell Monday morning, indicating that investors are concerned this proposal opens the door to some kind of additional regulation and/or rate caps.
Airlines like Delta Air Lines and United Airlines also fell. The companies earn billions of dollars a year from rewards programs with Delta reaping $2 billion from American Express in the third quarter, for instance.
Capping card interest rates would trickle down to rewards because it would undermine banks' profits on card lending. Credit rewards are funded by various sources, including revenue from swipe fees and interest charges, Schulz says. A 10% cap would curtail interest revenue, and in response credit card issuers may be more selective about how they reward customers.
"The middle class of the rewards space could end up being shut down," Schulz says.
Issuers would likely continue to lavish perks on their lowest-risk borrowers. A report last fall from Vanderbilt University found that a 10% cap wouldn't affect rewards for customers with credit scores above 760. However, those with credit scores below that level would see a reduction as banks move to maintain profitability.
In all, Americans would save $100 billion a year on interest expenses at a 10% rate, according to Vanderbilt. But that cap would also lead a $27 billion reduction in rewards for customers with FICO below 760. Borrowers with higher credit scores would keep their rewards, the report said.
A 10% cap would also impact banks and card issuers differently, depending on their exposure to the subprime consumer.
Among consumer finance companies, the most impacted would be "private label" card companies such as Synchrony Financial and Bread Financial Holdings, according to Wells Fargo analyst Mike Mayo. Capital One Financial would also take a hit as a third of its card business is lower-end credit, he notes.
Least impacted would be American Express, given its relatively affluent customer base.
One takeaway from consumers: Use your points before they may lose value.
Rewards points are generally a depreciating asset, Schulz says. Inflation is eroding their value. And card issuers are looking for ways to squeeze more out of rewards programs, in some cases by raising fees, curbing ancillary benefits or requiring higher balances to buy things like an airline ticket.
Consumers with an opportunity to put their points to use are usually better off doing that than stockpiling them for the future.
Write to Elizabeth O'Brien at elizabeth.obrien@barrons.com
This content was created by Barron's, which is operated by Dow Jones & Co. Barron's is published independently from Dow Jones Newswires and The Wall Street Journal.
(END) Dow Jones Newswires
January 12, 2026 15:10 ET (20:10 GMT)
Copyright (c) 2026 Dow Jones & Company, Inc.
