In response to Trump! Bank of America and Citibank are considering launching new credit cards with interest rates as high as 10%.
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Bank of America and Citigroup are studying feasible options as an “olive branch” in response to U.S. President Trump’s proposal—to cap credit card interest rates at 10% within a year.
According to sources cited by the media, both banks are considering launching credit cards with an annual interest rate of 10% as one potential solution.
Earlier this week, Trump stated he would ask Congress to advance this proposal, making it clearer to financial institutions the specific path he intends to take. Multiple bank executives have publicly opposed this interest rate cap, stating that it would force lenders to reduce consumers’ credit limits. JPMorgan Chase CEO Jamie Dimon said that an interest rate cap would have “catastrophic consequences” for the U.S. economy.
In recent years, credit card interest rates have remained above 20%. Lawmakers have targeted these high rates, viewing them as a way to alleviate consumer financial pressure. Some studies indicate that setting a 10% cap could save consumers at least $100 billion in interest expenses annually.
Some banking executives have publicly expressed their agreement with Trump’s focus on “affordability,” and the solutions currently under discussion are a way for banks to cooperate with government efforts to reduce consumer costs.
Kevin Hassett, Director of the National Economic Council, previously suggested that lenders might voluntarily introduce new “Trump cards,” and said the government is in discussions with major banks. Last week, Bilt launched three new credit cards with a 10% interest rate cap within one year, though this rate only applies to new purchases.
Compared to modifying the terms and conditions of existing credit cards, launching new products would be an easier way for banks to meet Trump’s requirements. In addition, when setting the credit limits and reward mechanisms, issuers take potential interest income into account, so if a card’s APR is adjusted, it would likely necessitate changes to other attributes of the product as well.
With a 10% interest rate, if Bank of America and Citigroup issue such new cards, they would be more attractive to consumers who often carry balances, but banks may not be able to offer rich rewards or high credit limits as they do with high-interest credit cards. In fact, many issuers—including Bank of America and Citigroup—already offer promotional rates as low as 0% for limited periods.
On Thursday afternoon during New York trading, Bank of America shares rose about 1.2%, and Citigroup rose 1.9%. The shares of some payment companies and issuers also climbed, with American Express up about 2.4%, and Capital One Financial up 2.5%.
On the same day, Bank of America CEO Brian Moynihan said a 10% interest rate cap would dampen consumer spending, but also noted the bank has been communicating with the government on the issue. “We are working very hard. We are trying to come up with a solution.”
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