Bank Stocks Plunge After Trump Targets Credit Card Interest Rates

TLDR

• Donald Trump announced plans for a 10% cap on credit card interest rates beginning January 20, 2026, in a Truth Social post Friday.
• Bank stocks including JPMorgan, Citi, and Bank of America fell between 2-4% in Monday premarket trading following the announcement.
• Current credit card interest rates average around 20%, with some reaching 30% for consumers with lower credit scores.
• Financial analysts say Trump cannot impose the cap without Congress passing legislation, making the proposal unlikely to become law.
• Alternative lending companies like Affirm, SoFi, and Upstart could see increased business if banks reduce credit card lending to higher-risk borrowers.

President Donald Trump’s weekend announcement about capping credit card interest rates sent shockwaves through financial markets Monday morning. Major banking institutions saw their stock prices fall as investors processed the potential policy change.

Trump used his Truth Social platform Friday to declare his intention to limit credit card annual percentage rates to 10%. The proposed cap would begin on January 20, 2026, and remain in effect for one year.

The president wrote that Americans are no longer going to be “ripped off” by credit card companies. He pointed to current rates that typically fall between 20% and 30% as evidence of unfair practices.

Stock market reaction came swiftly when trading began Monday. JPMorgan Chase shares declined 3% in premarket activity. Citi Group fell nearly 4%, and Bank of America dropped 2.45%.

Payment Companies Also Feel Impact

The selloff extended beyond traditional banks to payment processing firms. Visa shares decreased 1.58% before markets opened. Mastercard stock fell 2% in early trading.

Wells Fargo lost 2% of its value in premarket sessions. Capital One experienced the steepest decline among major issuers, with shares dropping nearly 9%. American Express fell 4.4%, while Barclays slid 2.5%.

The proposal matches a campaign promise Trump made during his 2024 run for president. His Friday announcement did not include details about enforcement mechanisms or implementation procedures.

Analysts at Raymond James quickly weighed in on the proposal’s feasibility. The firm’s research team, led by Ed Mills, stated that presidential authority does not extend to setting interest rate caps. Any such limit would require new legislation from Congress.

The analysts rated the chance of congressional passage as “relatively low.” They acknowledged the risk level increased after Trump’s public endorsement. Financial industry groups are expected to lobby heavily against any legislative effort.

Credit Access Concerns Emerge

Banking experts raised concerns about reduced credit availability under a rate cap system. Financial institutions might tighten their lending criteria if unable to price loans according to risk levels. Borrowers with lower credit scores could find it harder to obtain credit cards.

Raymond James analysts predicted banks would argue the cap harms the consumers it intends to protect. They identified the chairs of key congressional committees as important players in any future legislative process.

Mizuho analyst Dan Dolev offered a different perspective on potential market effects. He suggested buy-now-pay-later services could gain customers if traditional banks pull back from subprime lending. Companies including Affirm, Upstart, SoFi Technologies, Block, and PayPal might see volume increases.

Dolev’s analysis noted that over half of U.S. consumers maintain FICO scores below 745. These borrowers typically face higher interest rates on credit cards. Average credit card APRs currently hover around 20% across the market.

Trump’s announcement represents his first major policy statement targeting the financial services industry since taking office. The proposal’s ultimate fate depends on congressional action and industry response in coming weeks.

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