Credit unions and credit union advocacy groups have been quick to respond to President Trump’s claim that starting January 20th, he will cap credit card interest rates at 10% for one year. The news was posted last week to the President’s Truth Social account, but no legal action has thus been taken to move forward with it. Still, the financial services industry has responded with gusto, vehemently opposing the proposal.

While supporters claim the move would save Americans billions in interest for the year (experts estimate a total amount of $100 billion would be saved), critics state that the limit would harm lower-income families and make credit even more difficult to access for those who need it most. The result would be lower credit limits, less spending, and a harmed economy. Scott Simpson, President and CEO of America’s Credit Unions, wrote to the President over the weekend, urging him to reconsider.

“Credit unions were founded as the original consumer protectors, and that mission still shows up in the real-world value they deliver every day. Their members consistently benefit from the lowest rates in the marketplace, roughly half the average APR charged by other issuers, which translates into meaningful, measurable savings for working families. That’s affordability people can feel in their financial well-being,” said Simpson. “A 10% interest rate cap would be devastating for credit union members. While we appreciate the President’s desire to increase affordability, the plain truth is that capping rates at 10% does not make credit more affordable, it makes it unattainable for millions of working Americans because financial institutions will not be able to offer credit cards to most consumers at a 10% rate. We will continue to work to ensure this policy does not harm the very people the President intends to protect.”

America’s Credit Unions followed up with another letter on Monday, including key data points on how harmful the limit would be, noting that:

• “Federal Reserve data shows that 37% of Americans would struggle to cover a $400 emergency expense from their income or savings alone. Crucially, of those households, over 40% said they would cover a $400 emergency by borrowing on a credit card;
• 47 million “subprime” borrowers (effectively one-third of consumers) would be cut off from mainstream credit cards under a 10% interest rate cap; and
• Consumer spending is the engine of the American economy, accounting for roughly 70% of U.S. GDP. Purchase volume on consumer credit cards totaled $3.6 trillion in 2024, up from roughly $2.2 trillion in 2020, and accounted for 12% of the U.S. economy. Retailers of all sizes, including small businesses on Main Street, would see a significant decline in sales under a rate cap as consumers lose access to affordable credit.”

With the goal date for the cap to be imposed only a week out, decisions will have to be made very quickly, one way or another. While it’s possible the 20th will come and go with no action taken, credit unions should stay on the safe side and start preparing for the possibility.