MW Why investors shouldn't panic yet about Trump's credit-card rate-cap proposal

By Emily Bary

On the surface, a 10% cap on APRs could mean a big hit to credit-card companies' earnings. But a Jefferies analyst thinks it's 'highly unlikely' that Trump gets his way.

Even with its more premium customer base, Amex could take a profit hit from a 10% cap on credit-card interest rates. But a Jefferies analyst is doubtful Trump's proposal will become reality.

If successful in enacting a one-year cap on credit-card interest rates, President Donald Trump could dramatically alter financial-sector earnings and business models. But investors shouldn't panic just yet, as one analyst sees his proposal as "highly unlikely" to come to fruition.

The president put out a surprise social-media post on Friday, saying he planned to follow through with a campaign promise for a 10% cap on credit-card annual percentage rates, starting Jan. 20.

Read more: Trump says he'll cap credit-card interest rates at 10% as Americans battle soaring debt

Jefferies analyst John Hecht, however, wrote Saturday that Trump doesn't have executive authority to make such a move on his own. And if he brings the issue to Congress, it would presumably be "dead on arrival," he said, given the likely spillover effects of a rate cap and a lack of support for similar initiatives in the past.

Hecht, echoing what banking-industry groups have said recently, warned that a 10% rate cap wouldn't mean that credit-card companies simply lend as usual but with lower rates. Rather, they would be expected to tighten lending standards, shutting out borrowers with lower credit scores. And as a result, that could drive "weaker retail sales and consumption across the entire economy, hurting GDP," Hecht noted.

Still, he thought through how Trump's proposal would ripple across the financial-services sector in the event it did get implemented, and crunched the numbers for American Express $(AXP)$, Atlanticus Holdings $(ATLC)$, Bread Financial Holdings $(BFH)$, Capital One Financial $(COF)$, Synchrony Financial (SYF). (Visa (V) and Mastercard $(MA)$ operate credit-card networks but don't actually lend to consumers.)

See also: Visa, Mastercard reach settlement with merchants. Will it shake up credit-card rewards?

American Express has a more premium customer base, but "at face value," a 10% cap could still reduce its net interest margin to an estimated 5.7% from 9.2%, according to Hecht's calculations on the metric - a measure of banking-industry profitability. The impact would be far more dramatic for other companies with more subprime exposure, as the chart below shows.

Doing the math is somewhat difficult, he conceded, since credit-card companies likely wouldn't sit still and would probably put in place new fees to help make up for lost revenue and earnings.

Investors could find out more about what to expect when financial companies hold their earnings calls in the coming days and weeks.

For now, Hecht expects the proposal to remain "an (unnecessary) overhang on the sector until some type of resolution occurs."

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-Emily Bary

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January 11, 2026 15:05 ET (20:05 GMT)

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