Bank of America, Citigroup Eye 10% Credit Cards as Trump Cap Looms

Banks test a 10% card idea as politics hits consumer lending

Bank of America and Citigroup are considering new credit cards with a 10% rate as the Trump administration pushes a one-year cap on credit card interest, a policy shift that could reshape how lenders price risk and how investors value U.S. consumer finance. The move is an attempt to offer a product-based workaround without rewriting the entire industry’s pricing model, especially for unsecured borrowers where losses can spike when the economy slows.

The market reaction was positive on the day. Bank of America shares rose about 1.1% and Citigroup gained close to 2%, a sign investors see “new” and more targeted “cards” as a lower-risk approach than a broad mandated cap. The idea still depends on how Washington follows through, but it has already become a live variable for bank earnings, fintech competition, and credit conditions.

Trump’s cap looms after a missed deadline and a fresh push to Congress

Trump has called for a 10% ceiling on credit card interest rates for one year, pitching it as an affordability measure as household budgets remain stretched and delinquencies are rising for some subprime cohorts. A January 20 deadline previously floated for implementation passed without clear enforcement mechanics, leaving banks and markets to price uncertainty rather than a finalized rulebook.

The political risk is straightforward: a one-size-fits-all cap compresses spreads in the segment that historically subsidizes rewards programs, fraud protection, and losses. Even if the cap requires legislation, the headline alone can change behavior, pushing lenders to pre-emptively tighten underwriting or redesign product features.

The 10% rate card concept points to “no-frills” products and fewer perks

A key compromise route is a no-frills credit card offering. Under that structure, a 10% credit card rate could be paired with fewer benefits, lower reward payouts, and stricter eligibility standards. That keeps pricing closer to policy goals while preserving bank economics through reduced program costs and potentially lower servicing expenses.

It is also a segmentation strategy. Banks can keep premium products for high-credit customers while offering a simpler, controlled-risk product for borrowers most sensitive to monthly interest expense. That approach helps lenders avoid repricing the entire portfolio overnight, which is what investors fear in a hard-cap scenario.

Bank of America and Citigroup defend access as a second-order market risk

Executives have warned that a broad cap would likely reduce credit availability. Bank of America Chief Executive Brian Moynihan has said tight limits would restrict access, while Citigroup Chief Executive Jane Fraser has linked the policy risk to lower spending and weaker economic activity.

That matters because consumer credit is a transmission channel to growth. If banks tighten lines, consumers can pull back on travel, durable goods, and discretionary retail. That hits earnings across consumer-facing sectors and can feed back into credit losses, creating a loop that markets tend to reprice quickly.

Why credit cards are profitable, and why that attracts policy attention

Credit cards remain one of the strongest profit engines for large lenders because interest rates are high, balances revolve, and interchange fees add an additional revenue layer. Banks argue those rates reflect higher default risk on unsecured loans, while critics point to decades of elevated pricing and growing fee complexity.

From an investor angle, the fight is about bank net interest income and return on equity. A sudden shift to a lower cap could compress profitability across consumer portfolios, especially for issuers with large revolving balances. Even a targeted 10% product can become a margin story if it cannibalizes higher-yield accounts or forces broader price competition.

Fintech could gain if traditional banks tighten, even with new cards on offer

If big banks respond by offering stricter, lower-rate products, borrowers who do not qualify may drift toward alternative providers. That is where fintech platforms can gain share, particularly those built around installment financing, merchant-linked credit, or simplified approval models.

Markets have already been trading this possibility. Some investors see affordability-focused policy pressure as a tailwind for fintech names that can offer transparent pricing and faster onboarding, while traditional lenders face heavier scrutiny and less freedom to segment by risk.

Credit risk does not disappear at 10%, it moves into underwriting and limits

The core challenge is that a 10% rate changes the math of loss coverage. Credit cards price for expected charge-offs, fraud, servicing, and funding costs, plus a profit margin. If the rate is cut sharply, banks often respond by tightening approvals, shrinking credit limits, and reducing marketing to riskier segments.

That creates a market trade-off. Borrowers who qualify could benefit from lower interest costs, but the overall system could become less inclusive. For equities, that supports higher-quality issuers and rewards lenders with diversified fee income, while pressuring models that rely heavily on mass-market revolving credit.

Structured finance pricing could shift if spreads compress

Credit card portfolios are often packaged into asset-backed securities. A lower yield environment can ripple into ABS performance expectations, since investor returns depend on finance charge collections and loss coverage.

If the industry moves toward more 10% rate offerings, ABS buyers may demand different structures, higher credit enhancement, or shorter maturities to protect expected returns. That can raise funding costs for issuers and further influence which customer segments get offered credit.

Scenarios for markets: limited product rollout or broader pricing contagion

The base case is that Bank of America and Citigroup test limited 10% cards aimed at specific customer profiles, using the program as a response option while Washington debates the cap. Under this path, bank stocks can stay supported because earnings risk remains contained and product design is flexible.

An upside scenario for banks is that political pressure fades and the new cards remain a niche offering, improving headline optics without forcing a wider repricing of portfolios. That would keep net interest income intact and preserve the economics of rewards-heavy premium cards.

The downside scenario is broader contagion. If a cap becomes realistic or competitors match 10% pricing more aggressively, issuers could face margin compression across wider parts of the book. That would likely tighten credit supply, lift consumer stress indicators, and increase volatility in bank and consumer discretionary stocks.