Bank Stocks Sink as Trump Demands 10% Credit Card Rate Cap
Capital One falls 10% in premarket as President Trump calls for a one-year cap on credit card interest rates, threatening a key profit center for major lenders.
President Trump just put a target on Wall Street's most profitable product.
Bank stocks tumbled Monday after Trump called for a one-year cap on credit card interest rates at 10%—less than half the current industry average of 21%. Capital One dropped 10% in premarket trading. JPMorgan, Citigroup, and Discover all fell more than 2%.
The timing is brutal. Major banks report earnings starting Tuesday, and now they face an unexpected threat to the revenue stream that's been propping up profits as loan growth slowed.
What Trump Proposed
"Effective January 20, 2026, I, as President of the United States, am calling for a one year cap on Credit Card Interest Rates of 10%," Trump wrote on Truth Social late Friday.
He didn't elaborate on the mechanism. Executive orders can't unilaterally change contract terms between private parties and consumers. That would require legislation, which means this is either a pressure campaign to get voluntary compliance or a signal that congressional allies should draft a bill.
Neither scenario is good for bank stocks.
On Sunday, Trump escalated further, telling reporters that credit card issuers would be "in violation of the law" if they don't comply with the 10% cap. The legal basis for that threat remains unclear.
The Math Problem
Credit card interest is the crown jewel of consumer banking. JPMorgan's card business generated $18 billion in net interest income last year. Discover's entire business model revolves around the spread between what it pays depositors and what it charges cardholders.
A 10% rate cap would gut those economics. The Bank Policy Institute estimates that more than 14 million American households who carry balances would lose access to credit entirely—lenders simply wouldn't extend cards at rates that don't cover default risk for marginal borrowers.
That's the industry's argument, anyway. Consumer advocates counter that sky-high rates trap people in debt spirals and that banks would find a way to make money even with lower caps.
Political Strange Bedfellows
Here's the twist: Trump's proposal aligns almost perfectly with legislation from Bernie Sanders and Josh Hawley. The Vermont independent and Missouri Republican introduced a bill last year to cap credit card rates at 10% for five years.
Senator Elizabeth Warren, who rarely agrees with Trump on anything, said she'd work to pass a rate cap bill—but mocked the current approach. "Begging credit card companies to play nice is a joke," she said. "If Trump is serious, sign the bill."
The bipartisan support suggests this issue has political legs regardless of what happens with the immediate proposal. Banks may have to defend these rates publicly in a way they haven't before.
Earnings Week Collision
The worst part for bank investors is the calendar. JPMorgan reports Tuesday morning, followed by Wells Fargo, Bank of America, and Citigroup. Goldman Sachs and Morgan Stanley report Wednesday.
Analysts will ask about credit card profitability on every call. Management teams will have to address whether they'd comply with voluntary caps, what legislative risks they see, and how they'd reshape their consumer businesses if rates get regulated.
Those questions create headline risk even if the underlying numbers are solid.
Capital One is particularly exposed. Credit cards represent a much larger share of its business than for diversified banks like JPMorgan. The 10% premarket drop reflects that vulnerability.
The Bigger Picture
This is the second salvo in Trump's war on consumer lending costs in recent days. Last week, he announced mortgage bond purchases to push home loan rates below 6%. Now credit cards.
The pattern suggests an administration focused on consumer borrowing costs as an inflation-fighting tool. Whether these interventions work—or backfire by restricting credit access—remains to be seen.
For bank stocks, the uncertainty alone is damaging. These are businesses that price risk based on stable rules. When those rules might change via social media post, valuation multiples compress to reflect the new reality.