Shares of major banks and financial services companies dropped sharply on Monday after U.S. President Donald Trump proposed a one-year cap on credit card interest rates.
In a post published Friday, Trump said he is calling for a 10% limit on credit card interest rates starting Jan. 20, 2026. The announcement rattled markets, particularly companies heavily exposed to consumer credit.
Bank shares lead the decline
Banks with large credit card businesses saw the steepest losses. Capital One and Synchrony Financial fell sharply in early trading, reflecting concerns that the proposed cap would significantly compress profits. More diversified lenders experienced smaller declines, with Citigroup, JPMorgan Chase, and Bank of America all trading lower.
Payment processors also slipped despite not holding consumer credit risk, while other financial firms, including American Express, Wells Fargo, and Morgan Stanley, posted modest losses.
Details remain unclear
Trump did not outline how the proposed interest rate cap would be enforced or structured, though he said it would be in place for one year. He reiterated a campaign promise to prevent consumers from being overcharged by credit card companies.
Any such cap would require congressional approval. Similar bipartisan proposals have been introduced in the past, suggesting some legislative interest, though none have advanced into law.
Industry warns of unintended consequences
Banking industry representatives and analysts warned that a strict interest rate ceiling could lead to reduced access to credit, particularly for consumers with weaker credit profiles. With margins compressed, lenders may limit card issuance, reduce rewards programs, or tighten approval standards.
Critics argue that these changes could curb consumer spending, which represents a significant share of overall economic activity. Others caution that borrowers may turn to alternative forms of unsecured debt if traditional credit becomes less available.
Ripple effects across consumer finance
Buy-now-pay-later companies initially gained on expectations that demand could increase if credit card access tightens, but those stocks later reversed course as broader market concerns took hold.
Markets remain focused on whether the proposal will gain traction in Congress and how any eventual legislation could reshape the consumer credit landscape.