Financial experts are warning that Donald Trump’s 10% credit card rate cap could trigger a new subprime crisis. Following Trump’s announcement on Truth Social that the cap would begin on January 20, analysts pointed out that the policy makes it impossible to lend profitably to subprime borrowers.
Investor Bill Ackman led the warnings, arguing that if banks cannot charge higher rates to offset the risk of default, they will stop lending to people with bad credit. This would effectively shut millions of Americans out of the financial system. Ackman predicted that banks would cancel cards en masse to avoid losses, creating a liquidity crisis for vulnerable households.
The banking industry agreed, issuing a joint statement warning that the cap would “reduce credit availability.” They argued that the risk-based pricing model is essential for expanding access to credit, and that capping rates destroys that model. The industry groups predicted that the policy would hurt the very people Trump claims to help.
Senator Elizabeth Warren also criticized the move, calling it a “joke” without legislative action. She argued that Trump is ignoring the economic realities in favor of a populist soundbite. Warren challenged the administration to come up with a real solution to the debt crisis that doesn’t endanger the financial stability of the country.
Despite the warnings, the proposal has popular support. Senator Josh Hawley called it a “fantastic idea,” reflecting the widespread anger over high interest rates. As the debate continues, the fear of a new financial crisis looms large.