President Donald Trump’s move to place a 10% cap on credit card interest could affect more than just banks. It could affect airlines and retailers and could drive consumers to other sources of lending, such as neobanks and payday lenders, which are significantly more expensive than credit card rates, Wall Street analysts said on Monday.
Card-issuing banks, meanwhile, could turn to other tactics like increasing card fees, reducing rewards, cutting expenses, and pulling back on lending to offset the impact of the interest cap, especially if the limit becomes permanent.
But there’s substantial doubt about whether such a cap will succeed, as numerous previous efforts have failed. Lawmakers have repeatedly tried to cap interest rates federally, since the Supreme Court rejected state-level credit card rate caps in 1978, Morgan Stanley analyst Jeffrey Adelson pointed out in a note to clients.
“The gross revenue implication for card lenders would be a material negative (pre offsets), however enforcing such a cap is likely a challenge and has failed in the past,” Evercore ISI analysts led by John Pancari and Glenn Schorr said in a note to clients.
The Bank Policy Institute, American Bankers Association, Consumer Bankers Association, Financial Services Forum, and Independent Community Bankers of America issued a joint statement over the weekend, saying the executive order would reduce credit availability and drive consumers toward less regulated and more expensive options.
“We think the probability is low, but since the administration has demonstrated intent, we will keep close tabs,” KBW analyst Sanjay Sakhrani wrote in a note to clients. “We doubt the regulators have authority to impose any type of fee cap, and Congress would need to act.”
As it stands, Trump’s edict puts the 10% rate cap in place for one year, which would be manageable for most card-issuing banks, according to equity analysts. A more permanent cap, though, would “sharply hit EPS at most exposed card names, drive less credit for nonprime consumers, reduce card rewards, raise fees, cut costs,” Morgan Stanley’s Adelson said.
“In an economy that is about 70% driven by consumer spending (of which credit card spending represents a little over 20%), it’s clear that any pullback in lending by card issuers could result in potential knock-on effects to the economy,” KBW analyst Sanjay Sakhrani wrote in a note to clients.
He points to the airline and retail industries, which rely on credit card-related revenue. Furthermore, as credit is tightened, consumers will have to turn to other lenders, including neo banks and payday lenders, he said.
“The real issue is the growing pressure since the pandemic from high inflation, increased concentration which results in heightened pricing power, and massive divergence in income/wealth between higher end and lower end consumer segments, with even the middle income segment getting marginalized,” J.P. Morgan analyst Vivek Juneja wrote.
Credit card rates surged as the Federal Reserve boosted rates in an effort to push down inflation. That increase isn’t the main reason for the affordability crisis, Juneja said. “A temporary one-year cap would not alleviate the problem — it would likelyworsen it longer term in our view,” he said.
Among the money center banks, Citigroup (C) has the biggest share of credit card loans, at 23% of total, Juneja noted, followed by JPMorgan Chase (JPM), Bank of America (BAC), U.S. Bancorp (USB), and Wells Fargo (WFC). KBW estimates that Citi (C) 2026 EPS would drop by ~10%. JPM, BAC, WFC and USB would see more modest impacts of -1% to -4%, Sakhrani added.
Morgan Stanley sees significant hits to credit card company book value, with names like Bread Financial (BFH), Synchrony Financial (SYF), Capital One Financial (COF), and American Express (AXP) seeing book value falling as much as 20%-40% under a temporary cap.
“Under simplistic assumptions, the hit to card yields with no offsets would more than eliminate earnings at BFH, COF, & SYF, reduce AXP by 80%, and C by 60%,” Morgan Stanley’s Adelson said. “However, we would expect the industry to respond with meaningful strategy changes, including: less credit extended to the lowest FICO consumers (benefitting provision/NCOs), higher fees, lower credit card rewards, and cutting expenses elsewhere.”
Evercore ISI had a similar conclusion. “Our revenue sensitivity analysis points to 60-70% headwinds at the most NII-concentrated card lenders and 10-30% at the more diversified card lenders,” Pancari and associates said. “Revenue impacts at the universals and regionals are more manageable in the low-single-digit to high-single-digit range.” Similarly, that assessment does not include offsets that lenders would likely pursue.
The amount of risk clearly showed up in stock market action on Monday, with the stocks of lenders that have lower credit score borrowers falling the most. Bread Financial (BFH) stock sank 10% in midday trading, Synchrony Financial (SYF) slid 8.1%, and Capital One Financial (COF) dropped 6.3%.
Among the large banks, Citi (C) fell 3.4%, JPMorgan (JPM) slipped 1.7%, Bank of America (BAC) was off 1.4%, Wells Fargo (WFC) dipped 1.7%, and U.S. Bancorp (USB) descended 2.3%.
J.P. Morgan analyst Richard Shane, who covers consumer finance names, sums it up: “At this point, we view this as a high-severity, low-probability risk likely subject to significant legal challenges. Consequently, we have not changed our fundamental outlook, but highlight increased uncertainty across our sector that is likely to weigh on multiples.”
The firm’s base outlook assumes low single-digit returns for its consumer finance coverage in 2026, “with modest asymmetric risk to the downside.”
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