US bank stocks declined sharply after President Donald Trump called for a one-year cap on credit card interest rates at 10%, raising concerns about profitability, credit access, and legislative feasibility across the financial sector.
Shares of major US lenders fell in early trading after the president urged credit card companies to comply with a proposed 10% rate ceiling by January 20. Capital One Financial Corp., the largest US card issuer, dropped more than 7%, while JPMorgan Chase & Co. fell over 2%. Other lenders also recorded losses, reflecting investor concern about the impact on card earnings.
Analysts warned that the proposal could erase a full year of profits from credit card businesses. Mike Mayo of Wells Fargo & Co. said a strict cap would undermine card economics and reduce incentives to lend. Market participants noted that credit cards generate some of the highest margins in consumer banking due to their unsecured nature and default risk.
Payment firms also moved lower. Visa Inc. and Mastercard Inc. declined as investors assessed the potential for lower transaction volumes and fee income if lending slows. Airline stocks slipped as well, given the importance of card partnerships to loyalty programs.
Banking groups responded with a cautious message. The Bank Policy Institute and the Consumer Bankers Association said they support affordable credit goals but warned that a 10% cap could reduce access for millions of households and small businesses. They argued that lenders would tighten underwriting standards to manage risk under lower pricing.
Several analysts echoed those concerns. Brian Foran of Truist Financial Corp. wrote that the severity of the proposal makes approval unlikely. Others said lower-income and subprime borrowers would face the greatest impact if banks cut credit lines or exit riskier segments.
Data from the Federal Reserve show US credit card balances reached $1.23 trillion in the third quarter, while average rates hover near 20%. Analysts noted that lenders rely on higher rates to offset defaults. A cap would compress margins and limit the ability to price risk, which could shift borrowers toward higher-cost alternatives outside the banking system.
Market strategists questioned whether the president has the authority to impose the cap without congressional approval. Analysts at Jefferies said the proposal likely requires legislation and faces long odds in Congress, given limited momentum and strong industry opposition.
International lenders also felt the pressure. Barclays Plc fell in London trading as investors assessed exposure to US card operations. Bloomberg Intelligence noted that any US cap would weigh on European banks with significant American consumer businesses.
Some segments gained. Buy-now, pay-later providers such as Klarna Group Plc and Affirm Holdings Inc. rose as investors anticipated higher demand amid tighter traditional card credit. However, analysts cautioned that broader effects could include weaker consumer spending if credit availability contracts.
With major banks set to report earnings this week, investors will watch management commentary for guidance on potential responses. Markets continue to price uncertainty as the debate over credit card interest rate caps unfolds.
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