Bank of America (BAC.N) is exploring the possibility of introducing new credit cards with a 10% interest rate, according to sources familiar with the matter. This consideration comes in response to President Donald Trump’s call for a cap on credit card interest rates. Similarly, Citigroup (C.N) is reportedly evaluating new card offerings with a 10% rate as a potential solution to address the proposed cap. Citigroup has declined to comment on the matter. Bank of America is a multinational investment bank and financial services holding company headquartered in Charlotte, North Carolina. Citigroup is a multinational investment bank and financial services corporation headquartered in New York City.
Trump initially proposed a 10% interest rate cap earlier this month and reiterated his intention on Wednesday to seek congressional approval for a one-year implementation. The proposal has faced opposition from banking industry bodies, with executives cautioning that a broad cap could lead to reduced lending and hinder economic growth. However, some experts contend that credit cards generate substantial profits and offer scope for rate reductions.
Analysts suggest that implementing such a measure would necessitate legislation, which faces uncertain prospects in Congress. It has also been suggested that the industry might advocate for a compromise, introducing basic, no-frills cards at the 10% rate with limited benefits. An initial deadline of January 20 had been set for U.S. banks to implement the cap, first suggested by Trump, though the White House had not released details on how this would be enforced.
Bank of America CEO Brian Moynihan has voiced concerns that the proposal would limit access to credit, while Citigroup’s CEO Jane Fraser has warned of potential repercussions on spending and the broader economy. Credit cards remain a significant source of profit for banks, which impose high rates on these unsecured loans to compensate for the elevated risk of default.
