AILSA CHANG, HOST:
President Trump says that banks are ripping off Americans who use credit cards. Interest rates are at near-record highs, and Trump has called for a 10% cap on those rates starting today. But it's unclear if that will ever happen. NPR's Stephan Bisaha has been covering this and joins us now. Hi, Stephan.
STEPHAN BISAHA, BYLINE: Hey. Good to be with you, Ailsa.
CHANG: Hey. OK. So just catch us up here. What exactly has Trump said about credit card interest rates?
BISAHA: Well, he really did go after the banks on this. Here he is talking to reporters on Air Force One about banks and their credit card interest rates a couple weeks ago.
(SOUNDBITE OF ARCHIVED RECORDING)
PRESIDENT DONALD TRUMP: They've really abused the public. The credit card companies have totally abused - I'm not going to let it happen.
BISAHA: And those credit card rates, they are high. I mean, just five years ago, credit card rates were around 16% on average, and that was a lot back then, but they've only shot up more since then. In November, they were at 22%.
CHANG: Wow.
BISAHA: So yeah. So Trump recently wrote on Truth Social he wants a 10% cap on those rates. So dropping it down a lot. And during that Air Force One flight, he said, if banks do not comply with this cap by today, January 20, they will be in violation of the law. Now, we are at this deadline, but Trump has not announced how he'd actually enforce this, be it through executive order or something else.
CHANG: Yeah. Does the president even have the legal authority to require a change like this?
BISAHA: It's unclear what authority Trump would rely on to do this. He'd likely have to go through Congress. And there is a bipartisan Senate bill from last year that would cap rates at 10%. There's also another one in the House. Neither has seen much movement yet but, you know, Trump's backing could change that. The White House did put out this list today for what they're calling 365 wins in 365 days - today, of course, being a year since Trump's second inauguration. And No. 88 is Trump, quote, "directed credit card companies to cap interest rates," which does make this sound voluntary, at least so far.
CHANG: Sort of. I mean, to be fair, Stephan, why are credit card rates so high right now?
BISAHA: Well, like with any kind of interest rate in the U.S., one of the biggest factors is whatever is going on with the Federal Reserve, specifically the Fed's interest rates. That number has been high in recent years, and that's part of the reason credit card rates are also high. But, you know, the Fed did cut rates three times last year, and credit card rates, they are still near record numbers. So another reason banks give for these high rates are high levels of delinquencies. Basically, customers being unable to pay off their credit card debt. And that's a big risk for banks. 'Cause unlike a secured loan, like a mortgage, they don't get your house if you default. They just have to eat the loss.
But Brian Shearer says there's another factor. He is with Vanderbilt University and researched the consequences of a 10% cap. He says banks are incentivized to keep rates high because they make a lot of money on credit cards.
BRIAN SHEARER: This is the banks' cash cow. They make six times the profit on credit cards as they do everything else.
BISAHA: His research found a cap like this would save Americans around $100 billion, specifically Americans with credit card debt.
CHANG: OK. That sounds good but...
BISAHA: Yeah.
CHANG: ...Could a cap cause any problems for people with debt?
BISAHA: Yeah. Like, I asked Sara Rathner about that. She's with the financial advice website NerdWallet and is their expert on credit cards. And she said there could be serious consequences that could hurt some Americans. Banks might lower customers' credit limits, and that could hurt credit scores.
SARA RATHNER: The health of your credit and your credit score, you know, they can open a lot of doors for you, but they can shut some doors in your face, too.
CHANG: Well, what are the banks saying about this idea?
BISAHA: We haven't heard much from the banks doing this on their own. And one bank I spoke with said they're waiting for more information from the administration, but they said this is a bad idea and could lead to them having to cut off some risky customers that have a lot of debt.
CHANG: That is NPR's Stephan Bisaha. Thank you, Stephan.
BISAHA: Thank you. Transcript provided by NPR, Copyright NPR.
NPR transcripts are created on a rush deadline by an NPR contractor. This text may not be in its final form and may be updated or revised in the future. Accuracy and availability may vary. The authoritative record of NPR’s programming is the audio record.
