Shares of the large credit card lender Capital One (COF 6.42%) traded nearly 6.5% lower, as of 12:25 p.m. ET today. The move came after President Donald Trump announced late Friday that he plans to impose a one-year, 10% cap on credit card interest rates.
Trump moves to improve affordability
Trump is clearly starting to think about the midterm elections, which will take place later this year. Affordability remains a significant issue in the U.S., as the cost of living continues to be expensive, particularly in housing.
Image source: Getty Images.
Trump said the plan will take effect on Jan. 20, but as of this writing, details remain limited, and it's clear the market is concerned. Credit card borrowers do not pay interest on credit card balances, so long as they pay off their full balance by a set date each month. However, if you don't pay off the full balance, an annual percentage rate (APR) applies to the unpaid balance, although some lenders offer a grace period.
NYSE: COF
Key Data Points
According to data from the Federal Reserve, the commercial bank interest rate on U.S. credit cards was just shy of 21% in November 2025, making the APR a significant factor once it comes into play. Most bank industry groups are opposed to the cap, claiming it will reduce credit availability and potentially harm economic growth, which is heavily driven by consumer spending.
Implementation will likely be difficult
I also believe a 10% rate cap would likely limit credit, particularly for those with lower credit scores. It could also reduce consumer spending. Credit card companies apply higher APRs to riskier borrowers, so if the maximum rate they can charge is cut in half, I think it will be difficult to extend credit to this cohort. The administration may also have a difficult time implementing this measure so hastily.
While I can't predict how the Trump administration will act, I find it unlikely that this interest rate cap will be implemented, or that it will last only a short period if it is. For these reasons, I see the sell-off in Capital One as a buying opportunity, although the stock could be volatile in the near term.
