The Trump Administration is again pressuring credit card issuers to cap the interest rates they charge card holders.
"James Dimon, lower your friggin' credit card interest rates," White House trade advisor Peter Navarro said Thursday on Bloomberg Radio. "You are a criminal the way you charge the American people at 22, 25 and 30% and the president wants you to lower that,"
You might recall that early in January President Donald Trump called for a one-year, 10% cap on credit card interest rates. He said the cap would become effective on Jan. 20, the one-year anniversary of his second inauguration.
"Please be informed that we will no longer let the American Public be 'ripped off' by Credit Card Companies that are charging Interest Rates of 20 to 30%, and even more," Trump wrote on X on Jan. 9.
Image source: Getty Images.
A cap on card rates would require Congress to act
No rate cap has been imposed, of course, as that would require legislation. And Congress watchers say that's unlikely. The powerful financial industry has already vowed to fight the proposal with every weapon at its disposal. Legislation to cap credit card rates introduced by Vermont Senator Bernie Sanders early last year stalled in Congress while the financial industry killed a similar effort by the Consumer Financial Protection Bureau to cap late fees on credit card rates.
Despite that, Navarro's statements sent share prices of the major card issuers lower last week. Here are the major card issuers and their one-week performance:
|
Bank |
One-Week Performance |
|---|---|
|
Bank of America (BAC 0.87%) |
Down 8% |
|
JPMorgan Chase (JPM +0.17%) |
Down 6.9% |
|
American Express (AXP 0.57%) |
Down 5.6% |
|
Capital One Financial (COF +1.30%) |
Down 7.5% |
|
Citigroup (C +0.18%) |
Down 9.9% |
|
S&P 500 index |
Down 1% |
Source: Author's calculations
These five stocks are clearly underperforming the broader market, as measured by the S&P 500 index.
Also, stocks of the two major card payment networks were also down for the week. Visa (V +0.21%) fell 3.6% and Mastercard (MA +0.04%) is off about 4.7%.
The interest rate outlook favors bank stocks now
In fact, bank and financial industry stocks should be heading higher right now due to the outlook for interest rates. The futures market was pricing in two quarter-percent rate cuts (0.25%) by the Federal Reserve in 2026 (as of Feb. 13). The Consumer Price Index data published the Bureau of Labor Statistics last week indicated that inflation continued to moderate in January, even more than expected. As a result, futures markets are now starting to price in a third cut this year.
That's good news for banks. When the Fed cuts rates, it pushes short-term rates down more quickly than long-term rates, leading to a steeper yield curve. Simply compare the falling short-term federal funds rate to the 10-year Treasury yield (the longer end of the curve), and you see that the difference between the two rates is widening.
This should help banks, because they borrow money from depositors at lower short-term rates and then lend it to consumers and businesses at higher long-term rates. So when the yield curve steepens -- short-term rates fall and longer-term rates remain higher -- bank profits rise.
So, a cap on credit card rates doesn't look likely, despite White House demands, while the rate picture for banks is suddenly looking even brighter. And now may be a good time to buy the dip in bank stocks.
