Credit card APRs track the Federal Reserve because card issuers use a formula that ties directly to the Fed’s benchmark rate: Credit card APR equals the Prime Rate plus the individual bank’s margin. The Prime Rate itself sits approximately 3 percentage points above the Federal Reserve’s federal funds rate, which means any movement in Fed policy eventually ripples through to the interest you pay on your credit card balance. When President Trump announced in January 2026 that he wanted to cap credit card interest rates at 10%, he was essentially attempting to override this long-standing market mechanism—a promise that has not materialized four months later, with average APRs still hovering around 19.58%.
Trump’s specific proposal, announced on January 9, 2026, called for a temporary 10% cap on credit card interest rates, promising average cardholders approximately $900 in annual savings. By late January, Trump shifted tactics and called on Congress to enact the cap for one year rather than pursuing executive action. However, as of April 2026, the average credit card APR remains at 19.58%, with no widespread compliance from major card issuers and no congressional legislation enacted. This broken promise reveals a fundamental disconnect between political rhetoric and the economic forces that actually determine how much banks charge consumers for credit.
Table of Contents
- What Did Trump Actually Promise on Credit Card Interest Rates?
- How Credit Card APRs Are Mathematically Tied to the Federal Reserve
- Why Credit Card APRs Haven’t Fallen Even When the Fed Cut Rates
- Why Banks Aren’t Cutting Credit Card Interest Rates Despite the Fed’s Actions
- Can the President Actually Force Credit Card Companies to Cut Rates?
- What a 10% APR Cap Would Actually Mean for Different Consumers
- What Happens Next With Credit Card Interest Rates?
- Conclusion
What Did Trump Actually Promise on Credit Card Interest Rates?
On January 9, 2026, President trump announced his support for a temporary 10% cap on credit card interest rates, framing the proposal as consumer relief that would save the average cardholder approximately $900 per year. For context, someone carrying a $5,000 balance at the current average rate of 19.58% would pay roughly $979 annually in interest alone—so a reduction to 10% would nearly eliminate that burden. The announcement generated significant headlines and appeared to signal a shift in Trump’s economic priorities toward directly addressing consumer debt costs. Within two weeks, Trump’s approach changed.
Rather than issuing an executive order, he called on Congress to enact the 10% APR cap as temporary legislation lasting one year. This pivot was significant because it acknowledged a legal reality: presidents cannot unilaterally force private credit card companies to slash their interest rates without congressional authority. By April 2026, neither Trump nor Congress had made further moves on the proposal, leaving it in legislative limbo while credit card companies maintained their existing pricing structures. Bank of america briefly explored whether a temporary 10% cap was feasible but never committed to anything definitive, signaling that even large financial institutions were unwilling to voluntarily adopt such a dramatic rate reduction. This hesitation foreshadowed the broader challenge: changing credit card APRs requires understanding why those rates exist in the first place, which brings us directly to the Federal Reserve’s role.
How Credit Card APRs Are Mathematically Tied to the Federal Reserve
The Federal Reserve does not directly set credit card interest rates. Instead, it sets a target range for the federal funds rate—the interest rate at which commercial banks lend overnight reserves to each other. Credit card APRs are then built on top of this foundation through a straightforward formula: Credit card APR equals the Prime Rate plus the individual bank’s risk margin. The Prime Rate, in turn, sits approximately 3 percentage points above the Federal Reserve’s federal funds rate. To illustrate how this works in practice: If the Fed maintains its federal funds rate at 3.5%–3.75% (which it has held steady since December 2025), the Prime Rate typically sits at 6.5%–6.75%.
A bank then adds its own margin—typically ranging from 8 to 12 percentage points depending on the cardholder’s creditworthiness—to arrive at a final APR. A consumer with fair credit might end up with an APR of 15%–17%, while someone with lower credit scores could see rates above 24%. This explains why the current average APR of 19.58% remains so stubbornly high despite the Fed’s efforts to manage its benchmark rate. The limitation of this system becomes apparent when you consider what Trump’s 10% cap would actually require: It would effectively reduce credit card companies’ margins below what they currently earn. Currently, these margins are already providing substantial profit for card issuers; capping the total APR at 10% would mean the bank margin itself would drop to near zero, essentially eliminating the risk premium that lenders charge to cover defaults and losses.
Why Credit Card APRs Haven’t Fallen Even When the Fed Cut Rates
Despite the Federal Reserve’s rate cuts in late 2025, credit card APRs barely declined. Card companies ended 2025 charging an average APR of around 19.7%—only approximately 1 percentage point below 2024’s highs. This disconnect between Fed policy and consumer relief reveals a critical flaw in how markets function when debt levels are elevated and delinquencies are rising. The reason is simple: High consumer debt levels and increasing delinquencies make lenders reluctant to reduce APRs aggressively.
Banks maintain high rates to offset risk and protect their profit margins. In other words, even though the Fed has created an environment where borrowing costs *could* drop, credit card companies have chosen not to pass those savings along. This is the “pass-through problem,” and it directly undermines Trump’s promise. Even if Congress passed a 10% APR cap, banks would likely fight it in court or simply stop issuing new credit card offers—behavior we’ve seen before when regulations become too restrictive. A real-world example: Consumers who refinanced high-rate credit card debt into personal loans or balance transfer cards with lower promotional rates saw the advantage disappear as those promotional periods ended and banks reverted to standard 18%–22% APRs. The structural problem isn’t just the Fed; it’s that banks control the actual rates charged, and they have little incentive to reduce them when consumer defaults are climbing.
Why Banks Aren’t Cutting Credit Card Interest Rates Despite the Fed’s Actions
Credit card companies resist APR cuts for a straightforward reason: risk and profitability. As consumer debt levels rise and delinquencies increase, banks become more risk-averse, not less. They view high APRs as a cushion against potential losses. When a consumer misses a payment or defaults, the bank needs the high interest income from profitable accounts to offset those losses. Cutting APRs to 10% would eliminate this cushion entirely, making the credit card business far riskier for lenders. Consider the trade-off: A credit card company could choose to reduce APRs to 10%, which would immediately make credit cards more accessible to consumers and potentially increase volume.
However, it would also compress profit margins dramatically and expose the lender to greater losses during economic downturns. Most large banks have concluded that maintaining 18%–21% APRs is the safer financial strategy, even if it means disappointing consumers and defying a presidential pledge. Bank of America’s lukewarm response to Trump’s proposal—exploring the idea but refusing to commit—reflects this calculation perfectly. The limitation of any policy-based solution is that you cannot legislate profit margins out of existence. If Congress passes a 10% APR cap, banks have options: stop issuing credit cards, tighten credit standards dramatically, or reduce cardholder benefits. The promise of painless consumer relief ignores the reality that someone, somewhere, will bear the cost of lower lending rates.
Can the President Actually Force Credit Card Companies to Cut Rates?
Legally, the answer is no. Trump lacks the unilateral authority to force credit card companies to slash interest rates. The President can use various tools—executive orders, regulatory agency guidance, public pressure—but cannot override the pricing decisions of private corporations without congressional legislation. This is why Trump pivoted to calling on Congress in late January 2026, tacitly acknowledging this constraint. Congress theoretically could pass legislation capping credit card APRs, but this faces several obstacles. First, the credit card industry is politically powerful and would mount significant opposition.
Second, a rate cap would likely trigger legal challenges based on constitutional grounds regarding takings and regulatory overreach. Third, lenders might simply withdraw from the credit card market rather than accept razor-thin margins. The last time the U.S. attempted aggressive price controls on lending—during the Dodd-Frank debates and the passage of the CARD Act of 2009—the result was stricter credit standards and reduced access for subprime borrowers. A more aggressive cap at 10% would likely produce similar or worse outcomes. A warning worth noting: Advocating for price controls without addressing the underlying causes of high debt and delinquency rates can create unintended consequences. If a 10% APR cap is enacted but defaults spike, credit card issuers might exit the market entirely, leaving consumers with fewer borrowing options and forcing many toward payday lenders and other predatory alternatives.
What a 10% APR Cap Would Actually Mean for Different Consumers
The $900 annual savings figure Trump cited assumes an average cardholder with an average balance. Let’s look at real scenarios: A consumer with a $3,000 balance at 21% APR currently pays $630 annually in interest; at 10%, they would pay $300—a real savings of $330 per year. A consumer carrying $10,000 in credit card debt would save roughly $1,100 per year.
However, a consumer with a $500 balance and excellent credit already paying 12% APR would see no meaningful benefit from a 10% cap (they’d save $10 annually), highlighting how rate caps disproportionately help those with the highest balances and worst credit scores. The comparison reveals an uncomfortable truth: Rate caps help people who are already struggling with debt the most, but they provide little benefit to responsible borrowers. This explains why the credit card industry argues that caps unfairly penalize lower-risk customers to subsidize higher-risk ones, a claim that has some merit even if you believe rate caps are overall desirable policy.
What Happens Next With Credit Card Interest Rates?
As of April 2026, the Trump administration has made no moves to reintroduce the 10% APR cap proposal, and Congress has shown no interest in advancing such legislation. Credit card companies continue to charge APRs in the 18%–21% range, with no indication of voluntary compliance with Trump’s January announcement. Federal Reserve officials have indicated that further rate cuts are unlikely in the near term, meaning the Prime Rate will likely remain stable and APRs will remain elevated.
Looking forward, consumers should expect credit card interest rates to stay high as long as the Fed maintains its current 3.5%–3.75% federal funds rate target. The only paths to meaningful APR relief are either (1) Congressional legislation imposing rate caps, (2) economic improvement reducing consumer delinquencies and making banks more willing to compete on rates, or (3) consumers proactively managing debt by moving balances to lower-rate options or paying down principal. Trump’s promise has faded from the headlines, but the underlying problem—high interest rates on consumer debt—remains unresolved.
Conclusion
Credit card APRs track the Federal Reserve because banks use a formula that ties interest rates to the Fed’s benchmark rate plus their own risk margin. President Trump’s January 2026 promise to cap credit card APRs at 10% was premised on misunderstanding how much legal authority he actually possesses and how reluctant banks are to cut rates when consumer debt is high and delinquencies are rising.
As of April 2026, that promise remains completely unfulfilled, with average APRs still at 19.58% and no congressional action on legislation to impose caps. Consumers waiting for relief from high credit card interest rates should focus on immediate actions within their control: transferring balances to lower-rate cards if creditworthy, paying down principal aggressively, or consolidating high-rate credit card debt into personal loans. Betting on government mandates to solve the credit card APR problem has proven to be a losing strategy, and the next four years are likely to unfold much like the last four months—with political promises disconnected from economic reality.