Business
Commentary: Trump is demanding a 10% cap on credit card interest. Here’s why that’s a lousy idea
A few days ago, President Trump staked a claim to the “affordability” issue by demanding that banks cap their credit card interest rates at 10% for one year.
Actually, Trump announced that in effect he had imposed the cap, a claim that some news organizations accepted as gospel.
So let’s dispose of that misconception right off: Trump has zero power to cap interest rates on credit cards. Only Congress can do so.
The idea of a 10% rate cap has all the seriousness of bread-and-circuses governance.
— Adam Levitin, Georgetown Law
More to the point, his proposal, announced via a post on his TruthSocial platform, is a terrible idea. It’s half-baked at best, and harbors unintended consequences by the carload — so much, in fact, that the putative savings that ordinary households could see from the rate reduction might be diluted, or even reversed, by the drawbacks.
Still, the idea has so much consumerist appeal that it placed Trump in accord with some of his most obdurate critics, such as Sen. Elizabeth Warren (D-Mass.), who has been pressing to place limits on bank fees for years. Warren said she and Trump had a phone conversation in which they seemed to have talked companionably about the issue.
Trump’s announcement did have the salutary effect of placing the issue of financial services costs on the front burner, after its having languished for years. But it obscured the immense complexities of making any such change.
“Certainly this demonstrates a populist streak on both sides of the aisle,” says Adam Rust, director of financial services at the Consumer Federation of America. “But you can’t just write a tweet and upend a huge market.”
The market for credit cards is indeed huge. As of 2024, credit card debt in the U.S. exceeded $1.21 trillion. This is the most profitable line of business for many banks, producing $120 billion in interest income and $162 billion in fees, chiefly those the card issuers impose on merchants.
“Almost 30% of that is pure profit,” reported Brian Shearer of Vanderbilt University, a former official at the Consumer Financial Protection Bureau, in a 2025 study.
So it should come as no surprise that the entire banking industry has circled the wagons against a cap on credit card interest rates, especially one as stringent as 10%. On Jan. 9, the very day of Trump’s announcement, five leading bank lobbying organizations issued a joint statement asserting that a 10% cap would be “devastating for millions of American families and small business owners who rely on and value their credit cards, the very consumers this proposal intends to help.”
Among its drawbacks, the statement said, “this cap would only drive consumers toward less regulated, more costly alternatives.”
It’s tempting to dismiss the statement as the normal grousing of a big industry about a government regulation. Banks have acquired a certain reputation for profiteering from customers, especially less well-heeled customers, and playing fast and loose with the facts about their costs and profits. But the truth is that on this topic, they have a point.
Let’s take a look, starting with some basic facts — and misconceptions — about credit cards.
The credit card market is heterogeneous, segmented by income and more importantly by credit score. Those with the highest FICO scores typically get the lowest interest rates, but are also more inclined to pay off their balances every month without incurring any fees, even as their average balances are the highest.
About 40% of all users, including many with middling credit scores, pay off their balances monthly but use their cards for convenience, to access fraud protections provided by credit cards but not by other forms of credit, and to garner card rewards.
Interest fees aren’t the issuers’ sole source of revenue. Most revenue comes at the other end of the transaction, in interchange or “swipe” fees paid by merchants.
That’s why card issuers still cherish high-income transactors and shower them with rewards — the monthly balances of users in the 760-to-840 FICO score range vastly exceed those of other users, indicating that they’re generating correspondingly more in interchange fees from the merchants they patronize.
The average interest rate on credit cards reached 25.2% last year, according to a December report by the Consumer Financial Protection Bureau. It has steadily increased since 2022, mostly because of an increase in the prime rate, the benchmark for card issuers.
How did it get so high? Blame the Supreme Court, which in 1978 undermined state usury laws by ruling that banks could charge customers the usury rate of their home state rather than the rate in the customer’s state. That’s why your credit card may be “issued” by a bank subsidiary in Utah, South Dakota or Delaware, which have lax usury limits. The solution would be enactment of a nationwide usury limit, but that falls entirely within congressional authority.
So what would happen if Congress did place a limit on the maximum credit card interest rate — if not 10%, then 15% or 18%, as has been proposed in the past? Shearer contends that banks make such fat profits from credit card users at every FICO level that they could still earn healthy returns even at a 15% cap. Shearer estimated that a cap of 15% would produce more than $48 billion in annual customer savings “coming almost entirely out of bank profits.”
Other analysts are not so sanguine. “There is no free lunch here,” argues Adam Levitin, a credit market expert at Georgetown law school. Levitin argues that while issuer profits are large, their margins are not so large. He calculates that a 10% cap would make the general credit card business unprofitable, because there wouldn’t be enough headroom over the benchmark prime rate (currently 6.75%) to cover administrative costs and other overhead.
Issuers don’t have many options to preserve their profitability. So they’re likely to respond by shutting the door on low-income and low-FICO customers and ratcheting back credit limits.
“The effects will be devastating,” Levitin says. “Families that need the short-term float or the ability to pay back purchases over several months won’t have it. How will they pay for a new water heater when the old one goes out and they don’t have $3,000 sitting around?”
Many will be forced to resort to other short-term unsecured lenders — payday lenders, buy-now-pay-later firms and others that don’t offer the consumer protections of credit cards and would be exempt from the interest cap on credit cards.
“The idea of a 10% rate cap,” Levitin says, “has all the seriousness of bread-and-circuses governance.”
The availability of credit from alternative consumer lenders that don’t offer the statutory protections mandated for credit cards concerns consumer advocates.
A hard cap on interest rates “could create a sharp contraction in the kind of credit available in the marketplace,” says Delicia Hand of Consumer Reports. “It sounds good, but there could be unintended consequences, especially if you don’t think about what fills the gap,”
Alternative products aren’t regulated as stringently as credit cards. “Direct-to-consumer products can layer subscription fees, expedited access fees, and ‘voluntary’ tips in combinations that produce effective annual percentage rates ranging from under 100% to well over 300% — and in some documented cases, exceeding 1,000% when annualized for frequent users,” Hand said in remarks prepared for delivery Tuesday to the House Committee on Financial Services.
If an interest rate cap is too tight, all but the highest-rated customers might face higher annual fees and stingier rewards. Issuers are likely to squeeze merchants too. Big businesses — think Costco and Amazon — might be able to negotiate swipe fees down and eat the remainder instead of passing them through to consumers. But small neighborhood merchants might refuse to accept credit cards for purchases below a certain amount, or add a swipe fee surcharge to customers’ bills.
Other complexities bedevil proposals like Trump’s, or for that matter bills introduced last year in the Senate by Bernie Sanders (I-Vt.) and Josh Hawley (R-Mo.) and in the House by Reps. Alexandria Ocasio-Cortez (D-N.Y.) and Anna Paulina Luna (R-Fla.), capping rates at 10% for five years. Those measures have the virtue of simplicity — they’re only three pages long — but the drawback, also, of simplicity.
Among the open questions, Levitin observes, are whether the 10% cap would apply to all balances or just to purchases. If the former, it remakes credit cards into tools for “low-cost leverage for cryptocurrency speculation and sports betting,” because in today’s interest rate environment it’s cheap money.
Trump’s announcement, in particular, displays all the drawbacks of insufficient cogitation characteristic of so many of his ventures. Published on Jan. 9, it called for the cap to be implemented on Jan. 20, the anniversary of his inauguration: a mere 11 days to implement a change in a $1.21-trillion market with potential ramifications on a dizzying scale.
Since he doesn’t have the authority to mandate the cap by executive order, he’s in effect calling for the banks to make the change voluntarily. Given the impact on their profits, on the gonna-happen scale, that’s a “not.”
Adding to the sour ironies of this effort, Trump’s far-right budget director, Russell Vought, has been pursuing a vicious campaign to destroy the agency with statutory authority over the consumer lending industry, the CFPB — of which Trump appointed Vought acting director.
Vought also rescinded a Biden-era CFPB rule reducing credit card late fees to no more than $8 from as much as $41—further undermining Trump’s attempt to pose as a friend of the credit card customer.
Consumer advocates are pleased that the debate over card fees has placed financial services costs squarely in the “affordability” debate, where they belong.
There’s no question that capping card interest rates at some level could bring savings to consumers to maintain monthly balances — “revolvers,” in industry parlance. “It could be worth several bags of groceries a month, or a tank of gas,” Rust conjectures — “significant savings for millions of people.”
The challenge is finding “where the right level is, balancing risk and availability,” he told me. “That’s not clear at the moment.”
Child safety advocates say the massively popular gaming platform Roblox could be bad for kids.
Fairplay and the National Center on Sexual Exploitation have requested the Federal Trade Commission to investigate if the games on Roblox are designed to make kids spend an unhealthy amount of time and money on their screens.
Roblox’s core users are young kids.
In a letter submitted to the FTC, the groups argue that Roblox’s engagement-maximizing design features, virtual currency system, and voice and text chat communication features are inappropriate for the platform’s user base and pose a substantial risk of harm.
“Alone and in combination, these three components capitalize on young users’ developmental vulnerabilities, exploit their desire for authentic self-expression, monetize their lack of impulse control, and turn in-game purchasing power into a form of social status,” the groups noted in the letter submitted Thursday to the FTC.
Roblox allows the purchase of virtual assets — clothing and dance moves, for example — which can only be purchased with the platform’s in-game currency, Robux. The platform obscures the exchange rate between dollars and the in-game currency, leaving young players to navigate a complex system of fluctuating conversion rates that increases the amount of real-world money players spend, according to the letter.
For instance, players can receive more Robux per dollar by purchasing larger bundles of currency or buying a “Roblox Premium” subscription, making it harder for children to perform financial calculations on how much they are spending on the platform.
The letter pointed to instances of unexpected Roblox charges, as one parent discovered that his daughter spent more than $5,000 on Roblox without understanding that she was spending real money.
The letter also outlined examples of “scarcity marketing” techniques that increase demand through limited-quantity assets and time-based reward to drive sales of virtual items, driving a false sense of urgency. Some see it as a strong-arm sales technique that should not be used on children:
“Items only available for a limited time encourage both rapid purchases and returning to the platform frequently — sometimes multiple times per day — to avoid missing out on items,” the letter said.
A Roblox spokesperson said that the company “strongly disputes these claims. Our platform is designed to provide a positive, healthy and enjoyable experience — we build for fun and connection, not short-term engagement. While no system can be perfect, we have a set of safeguards designed to support a safe and civil environment, and clear policies for game creators that require fair treatment of players.”
The groups pointed out that third-party games developed on Roblox are designed to profit from in-game purchases, and have “gambling-like” engagement mechanisms such as lootboxes, in which players cannot see what’s inside until after they have purchased it — and the items vary in value.
“We have clear policies prohibiting both actual and simulated gambling, and a set of rules governing how game creators can use gameplay mechanics like paid random items,” the Roblox spokesperson said. “Most games on Roblox are free to play and no one is required to purchase Robux. In the first quarter of 2026, only 1.4% of our 132 million daily active users were payers on the platform.”
The letter also alleged that the voice and text chat features on the platform expose children to sexual content, and argue that recent changes to age checks have not eliminated opportunities for adult-minor contact.
Everyone will know more, he told me, when Quantica signs a contract with a tech company to use the facility. That announcement could come by the end of the year.
Besides, Mr. Peterson said, much of the apprehension over the data center comes from people who are afraid of A.I. more broadly, as if “Big Brother is going to take over,” he said.
Those people, he added, “have no role in this conversation.”
What Mr. Peterson could tell me now, he said, was that the project would have minimal impact on the land and the people who live nearby. And residents wouldn’t have to pay a thing for it. He offered no guarantees, but said the project would bring its own power — at least some of it from solar and natural gas.
Despite what opponents have been saying, and despite the information gleaned from data centers around the world, Mr. Peterson said the Broadview site would need “not that terribly much” water.
It will bring jobs, he said. Thousands of temporary workers could descend on Broadview for the construction. The number of permanent jobs would be 30, 40, 100 — he doesn’t know for sure. But he described them as good-paying jobs that would not require specialized training or a college education. Jobs like janitors, maintenance workers or security guards.
He likened it to “being a miner, but not having to grab a drill.” Generations of families could stay in Broadview because people would not have to move to make a living, as many are doing now. They could say, “Oh my gosh, I could push a broom and come home to my home in Lavina that I love — and my kids can do that?”
For anyone who doesn’t like the idea of living next to a data center, he added, “there’s probably a county up the road that doesn’t have one.”
He said the eventual deal would include a “community benefits package,” which could help Broadview pay for things like its problematic wastewater lagoon. The Montana Department of Environmental Quality issued the town a violation in March for longstanding issues at the site, demanding compliance. Remediation could cost millions.
After a 6½-year hiatus from theaters, “Star Wars” returns to the big screen this weekend with “The Mandalorian and Grogu.”
This time around, however, the franchise faces a much different universe than it did in 2019 when the last film came out. For one, theatrical attendance has fallen dramatically since “Star Wars: Episode IX — The Rise of Skywalker” grossed more than $1 billion worldwide in the pre-pandemic days.
Then, there’s Walt Disney Co.-owned Lucasfilm’s own trajectory. In the last few years, new “Star Wars” stories have come only via streaming series on Disney+. And since the service debuted in 2019, the San Francisco-based studio pumped out 13 shows, including “The Mandalorian,” which inspired the film, though others received mixed reviews.
Lucasfilm is also under new leadership, as veterans Dave Filoni and Lynwen Brennan are now co-presidents after George Lucas’ handpicked successor, Kathleen Kennedy, stepped down this year.
It all adds up to a crucial question: Can the nearly 50-year-old franchise still delight its longtime fans, while bringing in new viewers to help it endure?
“There’s a lot riding on this,” said Jeff Bock, box-office analyst at entertainment data and research firm Exhibitor Relations. “It’s close to a make-or-break strategic test … just to see if the modern ‘Star Wars’ is still viable theatrically.”
“The Mandalorian and Grogu” is expected to gross around $80 million in the U.S. and Canada for the four-day Memorial Day weekend, according to studio estimates.
That would rank among some of the top openings this year, including Amazon MGM Studios’ “Project Hail Mary” ($80.5 million) and Disney-owned 20th Century Studios’ “The Devil Wears Prada 2” ($76.7 million). Another big sci-fi installment, Warner Bros. Pictures and Legendary Entertainment’s “Dune: Part Two,” opened to $82.5 million in 2024.
But for a “Star Wars” movie, that’s considered low.
2019’s “The Rise of Skywalker,” for example, opened to $177 million, with 2015’s “The Force Awakens” and 2017’s “The Last Jedi” each debuting to more than $200 million. The $84-million opening for 2018’s “Solo: A Star Wars Story” was considered a disappointment at the box office.
To be sure, theatrical expectations have changed dramatically since the pandemic, which altered moviegoers’ habits and trained many to wait and watch films at home.
“The Mandalorian and Grogu” also stems from a streaming series and does not continue the story line of the traditional “Star Wars” saga films that follow the Skywalker family. (The movie’s reported production budget of $166 million also makes it cheaper than its predecessors.)
And for Disney, box-office revenue will not be the only indicator of this film’s success.
Director Jon Favreau, left, and Pedro Pascal on the set of Lucasfilm’s “Star Wars: The Mandalorian and Grogu.”
(Nicola Goode / Lucasfilm Ltd. / Disney via Associated Press)
The company expects the movie will boost other parts of its business, including streaming, its gaming collaboration with Fortnite and the all-important theme parks, where the film’s main characters appear at the Star Wars: Galaxy’s Edge-themed land, and the Millennium Falcon: Smugglers Run ride has been overlaid with a “Mandalorian and Grogu” storyline.
Then of course, there’s merchandise. (Famously, fans rushed to buy items of Grogu — known colloquially as Baby Yoda — after “The Mandalorian” show debuted in 2019, though products didn’t arrive for months. Once available, 13 million Grogu toys were sold in the two years after they were released, Disney has said.)
“It’s not using cinema in the way ‘Star Wars’ used cinema before,” said Carmelo Esterrich, a professor at the school of communication and culture at Columbia College Chicago, who has written about how “Star Wars” is a reflection of American culture. “It’s using the franchise of television and the power machine of Grogu to bring it to the big screen.”
Grogu’s appeal highlights an important goal for the franchise: expanding beyond its original fan base to new audiences. Although “The Mandalorian and Grogu” builds on storylines from the streaming show, the film was designed to be accessible to viewers who had never watched it.
“I hope that our excitement and joy and love of ‘Star Wars’ translates to a new generation of fans seeing it, experiencing it the way we did for a long time,” director Jon Favreau told an audience in April at the CinemaCon trade conference during a presentation about Disney’s film lineup.
Early ticket sale tracking indicated strong interest from older men, who have historically been the core audience for “Star Wars” films. But after an extensive marketing campaign, Disney’s studio estimates now show audiences are younger, with more families and women represented.
To date, “The Mandalorian” is still the most popular Disney+ series. The show, which has run for three seasons, has won 15 Emmys, including for sound mixing and special effects. The critical and fan response, as well as the opportunity to explore new characters’ backstories, led Lucasfilm to choose this show to spin off into a movie, according to sources close to the studio.
Since the launch of the platform in November 2019, “The Mandalorian” and other “Star Wars” titles such as “The Acolyte” and the second season of “Andor” have seen relatively high audience demand, according to an analysis by Parrot Analytics, a firm that tracks streaming data. Despite several big hits, the average demand for live-action television series set in the galaxy far, far away have shown a slight downward trend over time.
In contrast, demand for live-action series from Disney-owned Marvel Studios has held stable since the premiere of its first streaming show, “WandaVision.” Though Marvel’s television offerings outnumber those of “Star Wars,” overall audience interest in the superhero shows is less than the biggest “Star Wars” hits and more comparable to some of Lucasfilm’s lesser-hyped titles, including “Skeleton Crew,” according to Parrot Analytics.
In the end, “The Mandalorian and Grogu” needs to keep audience interest in “Star Wars” on the big screen. Next year, Lucasfilm will release “Star Wars: Starfighter,” a film starring Ryan Gosling and directed by Shawn Levy of “Deadpool & Wolverine” that has generated great interest, particularly given Gosling’s turn in “Project Hail Mary.”
“This is a safe reentry point,” Bock of Exhibitor Relations said of “The Mandalorian” movie. “If Grogu can bring in the families and if ‘The Mandalorian’ continues to bring in the audiences of the old movies, maybe they can bridge these generations like classic ‘Star Wars’ once did.”
-
Finance1 minute agoCare New England eliminates 30+ positions, citing financial strain
-
Fitness8 minutes agoAt 55, Zoe Ball relies on NEAT exercise to stay fit without the gym – here’s how to make it work
-
Movie Reviews20 minutes ago‘Madame’ Review: A Working-Class Frenchwoman Looks After a Saudi Prince’s Mistress in This Smart and Nuanced Debut
-
World32 minutes agoEnhanced Group Shares Tumble After PED-Friendly Opener
-
Culture1 hour agoCan You Match the Places These Authors Lived With Settings in Their Books?
-
Lifestyle1 hour agoWhy the French Open is named after Roland Garros, who didn’t play tennis
-
Education1 hour agoVideo: The Very Best Veggie Burgers
-
Technology2 hours agoGoogle Health is here, but a lot of people want their Fitbit app back instead
