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Americans now owe nearly $1.3 trillion in credit card debt, as some lawmakers push to cap interest rates at 10 percent in a bid to ease the financial burden on borrowers.
America's credit card debt has risen by $22 billion in the third quarter of 2026 and is $52 billion higher than a year earlier, the Federal Reserve Bank of New York said this week. The average rate charged by commercial banks on accounts that were assessed interest was 22.36 percent, according to separate Federal Reserve data. While balances increased, the share of credit card balances newly flowing into serious delinquency—at least 90 days late—was 6.87 percent in the third quarter, down from 7.05 percent a year earlier.
To tackle the climbing debt, President Donald Trump and several lawmakers have proposed a 10 percent cap on interest rates. Trump said in January this year that Americans are being “ripped off” by card companies charging rates of 20 to 30 percent or more. He called for the 10 percent rate to take effect January 20, but that deadline passed without the cap being implemented.
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Last week, Democratic Senator Elizabeth Warren said she is willing to work with Trump to get an interest limit in place.
"Look, President Trump himself said that he wants to reduce interest rates on credit cards to 10 percent," she said on CBS News’s Face the Nation. "I got the bill, I'm ready to go."
In January, Warren introduced the Empowering States’ Rights to Protect Consumers Act, which would allow states to enforce their own interest rate caps on credit cards and other consumer loans. Democratic and Republican lawmakers also last year introduced companion bills in the House and Senate which would temporarily introduce a cap, with lenders being forced to forfeit the interest if they violate a 10 percent limit.
The policy, if enacted, would reduce interest bills for credit consumers, but ultimately could have wider consequences for borrowers as lenders seek to recover lost revenue via other means.
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Winners
Credit card debt holders would be the clearest winners of a 10 percent interest cap, at least in terms of seeing their interest payments go down.
Professor Mariano Torras, chair of Adelphi University’s Department of Finance and Economics, said a household carrying $8,000 would see its annual interest bill drop from roughly $1,800 to $800 at a 10 percent rate.
"A 10 percent ceiling could meaningfully reduce that burden," he told Newsweek. "Existing borrowers with large balances would
gain most in absolute dollars, since the cap applies to whatever is outstanding."
A limit on interest would also likely mean borrowers can pay down their debt quicker, with less of their money going toward interest—provided they keep monthly payments at the same level.
Losers
Naturally, a lower interest rate would mean less revenue for lenders, with Torras saying the revenue loss would "undoubtedly be significant."
"Interest income is the core of the credit card business, and a 10 percent ceiling cuts deeply into it," he said. "I don’t think that lenders would take this lying down."
If such a cap were introduced, lenders would need to make up that revenue elsewhere, which would have downstream impacts on credit consumers.
"They might raise or reintroduce annual fees, for instance, or cut rewards programs—which, notably, are funded in part by the interest paid by the households least able to avoid carrying balances—tighten underwriting, reduce credit limits, and pull back from the subprime segment," Torras said. "Probably all of these."
Indeed, lenders have been adamant that the policy would negatively impact borrowers, even if it reduces interest payments.
"While such a proposal may sound appealing, the real-world result would be reduced access to safe, affordable credit for millions of Americans, particularly those with lower credit scores or limited credit histories," Sarah Grano, a spokesperson for the American Bankers Association (ABA), told Newsweek, saying banks would likely need to "reduce credit lines, close accounts or make other changes to manage the increased risk, leaving many consumers with fewer options and potentially pushing them toward less regulated, higher-cost alternatives."
Torras said those who lose access to mainstream lending could end up turning to costlier forms of credit like payday loans or buy-now-pay-later products. Some payday loans can charge interest rates of around 400 percent, according to the Consumer Financial Protection Bureau.
"Without aggressive regulation of such alternatives, the cap could inadvertently divert indebted households toward even more expensive credit," he said. "A ceiling on card rates is indeed overdue, but it is hardly sufficient on its own."
Contact Newsweek editors on this story: Ben Kelly and Emma Lee-Sang
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