President Trump has spurred debate by calling for a 1-year, 10% cap on credit card interest rates. Trump argued that credit card companies have taken advantage of consumers and believes creditors should lower rates to help give consumers some financial breathing room.
While this proposal is specifically in the US, Canadians are wondering how such a rate cap south of the border could impact the financial system here. More specifically, many may wonder if such a policy could actually be implemented in Canada.
What Is Trump’s 10% Credit Card Rate Cap Proposal?
In a nutshell, Trump proposes to limit the maximum APR that credit card companies can charge on credit card debt to 10% for a 1-year period.
The goal is to ease financial strain on American consumers, especially those carrying high balances on revolving debt. This could potentially save consumers hundreds or even thousands of dollars a year in interest payments.
| What’s The Average Rate On Credit Cards? In the US, the average rate on credit cards is between 19.65% and 21.5%. In Canada, that figure hovers around 21.11%. |
The proposal is not yet law and still requires congressional approval. However, if it goes through, it would be implemented as of January 20, 2026.
Criticism From Financial Institutions
Financial institutions have pushed back, claiming that a cap on credit card interest rates could lead lenders to scale back how much credit they offer. In turn, this could slow consumer spending and leave consumers with fewer borrowing options, potentially pushing them to more expensive alternatives, like payday loans.
How The US Rate Cap Could Affect Canada’s Credit Card System
Even though the proposal is in the US, there’s a possibility that it could affect Canada in some way, given how close and interconnected Canada’s financial system is with that of the US. Here’s how:
1. Pressure On Canadian Banks To Justify High Interest Rates
If the US implements a 10% rate cap, Canadian consumers and advocacy groups would likely wonder how Canadian credit card companies can continue to charge sky-high rates of 20% or more. As such, Canada’s banks could face pressure to explain why similar rates are not offered in Canada.
This possibility alone could push Canadian banks to lower their rates on credit card products, just as they did with the criminal interest rate.
Learn more: New Criminal Interest Rate In Effect
2. Impact On Cross‑Border Banking & Credit Card Issuers
Many major credit card issuers operate in both Canada and the US, including TD Bank, RBC, and Scotiabank. If 10% rate caps are enforced, these companies may take measures that could include tightening lending standards and reducing rewards programs.
| What Could This Mean To Canadian Consumers? If credit card companies in Canada take various measures such as those mentioned, this could mean any of the following: – Higher annual fees – Reduced rewards value – Stricter approval requirements – Fewer premium card offerings |
Even if Canada doesn’t make any regulatory changes, consumers in Canada could still feel indirect effects.
3. Increased Market Competition
If US credit card companies introduce low interest credit cards to comply with a rate cap, Canadian consumers may demand similar products. This could cause Canadian banks to face stiffer competition. More specifically, they’d compete by offering the following:
- Lower-rate credit cards
- Hybrid cards with capped rates
- More transparent pricing
Would Canada Adopt A Similar 10% Cap?
The proposal and adoption of a credit card rate cap in Canada would likely face hurdles and pushback from industry professionals and advocates.
According to the Canadian Bankers Association, Canada’s credit card industry operates within a competitive and well‑regulated environment. They warn that imposing limits on credit card interest rates could restrict access to credit for both individuals and small businesses.
Further, there is concern that such caps might push consumers toward more expensive borrowing options and minimize the overall benefits consumers currently receive from credit cards. These are similar concerns expressed by US institutions.
As noted, when rates are lowered, banks often tighten lending requirements and raise annual fees, limiting access for borrowers with lower credit or incomes. So while capping credit card rates at 10% helps protect borrowers from predatory lending, it can also restrict access for non-prime borrowers, pushing them toward costlier options like payday loans.
Learn more: Might A Lowered Maximum Interest Rate Negatively Impact Credit-Constrained Canadians?
How Would The Proposal Affect Canadian Banks That Operate In The US?
Banks with US subsidiaries could see reduced profitability on American credit card portfolios. This might lead them to adjust fees, rewards, or lending strategies in Canada to balance overall performance.
Bottom Line
President Trump’s proposal to cap US credit card interest rates at 10% is a bold and controversial decision, though it has yet to become law. That said, it has already sparked debate both in the US and Canada. For Canadians — both consumers and bankers — the topic is a hot one and has people wondering if the same proposal could end up here. And even if it doesn’t, there could be a possible indirect ripple effect on the Canadian financial industry.
