US Financial Stocks Drop as Trump Proposes Credit Card Interest Rate Cap

U.S. financial stocks fell sharply in early trading on Monday after President Donald Trump proposed a one-year cap on credit card interest rates, putting pressure on major banks and lenders. The proposal, announced last Friday, suggested a 10% maximum interest rate starting January 20, though Trump did not specify how the limit would be enforced.

Top lenders felt the immediate impact, with JPMorgan Chase shares down 3.2% and Bank of America slipping 2.5%. Citigroup fell 3.6%, and Wells Fargo dropped 2.2%, highlighting investor concern over a potential hit to a significant revenue stream for these institutions. Analysts argue that such a cap could shift borrowing away from traditional banks and toward riskier, non-bank lenders.

“This rate cap could push consumers toward more expensive debt options and won’t solve the root problem,” said J.P. Morgan analyst Vivek Juneja. Consumer finance companies like American Express tumbled 4%, while payment processors Visa and Mastercard fell over 1%, reflecting broader concerns across the sector.

Shares of firms that specialize in consumer credit, such as Synchrony Financial, Bread Financial, and Capital One, experienced even steeper declines of 8% to 10%. Some experts suggest that restrictions on credit pricing could reduce credit lines, pushing borrowers toward payday lenders and “buy now, pay later” services. Affirm, a BNPL lender, saw shares rise 2% in response.

As the U.S. banking sector gears up for the fourth-quarter earnings season this week, all eyes will be on JPMorgan Chase, Bank of America, Citigroup, and Wells Fargo. Investors will be closely watching how the proposed rate cap, if legislated, could affect lending practices and bank profitability in the coming year.

source: reuters