A 10% Interest Cap Sounds Great. Here’s Why It Could Kill Your Rewards.

A viral idea is making the rounds again: capping credit card interest rates (APR) at 10%.

President Trump recently urged card issuers to slash rates to 10% for one year, starting Jan. 20, 2026. Separately, Congress has a live bill—S.381, the “10 Percent Credit Card Interest Rate Cap Act”, introduced by Senators Bernie Sanders and Josh Hawley, which would impose a strict 10% cap.

If you’re staring at a 25–30% APR statement, a cap feels like an obvious win. But in credit markets, price caps don't just lower prices—they change who gets the product entirely.

For those of us playing the credit card game, this isn't just about interest rates. It’s about the underlying economics that fund the sign-up bonuses, travel perks, and cash back we love.

Here is what is actually being proposed, and what would likely happen to your cards (and rewards) if a 10% APR cap became reality.

What Exactly Is Being Proposed?

There are currently two different approaches floating around:

1. The "10% for One Year" Ask Reports indicate President Trump has called for a temporary 10% cap for one year, starting Jan. 20, 2026. It remains unclear whether this would be attempted via executive action or voluntary pressure on banks.

2. The Senate Bill: S.381 This legislation would amend the Truth in Lending Act to cap credit card APRs at 10%, inclusive of all finance charges. It includes two critical details:

Anti-Evasion Fee Rule: Banks can’t just replace interest with fees. The bill states that fees not considered finance charges "may not be used to evade" the cap.
Sunset Clause: The cap would expire on Jan. 1, 2031.

This isn’t just "make APR lower." It is a fundamental change to how credit cards generate revenue.

Why Capping APRs Changes Access to Credit

Credit card APRs are high because they are priced as unsecured, revolving debt. Unlike a mortgage (secured by a house) or an auto loan (secured by a car), credit card debt has no collateral. Banks face:

High fraud and chargeback risks.
A meaningful chance of default.
Significant servicing costs (customer service, disputes, rewards programs).

Current average APRs are over 20%. Dropping that to 10% isn't a small trim; it's a regime change.

When you cap the price of risk, lenders usually respond by rationing credit. If a bank cannot charge enough interest to cover the risk of lending to a specific person, they often stop lending to that person entirely.

We likely wouldn't see "the same credit card, but cheaper." We would see a different set of people getting approved for credit at all.

How This Would Reshape the Credit Card Market

If a 10% cap became law, we expect the market to shift in four predictable ways.

1. Fewer Approvals and Lower Limits

If issuers can't price for risk, they manage it by avoiding it. This likely means:

Tighter underwriting standards (higher credit score requirements).
Lower credit limits for new and existing accounts.
More applicants shifted toward "secured" cards (where you put down a cash deposit).

2. Rewards and Benefits Would Likely Get Worse

This is the big one for CardSavvy readers. Credit card rewards are not free. They are funded by a mix of merchant fees (interchange), consumer fees, and interest income.

If banks lose the ability to generate interest income from revolvers (people who carry a balance), they have to make up that revenue elsewhere. The most obvious targets are:

Devalued Rewards: Lower redemption rates or capped earnings.
Higher Annual Fees: More cards moving to a "membership" pricing model.
Reduced Perks: Cuts to ancillary benefits like travel insurance, lounge access, or purchase protection.

Since S.381 restricts "fee evasion," banks might have limited options to add new monthly fees, making rewards cuts even more likely.

3. A Shift to "Annual Fee" Pricing

Without high interest revenue, issuers may focus on reliable, upfront revenue streams. We could see a market where lucrative rewards cards are exclusively gated behind significant annual fees, while "no annual fee" cards become bare-bones products with little to no rewards.

4. Migration to Alternative Lending

If traditional credit cards become harder to get, borrowers often move toward alternatives like Buy Now, Pay Later (BNPL) services or other lending products that might have different regulatory structures.

What This Means for CardSavvy Users

While the politics of this proposal will play out in Washington, the strategy for you remains consistent.

If You Pay in Full Every Month: A 10% APR cap doesn't directly help you because you aren't paying interest anyway. However, it could hurt you if it leads to watered-down rewards programs or higher annual fees. Your strategy is to lock in high-value cards now and watch for devaluation announcements.

If You Carry a Balance: You are the theoretical beneficiary of this policy, but you face the risk of reduced credit lines or account closures.

Actionable Advice: Don't wait for a law to pass. If you have high-interest debt, look for 0% Intro APR balance transfer offers immediately. These effectively give you a 0% rate now (usually for 12-21 months), which is far better than waiting for a potential 10% cap in 2026.

Bottom Line

A 10% APR cap sounds like a win for consumers, but in practice, it’s a blunt instrument. It risks shrinking access to credit and gutting the rewards ecosystems that many savvy users rely on.

What you can do now: Audit your wallet. If you are paying interest, move that balance to a 0% APR card immediately. If you are chasing rewards, keep an eye on your issuer's terms—if the economics of credit change, the points game will change with it.