Billionaire investor Bill Ackman, a vocal supporter of Donald Trump, has issued a sharp warning against the former president’s proposal for a one-year, 10% credit card interest cap. Ackman labels the plan a “mistake” that could harm millions of Americans. Trump aims to combat what he calls “unjust” and “unfair” rates currently between 20-30%, seeking to improve affordability for consumers. However, financial experts, including Ackman, argue that this policy could severely restrict access to essential credit. This article delves into the heated debate surrounding this potential policy, exploring its implications for consumers and the broader financial landscape.
The Proposed Credit Card Cap: Trump’s Vision for Affordability
Donald Trump announced a significant proposal via Truth Social, targeting high credit card rates. He called for a temporary 10% cap on interest for one year, effective January 20, 2026. This move, echoing a 2024 campaign pledge, seeks to protect the American public from being “ripped off.” Trump’s administration intends to address the “affordability” crisis, particularly for those burdened by soaring credit card debt. He did not, however, detail the specifics of implementation or enforcement for this nationwide cap.
This proposal arrives amidst record-high consumer debt levels in the United States. Credit card balances alone surged to $1.23 trillion in late 2025. Overall U.S. household debt continues to climb, highlighting the financial pressures many Americans face. Trump’s initiative aims to provide direct relief by significantly lowering borrowing costs for credit card users.
Bill Ackman’s “Mistake” Warning: The Risk of Credit Restriction
Hedge fund manager Bill Ackman, CEO of Pershing Square Capital Management, wasted no time in publicly criticizing Trump’s proposed interest rate cap. In a series of posts, Ackman declared the policy a “mistake.” His primary concern centers on the economic realities of lending. Ackman argued that a 10% cap prevents lenders from adequately pricing risk. Banks must cover potential losses and earn a reasonable return on equity to operate sustainably.
Without this ability, credit card companies would face an untenable financial position. Ackman warned this would force lenders to cancel credit cards for millions of consumers. Those with weaker credit profiles would be most affected. “Without being able to charge rates adequate enough to cover losses and to earn an adequate return on equity,” Ackman wrote, “credit card lenders will cancel cards for millions of consumers.”
The Peril of “Loan Sharks” and Inferior Terms
Ackman painted a stark picture of the consequences for consumers whose cards are canceled. He suggested these individuals would be forced into desperate measures. Many would “turn to loan sharks for credit,” facing rates “higher than and on terms inferior to what they previously paid.” In a later, slightly softened statement, Ackman even mentioned the potential for “physical harm or worse” for default under such predatory lending. He clarified that he holds no investments in the credit card industry. He views the market as “highly competitive,” further reinforcing his argument that a price cap is an artificial distortion.
Broader Expert Consensus: Why Price Controls Fail
Ackman’s concerns are echoed by a chorus of financial policy experts and banking advocacy groups. Gary Leff, a financial officer and industry blogger, warned that a hard cap would drastically reduce access to credit. This reduction would negatively impact the economy. It would also push vulnerable consumers towards much more expensive, less regulated options like payday lending. Leff noted that if unsecured credit could be profitably offered at 10%, the competitive market would already provide it.
Nicholas Anthony, a policy analyst at the Cato Institute, labeled price controls a “failed policy experiment.” He predicted they would lead to “shortages, black markets, and suffering.” A joint statement from major banking groups, including the Consumer Bankers Association and American Bankers Association, reinforced this view. They cautioned that a 10% credit card interest cap would “only drive consumers toward less regulated, more costly alternatives.” This could ultimately harm the very people it intends to protect.
An Alternative Approach: Fostering Competition
While critical of the 10% credit card cap, Ackman acknowledged Trump’s “goal of reducing credit card interest rates” as “worthy and important.” He suggested a more effective approach. Instead of imposing price controls, he advocated for regulatory reform. Such reforms would make the regulatory regime “more conducive to new entrants and new technologies.”
Increasing competition in the credit card market, Ackman argued, would naturally drive down rates. New players and innovative technologies could create a more efficient and consumer-friendly environment. This market-based solution contrasts sharply with government-mandated price limits. It aligns with historical economic principles that favor competition over intervention for optimal outcomes.
The Problem with Rewards Programs
Ackman also broadened his critique to address the inherent fairness of credit card rewards programs. He argued that the points and rewards given to high-income cardholders are effectively subsidized. This subsidization comes from lower-income cardholders who do not receive similar benefits. Premium rewards cards carry higher “discount fees” for merchants. These can be 3.5% or more, compared to about 1.5% for cards without rewards. Since merchants charge all consumers the same price, those without rewards indirectly pay for others’ perks. This perspective adds another layer to the discussion around equitable financial policies.
Implementation Hurdles and Political Context
Implementing a nationwide credit card interest cap faces significant legal and political hurdles. Such a cap would almost certainly require authorization by Congress. The precise legal pathway for a president to bypass this requirement remains unclear. Trump’s administration has previously focused on credit card regulations. An earlier attempt to overturn a Biden-era rule limiting credit card late fees to $8 was struck down by a federal judge. This history suggests legislative battles are likely.
Ackman’s criticism of the Trump’s credit card cap is not an isolated incident. Despite being a prominent Trump supporter, he has previously voiced strong opposition to other Trump policies. Notably, he issued a dire warning against Trump’s proposed sweeping tariff plan. Ackman described tariffs as leading to a “self-induced, economic nuclear winter,” highlighting his willingness to challenge policies he believes are economically detrimental, even from his preferred political candidate. This pattern underscores a consistent focus on market-based economic principles.
Frequently Asked Questions
What is Donald Trump’s proposed credit card interest cap?
Donald Trump has called for a one-year, 10% cap on credit card interest rates, effective January 20, 2026. This proposal, announced via Truth Social, is part of his broader effort to address the “affordability” crisis and prevent Americans from being “ripped off” by high interest rates, which he noted often range from 20-30%. The specific details of how this nationwide cap would be implemented or enforced remain unclarified, and it would likely require congressional approval.
What are the potential risks of a credit card interest cap for consumers, according to experts?
According to billionaire investor Bill Ackman and other financial experts, a credit card interest cap, such as Trump’s proposed 10% limit, poses significant risks to consumers. Lenders would be unable to charge rates sufficient to cover losses and earn adequate returns. This would compel them to cancel millions of credit cards, especially for those with weaker credit profiles. These consumers would then be forced to seek credit from less regulated, more costly alternatives like “loan sharks,” often at higher rates and under worse terms, potentially exacerbating their financial vulnerability.
How might credit card interest rates genuinely be lowered, according to experts?
Experts like Bill Ackman suggest that instead of imposing price controls, a more effective way to lower credit card interest rates is by fostering greater competition within the market. This could be achieved through regulatory reforms that are more conducive to new entrants and new technologies. Increasing the number of players and introducing innovative solutions can drive down rates naturally, benefiting consumers without the negative consequences of restricted credit access often associated with government-mandated interest rate caps.
Conclusion: Balancing Affordability with Access
The debate surrounding Trump’s proposed credit card interest cap highlights a fundamental tension in financial policy. On one side, there’s a strong desire to protect consumers from predatory rates and alleviate the burden of debt. On the other, there’s the economic reality of risk assessment and the potential for unintended consequences. Bill Ackman’s critique, backed by other financial experts, offers a clear warning: while the goal of affordability is noble, the chosen method could backfire. Restricting lenders’ ability to price risk may ultimately reduce credit access for the most vulnerable, pushing them toward far riskier options. The path forward may lie in fostering genuine market competition and careful regulatory reform, rather than broad price controls, to achieve sustainable and equitable financial solutions for all Americans.
