Shares of banks and credit card companies moved lower after US president Donald Trump proposed capping interest rates on cards to 10% for a year starting January 20, rekindling an idea initially put forward during his 2024 presidential campaign.
The average interest rate for credit cards in the US is reportedly about 20%.
In a post on his social media app Truth Social on Friday, Trump did not provide specifics on how the policy would be implemented or ensure compliance.
“Please be informed that we will no longer let the American Public be ‘ripped off’ by Credit Card Companies that are charging Interest Rates of 20 to 30%, and even more, which festered unimpeded during the Sleepy Joe Biden Administration,” Trump wrote in the post.
Wedbush analysts wrote that rate caps, if put into place, would result in consumers with more risky profiles losing access to credit and turn lead to incremental cash requirements.
According to the analysts, this would reinforce “the need for access to cash as well as likely increasing transaction volumes, a shift we would view as positive for ATM makers, and for NCR Atleos, in particular, given its higher exposure to the US consumer through its Allpoint network.”
On the news, Synchrony Financial (NYSE:SYF, XETRA:SFE) shares plunged 7.9%, Capital One Financial Corp (NYSE:COF) shares fell 6%, American Express Company (NYSE:AXP, XETRA:AEC1) stock was down 4.3%, Mastercard Inc (NYSE:MA) shares fell 1.5% and Visa Inc (NYSE:V, XETRA:3V64) shares were down 1.1%.
UK bank Barclays PLC (LSE:BARC), which has a significant US card business, also saw its US-listed shares fall 1.8%.
Niklas Kammer, senior equity analyst at Morningstar, wrote that because US congress would have to pass legislation for banks to be breaking a law, he does not see an imminent risk for Barclays.
“However, Barclays and US banks could be exposed to greater scrutiny by the Trump administration if they don’t adhere to the deadline, or at least show some form of goodwill towards the Trump administration,” Kammer wrote.
“This is especially sensitive for Barclays as the UK lender has been building out its exposure to the US credit card market over the last years and has further ambitions to grow its portfolio. The political and regulatory risk around Barclays‘ equity story has increased as a result, in our view.”