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Trump wants to cap credit card interest rates at 10%. But such limits could harm consumers

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Credit cards are the sharpest double-edged sword in Americans’ personal finance arsenal.

They can be an indispensable tool for coping with financial hardship, a great way to finance your family vacation, or a free pass granting access to luxury lounges at the airport. But for many consumers, they can also be a debt trap with no escape.

Like Robin Hood in reverse, credit card companies take the interest payments from those who carry a balance and redistribute them as rewards that benefit people who don’t.

Sky-high annual percentage rates (APRs) on U.S. credit cards are worsening the debt trap for those who carry a balance. Four years ago, the average APR was less than 15%. By 2024, it was over 21%, and a growing number of Americans are finding themselves with interest rates over 30%.

On Friday, President Donald Trump called for a one-year cap on credit card interest rates at 10%, effective Jan. 20.

That comes after Sens. Bernie Sanders (I-VT) and Josh Hawley (R-MO) introduced a bill last year that would cap credit card interest rates at 10% for five years. On the campaign trail, Trump supported the idea—despite stark opposition from the banks and credit unions that issue credit cards.

“When large financial institutions charge over 25 percent interest on credit cards, they are not engaged in the business of making credit available. They are engaged in extortion and loan sharking,” stated Sanders in a press release. 

The bill aims to curb the profits that flow from credit card lending and provide financial relief for working families. However, if passed the measure would likely reduce easy access to credit and also undercut the credit card rewards that power the industry.

The unintended consequences of a credit card interest rate cap

Whenever the Congress imposes new regulations on the economy, second- and third-order effects often create unintended consequences, experts and industry groups told Fortune last year. By solving the problem of high credit card APRs, a rate cap could very well end up hurting those it was intended to help.

Credit card interest rates vary widely depending on the unique risk profile of each cardholder. Limiting banks’ ability to charge rates commensurate with historic default levels would likely send shock-waves through the industry. 

Jennifer Doss, executive editor at Cardratings.com, explains that cards with high APRs give banks the option to offer credit to people who might not otherwise qualify. “Credit card companies typically charge higher interest rates to mitigate higher perceived risk,” she said. “Consequently, individuals with lower credit scores generally face higher interest rates.“

John Cabell, managing director of payments intelligence at J.D. Power, adds that rate caps could make it economically unviable for issuers to provide credit to people who struggle with delinquency.

“If you are forced to cap [APRs for] those with the highest interest rates, it would no longer make sense for the issuer to even offer them a product because it might not even be net positive from a revenue perspective,” he said.

Consumers denied access to credit cards by interest rate caps would still need access to credit. They could end up opting for payday loans or similar options that carry even more expensive rates than high-interest credit cards. 

“Research clearly shows that when politicians, rather than the free market, dictate prices, consumers ultimately pay the price through limited choices outside the well-regulated banking system,” said Consumer Bankers Association President and CEO Lindsey Johnson.

A cap on interest rates could diminish credit card rewards

Capping card rates would also likely dampen credit card rewards. If you’ve ever redeemed points or miles for a flight or hotel stay, you’ve benefited from high credit card interest rates. That’s because the revenue generated by interest payments on card balances helps to power the ecosystem of points, miles, and cashback rewards. 

According to Cabell, cardholders who never carry a balance need to understand that their expectations of getting “something for nothing” carries a steep cost for other consumers. “Higher net worth individuals are consuming all of those perks, at the cost of the lower-end consumers who don’t benefit,” he said.

Customers who reap the most rewards from credit cards don’t pay interest. Federal Reserve research has found that every year a whopping $15 billion is transferred from those who carry a balance and redistributed to those who earn rewards.

Credit card payment fees on retail transactions—some of which are as high as 4%—are another source of support for card rewards, and some experts believe swipe fees could have a more direct financial connection to the rewards system. However, a separate bill in Congress is taking aim at high swipe fees.

The proposed Credit Card Competition Act, a bipartisan bill introduced in 2024 by Sens. Dick Durbin (D-IL) and Roger Marshall (R-KS), targets the dominance of payments processors Visa and Mastercard—which together took in $93 billion in credit card swipe fees in 2022. 

The bill would require large financial institutions to allow at least two credit card payment processing networks to be used on their card cards—and one of them cannot be Visa or Mastercard. This would give merchants greater flexibility to choose payment networks and, it’s hoped, reduce the swipe fees. 

If both bills were to pass, the reduction in revenue from interest payments and swipe fees would likely be the final straw for credit card rewards programs.

A version of this story was originally published on Feb. 6, 2025.



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The mayor of Minneapolis said Sunday that sending active duty soldiers into Minnesota to help with an immigration crackdown is a ridiculous and unconstitutional idea as he urged protesters to remain peaceful so the president won’t see a need to send in the U.S. military.

Daily protests have been ongoing throughout January since the Department of Homeland Security ramped up immigration enforcement in the Twin Cities of Minneapolis and St. Paul by bringing in more than 2,000 federal officers.

Three hotels where protesters have said Immigration and Customs Enforcement officers were staying in the area stopped taking reservations Sunday.

In a diverse neighborhood where immigration officers have been seen frequently, U.S. postal workers marched through on Sunday, chanting: “Protect our routes. Get ICE out.”

Soldiers specialized in arctic duty told to be ready

The Pentagon has ordered about 1,500 active-duty soldiers based in Alaska who specialize in operating in arctic conditions to be ready in case of a possible deployment to Minnesota, two defense officials said Sunday.

The officials, who spoke on condition of anonymity to discuss sensitive military plans, said two infantry battalions of the Army’s 11th Airborne Division have been given prepare-to-deploy orders.

One defense official said the troops are standing by to deploy to Minnesota should President Donald Trump invoke the Insurrection Act.

The rarely used 19th century law would allow the president to send military troops into Minnesota, where protesters have been confronting federal immigration agents for weeks. He has since backed off the threat, at least for now.

“It’s ridiculous, but we will not be intimidated by the actions of this federal government,” Minneapolis Mayor Jacob Frey told CNN’s State of the Union on Sunday. “It is not fair, it’s not just, and it’s completely unconstitutional.”

Thousands of Minneapolis citizens are exercising their First Amendment rights and the protests have been peaceful, Frey said.

“We are not going to take the bait. We will not counter Donald Trump’s chaos with our own brand of chaos here,” Frey said.

Gov. Tim Walz has mobilized the Minnesota National Guard, although no units have been deployed to the streets.

Some hotels close or stop accepting reservations amid protests

At least three hotels in Minneapolis-St. Paul that protesters said housed officers in the immigrant crackdown were not accepting reservations Sunday. Rooms could not be booked online before early February at the Hilton DoubleTree and IHG InterContinental hotels in downtown St. Paul and at the Hilton Canopy hotel in Minneapolis.

Over the phone, an InterContinental hotel front desk employee said it was closing for the safety of the staff, but declined to comment on the specific concerns. The DoubleTree and InterContinental hotels had empty lobbies with signs out front saying they were “temporarily closed for business until further notice.” The Canopy hotel was open, but not accepting reservations.

The Canopy has been the site of noisy protests by anti-ICE demonstrators aimed to prevent agents from sleeping.

“The owner of the independently owned and operated InterContinental St. Paul has decided to temporarily close their hotels to prioritize the safety of guests and team members given ongoing safety concerns in the area,” IHG Hotels & Resorts spokesperson Taylor Solomon said in a statement Sunday. “All guests with existing reservations can contact the hotel team for assistance with alternative accommodations.”

Earlier this month, Hilton and the local operator of the Hampton Inn Lakeville hotel near Minneapolis apologized after the property wouldn’t allow federal immigration agents to stay there. Hampton Inn locations are under the Hilton brand, but the Lakeville hotel is independently operated by Everpeak Hospitality. Everpeak said the cancelation was inconsistent with their policy.

US postal workers march and protest

Peter Noble joined dozens of other U.S. Post Office workers Sunday on their only day off from their mail routes to march against the immigration crackdown. They passed by the place where an immigration officer shot and killed Renee Good, a U.S. citizen and mother of three, during a Jan. 7 confrontation.

“I’ve seen them driving recklessly around the streets while I am on my route, putting lives in danger,” Noble said.

Letter carrier Susan Becker said she came out to march on the coldest day since the crackdown started because it’s important to keep telling the federal government she thinks what it is doing is wrong. She said people on her route have reported ICE breaking into apartment buildings and tackling people in the parking lot of shopping centers.

“These people are by and large citizens and immigrants. But they’re citizens, and they deserve to be here; they’ve earned their place and they are good people,” Becker said.

Republican congressman asks governor to tone down comments

A Republican U.S. House member called for Walz to tone down his comments about fighting the federal government and instead start to help law enforcement.

Many of the officers in Minnesota are neighbors just doing the jobs they were sent to do, House Majority Whip Tom Emmer told WCCO-AM in Minneapolis.

“These are not mean spirited people. But right now, they feel like they’re under attack. They don’t know where the next attack is going to come from and who it is. So people need to keep in mind this starts at the top,” Emmer said.

Across social media, videos have been posted of federal officers spraying protesters with pepper spray, knocking down doors and forcibly taking people into custody. On Friday, a federal judge ruled that immigration officers can’t detain or tear gas peaceful protesters who aren’t obstructing authorities, including when they’re observing the officers during the Minnesota crackdown.

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Contributing were Associated Press writers Konstantin Toropin in Washington; Steve Karnowski in Minneapolis; Edith M. Lederer at the United Nations; Jeffrey Collins in Columbia, South Carolina; and Christopher Weber in Los Angeles.



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Trump is charging world leaders $1 billion each for their countries to permanently join Gaza ‘Board of Peace’

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At least eight more countries say the United States has invited them to join President Donald Trump’s Board of Peace, a new body of world leaders meant to oversee next steps in Gaza that shows ambitions for a broader mandate in global affairs. Two of the countries, Hungary and Vietnam, said they have accepted.

A $1 billion contribution secures permanent membership on the Trump-led board instead of a three-year appointment, which has no contribution requirement, according to a U.S. official who spoke on condition of anonymity about the charter, which hasn’t been made public. The official said the money raised would go to rebuilding Gaza.

Hungarian Prime Minister Viktor Orbán has accepted an invitation to join the board, Foreign Minister Péter Szijjártó told state radio Sunday. Orbán is one of Trump’s most ardent supporters in Europe.

Vietnam’s Communist Party chief, To Lam, also has accepted, a foreign ministry statement said.

India has received an invitation, a senior government official with knowledge of the matter said, speaking on condition of anonymity as the information hadn’t been made public by authorities.

Australia has been invited and will talk it through with the U.S. “to properly understand what this means and what’s involved,” Deputy Prime Minister Richard Marles told Australian Broadcasting Corp. on Monday.

Jordan, Greece, Cyprus and Pakistan said Sunday they had received invitations. Canada, Turkey, Egypt, Paraguay, Argentina and Albania have already said they were invited. It was not clear how many have been invited in all.

The U.S. is expected to announce its official list of members in the coming days, likely during the World Economic Forum meeting in Davos, Switzerland.

Those on the board will oversee next steps in Gaza as the ceasefire that took effect on Oct. 10 moves into its challenging second phase. It includes a new Palestinian committee in Gaza, the deployment of an international security force, disarmament of Hamas and reconstruction of the war-battered territory.

In letters sent Friday to world leaders inviting them to be “founding members,” Trump said the Board of Peace would “embark on a bold new approach to resolving global conflict.”

That could become a potential rival to the U.N. Security Council, the most powerful body of the global entity created in the wake of World War II. The 15-seat council has been blocked by U.S. vetoes from taking action to end the war in Gaza, while the U.N.’s clout has been diminished by major funding cuts by the Trump administration and other donors.

Trump’s invitation letters for the Board of Peace noted that the Security Council had endorsed the U.S. 20-point Gaza ceasefire plan, which includes the board’s creation. The letters were posted on social media by some invitees.

The White House last week also announced an executive committee of leaders who will carry out the Board of Peace’s vision, but Israel on Saturday objected that the committee “was not coordinated with Israel and is contrary to its policy,” without details. The statement by Prime Minister Benjamin Netanyahu’s office was rare criticism of its close ally in Washington.

The executive committee’s members include U.S. Secretary of State Rubio, Trump envoy Steve Witkoff, Trump’s son-in-law Jared Kushner, former British Prime Minister Tony Blair, World Bank President Ajay Banga and Trump’s deputy national security adviser Robert Gabriel, along with an Israeli business owner, billionaire Yakir Gabay.

Members also include representatives of ceasefire monitors Qatar, Egypt and Turkey. Turkey has a strained relationship with Israel but good relations with Hamas and could play an important role in persuading the group to yield power in Gaza and disarm.

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Boak reported from West Palm Beach, Florida. Associated Press writers Justin Spike in Budapest, Hungary, Rajesh Roy in New Delhi and Rod McGuirk in Canberra, Australia, contributed to this report.



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Dollar sinks as Trump’s new tariffs raise fears about U.S. debt and reserve currency status

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The greenback dropped while precious metals rallied Sunday as financial markets started reacting to President Donald Trump’s new tariff threats.

The dollar sank 0.31% against the euro to $1.16 and tumbled 0.32% against the yen to 157.58. Meanwhile, gold rose 1.95% to a fresh record of $4,684.30 per ounce. Silver jumped 5.66% to $93.53, also a new high.

Due to the Martin Luther King Jr. Day holiday on Monday, U.S. stock and bond futures were inactive.

On Saturday, Trump said Denmark, Norway, Sweden, France, Germany, the United Kingdom, the Netherlands, and Finland will be hit with a 10% tariff starting on Feb. 1 that will rise to 25% on June 1, until a “Deal is reached for the Complete and Total purchase of Greenland.”

The announcement came after those countries sent troops to Greenland this past week, ostensibly for training purposes, at the request of Denmark.

Trump has refused to back down from taking over Greenland, even keeping military options on the table, while the administration has also left open the possibility of buying the island.

At the same time, the European Union is weighing options for retaliation, including the bloc’s anti-coercion instrument that has been described as a “trade bazooka” for its scope and severity.

Not only do Trump’s latest tariffs pose an existential threat to the trans-Atlantic alliance, the fallout could threaten the dollar’s dominance and so-called exorbitant privilege.

“The dollar’s reserve-currency status allows us to live beyond our means. Soaring debt, tariffs, and military threats jeopardize that status,” Peter Schiff, chief economist and global strategist at Euro Pacific Asset Management, warned on X. “When it’s lost, economic collapse will follow.”

And the EU holds significant leverage over Trump as European countries own $8 trillion of U.S. bonds and equities, almost twice as much as the rest of the world combined, according to George Saravelos, head of FX research at Deutsche Bank.

America’s vulnerability in global financial markets was not lost on Rep. Thomas Massie, R-Ky., who reacted to Schiff’s post.

“As the dollar’s reserve currency status diminishes, so does our ability to tax the world by creating more money,” he wrote. “When reserve status is lost, maintaining current spending levels and servicing the debt will be even more painful for Americans who will bear the full inflation tax.”



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