US President Donald Trump has called for a one-year cap on credit card interest rates at 10%, starting from January 20 – a cap which is about half the current average rate.
The proclamation stemmed from an academic analysis in September last year, which found there were “astronomical profit margins in the [US] credit card market”. It concluded a 10% cap could save Americans as much as US$100 billion (A$149 billion) a year. However, the same analysis warned of likely unintended consequences at that level, including reduced access to credit for people with lower credit scores.
It is unclear how the White House intends to implement the proposal, with an Act of Congress needed for such caps to be imposed, given the legal challenges an executive order would face.
Trump’s announcement however has prompted questions about whether a similar approach could or should be considered in Australia, and what limits, if any, already exist on local credit card interest rates.
As of the end of 2025, Australians had more than $18 billion in credit card debt accruing interest.
Most cardholders typically pay interest rates of about 17–21% on unpaid monthly balances, broadly comparable to the US average of around 21%. Lower-rate cards are available, with interest as low as 11%, but these products usually charge higher annual fees than standard cards.
Interest rates vary depending on the borrower’s risk profile. Consumers with a strong repayment history are more likely to qualify for lower rates.
Those with late payments or a thin credit history are generally assessed as higher risk and charged higher interest. Income also plays a role. Lenders assess a borrower’s debt-to-income ratio, with higher incomes typically reducing perceived risk.
However, income alone is not decisive. A high-income borrower with poor credit habits may still face higher rates than someone on a lower income with a strong repayment record.
Credit cards are unsecured loans, meaning they are not backed by collateral such as a home or a car. If a borrower defaults, the lender has less security, which contributes to higher interest rates compared with secured loans like mortgages.
There is currently no cap on credit card interest rates in Australia. Rates are set by lenders and shaped by market competition.
The Australian Securities and Investments Commission regulates consumer credit and does impose caps on some other lending products. For example, for certain personal loans between $2,001 and $5,000 over two years, lenders can charge a maximum annual rate of 48%. No equivalent limit applies to credit cards.
Critics of a temporary 10% cap in the US, including some of Trump’s supporters, have warned banks could respond by lowering credit limits, tightening approval criteria or withdrawing access to credit for higher-risk borrowers. There is also concern that borrowers shut out of mainstream credit could turn to more expensive and less regulated alternatives, such as short-term loans or even unregistered or off-grid loan sharks.
Another risk is that a sudden or temporary cap, without a clear long-term framework, could create uncertainty for lenders, investors and consumers.
Supporters of a cap argue it could substantially reduce the interest paid by households carrying credit card debt, helping balances be paid down more quickly. Over time, that could ease financial stress, improve financial inclusion and strengthen household balance sheets.
The Vanderbilt analysis modelled caps at 10%, 15% and 18% in the US. It found that higher caps in the 15–18% range could still deliver meaningful savings to borrowers while limiting reductions in access to credit, whereas a 10% cap was more likely to lead to tighter lending.
Any similar proposal in Australia would require detailed local analysis to weigh savings for borrowers against potential impacts on credit availability. As the debate highlights, cheaper credit only delivers benefits if consumers can still access it.