Why Trump's idea for a 10% cap on credit card rates could backfire, according to UBS

• Trump proposed a 10% cap on credit card interest, sending financial stocks tumbling on Monday.
• UBS said the plan would have unintended negative effects.
• Rather than offer cheaper credit cards, many firms would dial back credit availability, UBS said.

President Donald Trump's idea to cap credit card interest could have far-reaching unintended consequences, UBS said on Monday.

On Friday, Trump posted on Truth Social that he was calling for a one-year, 10% rate cap for credit card interest, stating that the industry has been taking advantage of consumers.

The idea sparked a sell-off in major financial stocks on Monday, including Capital One, Synchrony Financial, JPMorgan, and Citigroup.

While investors reacted to the latest threat to lenders' bottom line, UBS said that Trump's plan would have a negative impact on Main Street despite its intention to relieve high borrowing costs for many Americans.

UBS analyst Erika Najarian said that the proposed credit card rate cap would likely backfire, as it would likely reduce consumer spending and curtail lending to certain borrower groups.

Najarian said that credit card providers are more likely to dial back the availability of credit to certain borrowers, rather than simply offer cheaper credit.

"It is pretty clear that a 10% credit card rate cap would cut off credit availability to those that need it most: middle- and lower-income Americans," she added.

The team of analysts at UBS said that while they see a low likelihood of the plan becoming law, the overall impact on credit availability would be felt by both investors and consumers.

"According to the Boston Fed, the aggregate credit card spend by annual household income was as follows in May '25: 1) <$39k: ~$26bn; 2) $59-83k: ~$37bn; 3) >$121k: $175bn. Based on Boston Fed data, this means 26% of credit card spend, at least, would be at severe risk, implying a major impact on the economy."

The analysts noted that consumer spending accounts for roughly 70% of US GDP on average. Additionally, credit card spending accounts for nearly half of Visa's payment volume and more than half of Mastercard's. The kind of pullback predicted by UBS could severely compromise US economic growth.

Najarian isn't the only finance pro to suggest that Trump's credit card rate cap plan could backfire. Billionaire investor Bill Ackman described it as a "mistake" and claimed that millions of credit cards could be cancelled as a result.