President Donald Trump is pushing for a 10% interest rate cap for credit cards. CBS News' Jill Schlesinger breaks down the implications.

Washington

President Trump has proposed a cap on credit card interest rates at 10%, a significant reduction from current average rates of around 19.65%. The proposal has been met with strong opposition from banks and credit unions, who argue that such a cap could force them to reduce the amount of credit they offer, particularly to consumers with lower incomes or weaker credit scores.

Analysts note that while the cap could provide short-term relief for some consumers, it may also lead to reduced consumer spending and push borrowers toward unregulated lenders. No legislative action has been taken yet, and details of the proposal remain unclear. Financial experts advise consumers to focus on paying down high-interest debt and not to expect government intervention as a solution.

Trump's push to cap credit card interest rates

Take a live look at the Dow, it's about 100 points up right now markets looking pretty flat this morning. With us CBS News business analyst Jill Schlesinger to talk all money watch news. So let's start with bank stocks taking a hit yesterday after some earnings reports were released to explain what those reports actually showed nothing. In fact, this is literally noise and you need to tune out the noise so it wasn't some of the banks had to report earnings which accounted for some unique circumstances at those banks this morning we had Goldman Sachs and Morgan Stanley and they were very robust and the stocks have been on a tear and they don't tell you anything about the U.S. economy except they do tell you something about the political environment and that is that banks are doing extraordinarily well under the Trump administration. There's lower regulation and stocks have gone up there's a lot of trading there's a lot of activity and there's more mergers and there's more acquisitions and there's more business. But if you look at your own 401 K. I beg you not to look at these earnings. It is useless. It is a waste of your time. You focus on your own financial goals. How you're going to get where you want to go. What is the best way to get there. So Joe staying on the subject the bank something we talked about last week the president is proposing a credit card interest rate cap to about 10 percent. And on the one hand if you are a consumer this sounds like a good idea because credit card interest rates are over 20 percent right now or 19.6 5. And if you hear that the interest rates will only be 10 percent that sounds good. The question that I have is let's take a look from the bank's perspective and I know people will be watching they'll say well who cares about the banks. You know there's a billionaires who run them. But if the banks see a cap like this what do they decide to do in terms of how much credit they offer people and what do they decide to do in terms of the revenue that they generate from all those interest rates. So the lobbying for the banks and the credit unions came out very hard against this proposed cap and they have come out hard against caps in the past. There have been some bipartisan efforts to get some caps going on credit cards. And the reason is they're their premise is hey if we are asked to lend money which is extend credit to someone who is a low earner or has a shaky credit score we need to get compensated for that risk. What if they don't pay us back. Makes sense. Possibly sure. At the end of the day I think there's also a problem that when you put these caps in place they're usually short term. Maybe it's a year. I mean it is helpful. You'll take it for a year. I get it. But it's not the answer for most people. So I think from the bank's perspective I think they were a little heavy handed. I think they probably should just keep their mouths shut and do their lobbying as they would normally do and not put these statements out because it makes them look kind of horrible like oh if you put it at 10% we won't give credit. Make as much money like. But but the ripple effect could affect. For example, if you if a bank says OK we've got to cap these interest rates of 10% that means what would have we would have extended $10,000 to somebody will extending $5,000 now the consumer goes well, you know I was going to spend right out of it was buying stuff there are 2 of impacts potentially one is if I don't have the credit extended to me. I will not spend the dollars in the economy and that will be a hit to growth right that is a that's rational or if I do have to go get money and I do want to spend in the economy, I'm going to go to this unregulated weird part of the economy where I'll get money maybe it's by now pay later, maybe it's going to a private lenders. What I think is important here is nothing has been done yet. And we don't have any contours or details if you are someone who is carrying a credit card balance and we know that I think 4647% of people who have credit cards are carrying about by the way that's down 11 percentage points from the decade before so we're making progress. I think a lot of people understand carrying a credit card balance is going to harm me I need to figure out a way out I would not bet on the government giving you that option to get that bailout so you're going to have to do the hard work. It takes time. It took a while for most people to gather up all that debt. So don't expect that it's going to boom just get paid down a little bit at a time highest interest first work your way down, you know some of the folks who come on the podcast. They are like incredible there. The reformed debtors who turn into amazing savers all that money that was going to pay down debt they immediately once they get out. They then take that money and put it into saving and put into retirement. So there is a way out it will be better if you can do a little bit of time. Okay, all right. So thank you for.

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