The Dow Jones fell nearly 400 points on Tuesday as traders reacted to President Trump's proposal to cap credit card interest rates at 10% for one year.

Wall Street

President Trump has proposed a one-year cap on credit card interest rates at 10%, a move that caused the Dow Jones to fall nearly 400 points as financial stocks declined. The proposal has received rare bipartisan support, including from Senator Elizabeth Warren, who has advocated for such a cap for years.

Experts note that the average American currently pays around 19.65% in credit card interest, with many paying even higher rates. While the cap could lead to significant savings for consumers, banks warn it may reduce their revenue and restrict credit access, especially for riskier borrowers. Those with strong credit may still receive offers but could see fewer rewards as a result.

What a 10% credit card interest rate cap could mean for borrowers

to Wall Street now with a down day for the Dow. The index fell nearly 400 points as traders react to President Trump's proposal to cap credit card interest rates at 10% for one year. Here's a look at the top 500 stocks is our interactive heat map brought to you by fin fizz fin viz. In the bottom left hand corner, you can see shares of big banks like J. P. Morgan, Welles Fargo dipped into the red today. Now, the president's proposal is drawing rare support from Democrats, including Senator Elizabeth Warren. She joined our own Katelyn Huey Burns on the takeout yesterday and said she spoke to Trump about the idea. Take a listen. We talked about remember Donald Trump had raised this question early on about putting a cap on credit card interest rates. And I had said at the time when he announced this a year ago, I said, great. I have been proposing that for years. Let's do it. And what's Donald Trump done since then? Nothing. All right, let's bring in Kristen Myers, the E. T. F. Editor in chief for Asset TV. Kristen, great to be with you. This proposal sparked a lot of chatter in our newsroom. Most of us swipe our credit cards nearly every day. Saving money on interest payments could have a huge impact. But how much do most Americans pay in interest now? And how much could they say with a 10% cap on those credit card interest rates? Yeah, that's a really great question. So for the average American right now, the interest rate is at 19.65%. So a lot higher than that 10% cap that has been proposed. But remember that your interest rate really depends on you, the borrower, your credit score, for example, your borrowing history. So right now, a lot of Americans have an interest rate of anywhere from 20% to 23%. It can be a lot higher if you are a riskier borrower, but it could also be lower if you are someone with a higher credit score and a great borrowing history. So we saw some banking and financial stocks fall today. What are the concerns with this credit card rate cap? Essentially, for the bank's revenue, the credit card interest rates is really how a lot of these banks make money. And so essentially, if you cap that interest rate at 10%, you are really preventing a lot of these banks from pulling in as much revenue as they have been, especially as a lot of Americans over the past year or so have actually been increasing their credit card balances. And then there's also the fact that the financial industry came out and said, Hey, if you want to cap the interest rates and you want to essentially therefore cap our revenue, it means we're not going to be able to offer credit to as many people as possible. As I said just a second ago, your interest rate really depends on you as the borrower. So if you are a riskier borrower, if you have a riskier profile, the bank says, Okay, that means we're going to give you a higher interest rate because it is riskier for us to give you credit. So what essentially a lot of concerns are is that if they lower that interest rate to that 10%, it's going to kick out a lot of borrowers from getting any kind of credit. And then for the folks that aren't kicked out, maybe they have great credit or they have a great borrowing history and the bank says, Hey, we can still offer you credit. It means they're not going to get as many rewards as they used to because that's also what the interest rates pay for. Kristen Myers. Thank you so much. Great to see you. Of course.

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Breakdown