JPMorgan chief says Trump’s credit card interest rate hike could hurt the economy
Financial expert on ‘difficult’ consequences for commercial credit cards: ‘Too many strings attached’
JPMorgan CFO Jeremy Barnum warned Tuesday that President Donald Trump’s push to cap 10% on credit card interest rates could hurt the broader economy and reduce access to credit.
“In fact, what will happen is that the provision of the service will change significantly. Specifically, people will lose access to credit, as a very broad and broad base, especially the people who need it,” said Barnum during a call accompanying the release of the bank’s fourth quarter earnings.
Barnum said this would create “a very negative effect on consumers and, frankly, probably a negative effect on the economy as a whole.”
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He also noted that this would also present a “major” challenge to JPMorgan’s credit card business.
A customer uses a credit card at a store. (Robert Nickelsberg/Getty Images)
“I think it should be clear that that would also be bad for us. I won’t go into the math, but in a small sense, this is a big business for us. It’s a very competitive business, but we wouldn’t be in it if it wasn’t a good business for us,” he said.
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Banks are actually warning consumers that in terms of rates, “they won’t be very willing to give credit cards to anyone who doesn’t have great credit and that the rewards that people like will be greatly reduced,” according to LendingTree consumer finance analyst Matt Schulz, who noted that this could ultimately lead to less consumer spending, which could hurt the economy.
Barnum’s comments echo earlier warnings that Trump’s call for a 10% discount on credit card interest rates could affect credit card access for many American consumers while also impacting small businesses.
On Friday, Trump announced that he wants to impose a 10% credit card interest rate one year from Jan. 20, which says it wants to prevent consumers from being “rip off” by credit card issuers with interest rates that can exceed 20% for some borrowers.
President Donald Trump has called for a one-year cap on credit card interest rates, blaming the high cost on the Biden administration. (Brent Lewin/Bloomberg via Getty Images)
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The president’s proposal follows the introduction of a bill last year by Sens. Bernie Sanders, Vt., and Josh Hawley, R-Mo., would cap credit card APRs at 10%.
But Richard Hunt, executive chairman of the Electronic Payments Coalition (EPC), told the press that EPC’s analysis of the 10% credit card cap found that almost every credit card account with a credit score of less than 740 would be closed or severely restricted if the 10% interest cap was applied.
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People walk past the corporate headquarters of JPMorgan Chase in Manhattan, May 20, 2015. (Reuters/Mike Segar/File)
That would affect 175 million to 190 million American cardholders who would lose access to their credit cards, in particular. low and middle income families. Data from the Federal Reserve Bank of New York found the average credit score for low-income Americans was 658 compared to 735 for middle-income households.
Schulz told FOX Business that it’s still unclear how this will all play out. He pointed out the 18% rate limit on credit union credit cards, and they still offer rewards for example.
“They’re not as profitable as what you can get from the Amex Platinum or Chase Sapphire Reserve, but they’re still important. Of course, the story might be different if the credit union cap was 10%, but credit unions are still proof that rewards and rate caps can exist successfully,” he said.
However, he believes that the 0% balance transfer credit card offer will disappear if the rate cap is implemented.
“Banks won’t be willing to take those kinds of risks below a flat rate, especially at 10%. That would be a big deal, although the interest paid below a flat rate of 10% would be so much lower than what people are facing now it would make those 0% deals less important,” he added.
The reason why politicians keep promoting them even though they get nowhere is because they are really popular even though they reduce the chances of getting loans and their rewards are very low.
A 2024 LendingTree study showed that three out of four credit card holders support these caps.
Eric Revell of FOX Business contributed to this report.
