What Trump Gets Right About Credit CardRates
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What Trump gets right about credit card rates | GUEST COMMENTARY
PUBLISHED: April 11, 2026 at 2:33 PM EDT
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The self-anointed “genius” in the White House regularly defies norms developed by religions over millennia and by nations since the Second World War.
But the success of the fool of the family derives from his occasionally discerning what others miss, most notably by attention to the concerns of the lower middle class, which determines American elections despite having few representatives of its own in Washington.
Trump’s proposal for a 10% ceiling on credit card interest rates is the product of one such discovery. Unlike the Democrats with their belated discovery of a similar issue, the burden of student loans, he does not propose to reward the improvident at the expense of the provident, nor plunder the federal treasury.
The proposal has called forth expressions of shock and horror from usually well-compensated academics pretending to be devoted to free markets. Doesn’t Donald Trump know that usury laws were a medieval practice, universally condemned in Economics 101 textbooks? Was he not asleep during his days at the Wharton School?
Actually not. Mr. Trump recalls some forgotten facts of modern history. Until 1979, all states had usury laws limiting permissible interest rates on transactions within their domain. Consumer loans typically involved interviews with bankers, a vanishing breed now supplanted by computers with built-in formulas. That year corresponded with the large-scale introduction of credit cards and with high inflation. The Supreme Court, led by Justice William Brennan, who in a long and influential career was frequently wrong but never in doubt, suddenly discovered in the Marquette National Bank case that a long-forgotten provision of the National Banking Act of 1863 forbade states from applying their usury laws to national banks incorporated elsewhere, even to transactions involving their own citizens. Such banks were to be governed by the usury laws, or lack thereof, of their states of incorporation.
Consumer credit subsidiaries of the largest banks stampeded to the most indulgent states, Joe Biden’s Delaware and Bill Janklow’s South Dakota. The new behemoths undid the work of Thomas Jefferson, Andrew Jackson, and Franklin D. Roosevelt, making community banking almost a thing of the past. Underwriting of credit card grants is perfunctory at best. As a former part-time federal bankruptcy trustee, I once redirected the mail of a deceased debtor, which trustees are allowed to do. The decedent lived in a dilapidated house, but in a respectable neighborhood, and I was therefore deluged with credit card offers addressed to the late debtor, a long-time devoted heroin addict.
Even bankruptcy does not always result in a denial of credit. It is required to be erased from credit reports after seven years; some debtors’ attorneys send anniversary reminders, reminiscent of dentists soliciting tooth cleanings. In many states, including Maryland, debtors may exempt substantial assets from bankruptcy, including retirement accounts, spendthrift trusts and substantial equity in real estate (unlimited in Texas).
In the fourth quarter of 2024, credit card companies charged off as losses roughly 4.1% of credit card loans. Eight-and-a-half percent were delinquent, but not charged off. In at least one year, 2009, the charge-off number ranged as high as 7%. These charge-offs were simply folded into interest rates by the credit grantors, who enjoy estimated margins of 10% on their credit card business.
Thirty to 40% of consumer spending is accounted for by credit cards. There was $1.23 trillion in credit card debt outstanding in 2025, up by 60% in four years, $660 billion of it in revolving credit. The credit-granting banks earned $105 billion in interest and $25 billion in late and other fees, the latter being somewhat limited by recent federal legislation. The average credit card interest rate was around 24%, 20.7% on new accounts. The credit-granting banks enjoy net interest margins of about 10% even after folding in charged-off losses; their break-even rates would almost certainly be in the range of 12% to 15%, not 24%, even without tightening of underwriting standards.
Little effort is made by banks to recover charge-offs. I was once briefly engaged by a leading bank to go to creditors’ meetings and negotiate nominal ($5 per month) repayment plans, the object obviously being to avoid the need to record charged-off accounts on banks’ income statements. This sort of chicanery is rare, but revealing.
Nonetheless, the Trump proposal for a 10% federal ceiling is undoubtedly a mistake. A formidable lobbying force has already been assembled against it, and any compromise legislation will not long survive his presidency. The appropriate remedy is congressional overruling of the Marquette case so as to allow the states to regulate loans to their own citizens. Their legislators are in closer touch than the lawyer-legislators of Washington to the adversely affected class, and present a very large and diffused target for bribery in the form of campaign contributions. When the cry of “Balkanization” is raised, as it frequently is against state as compared with federal controls, it should be remembered that the average state has a population of more than 7 million, and is larger than many successful Western European countries.
George Liebmann (george.liebmann2@verizon.net), writing in his individual capacity, is president of the Library Company of the Baltimore Bar and the author of various works on law and politics, most recently “The Tafts” (Twelve Tables Press, 2023).
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