US Banking Stocks Plunge as Trump Announces 10% Credit Card Interest Rate Cap
US banking stocks including Citi Group, Bank of America, and JPMorgan fell 2.5-4% in pre-market trading on Monday, January 12, after Trump announced a proposed 10% cap on credit card interest rates effective January 20, 2026. Credit card operators Visa and Mastercard also declined 1.5-2.5%, contributing to a 250-point drop in Dow futures. Additional market pressure came from Federal Reserve independence concerns after Chair Jerome Powell revealed the Fed received criminal indictment subpoenas from the Department of Justice.
*this image is generated using AI for illustrative purposes only.
US banking and financial services stocks faced significant pressure in pre-market trading on Monday, January 12, as investors reacted negatively to Trump's announcement of a proposed 10% cap on credit card interest rates. The announcement, made via Trump's Truth Social account, outlined plans for a one-year interest rate ceiling that would take effect from January 20, 2026.
Banking Sector Takes Heavy Hit
Major banking institutions experienced substantial declines in pre-market trading following the announcement. The impact was particularly pronounced among Dow Jones Industrial Average components:
| Bank | Pre-market Decline |
|---|---|
| Citi Group | 2.5% - 4% |
| Bank of America | 2.5% - 4% |
| JPMorgan | 2.5% - 4% |
The banking sector selloff contributed to broader market weakness, with Dow Jones futures extending their losses to 250 points as investors assessed the potential impact on bank profitability from reduced credit card revenue.
Credit Card Operators Also Affected
Pure-play credit card operators were not immune to the market reaction, with both major players experiencing notable declines:
| Company | Pre-market Decline |
|---|---|
| Visa | 1.5% - 2.5% |
| Mastercard | 1.5% - 2.5% |
These declines reflect investor concerns about the potential impact on transaction volumes and revenue streams from the proposed interest rate restrictions.
Trump's Policy Announcement
Trump's Truth Social post outlined the specifics of the proposed policy, stating: "Effective January 20, 2026, I, as President of the United States, am calling for a one year cap on Credit Card Interest Rates of 10%." The announcement represented the fulfillment of a campaign pledge made during the 2024 presidential race. Trump further emphasized the consumer protection aspect, adding: "Please be informed that we will no longer let the American Public be 'ripped off' by Credit Card Companies."
Federal Reserve Independence Concerns
Additional market pressure emerged from concerns regarding Federal Reserve independence. Chair Jerome Powell revealed in a video message that the Fed had received criminal indictment subpoenas from the US Department of Justice. Powell characterized this action as politically motivated, suggesting it resulted from the Fed's practice of making interest rate decisions independent of presidential preferences.
Broader Market Impact
The banking sector weakness contributed to broader market declines across major indices:
| Index | Futures Decline |
|---|---|
| Dow Jones | 250 points |
| S&P 500 | 55 points |
| Nasdaq | 275 points |
The market reaction reflects investor uncertainty about both the proposed credit card interest rate policy and potential challenges to Federal Reserve independence, creating a challenging environment for financial sector stocks.
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