TLDR
- Bank of America and Citigroup are considering credit cards with a 10% interest rate to meet Trump’s demand.
- The banks face challenges balancing affordability with profitability when offering cards at a 10% rate.
- Some banks, like Bilt, have already introduced 10% rate cards for a one-year period in response to the proposal.
- Bank CEOs acknowledge affordability concerns but emphasize balancing them with business realities.
- Both banks aim to offer competitive products while managing customer default risks and maintaining profitability.
Bank of America and Citigroup are considering launching new credit card products with a 10% interest rate. This move comes as both banks aim to meet President Trump’s demand to cap credit card interest rates at 10% for one year. Both banks, known for their large credit card portfolios, are evaluating ways to balance affordability with profitability.
Banks Evaluate New Credit Card Options
According to a Bloomberg report, both Bank of America and Citigroup are weighing introducing new credit card products with capped interest rates. These banks are exploring solutions to address the affordability issue raised by the Trump administration.
Solutions have been a key theme for both banks, as they seek ways to offer competitive products while complying with the proposed interest rate limit. The challenge lies in balancing the low interest rate with the risk of customer default.
Banks typically charge higher interest rates to cover potential losses from defaults. Offering cards with a 10% rate could result in lower profits for the banks, as they would need to manage the risk of non-payment.
Response to the President’s Demand and Industry Concerns
The pushback from major banks about the potential damage to their businesses has been strong. However, some banks, like Bilt, have already moved ahead with offering cards that adhere to the 10% cap, albeit for one year. This limited offer falls within the Trump administration’s proposed one-year timeline.
While banks have expressed concerns over the financial impact, many agree that affordability is a pressing issue. Bank of America and Citigroup are working to offer credit cards that cater to consumers while maintaining profitability.
“We too want to help out,” said one bank CEO, acknowledging that affordability is a concern, but it must be balanced with the economic realities of running a business. By managing the credit limits and offering the new 10% rate cards, banks aim to strike a balance between affordability and sustainable business practices.
The post Bank of America and Citi Explore New Credit Cards with 10% Interest Rate appeared first on Blockonomi.
Source: https://blockonomi.com/bank-of-america-and-citi-explore-new-credit-cards-with-10-interest-rate/