10% Credit Card Interest Rate Cap to Force Immediate Reassessment of Business Financing and Consumer Credit

President Donald Trump announced on January 10, 2026, a proposal for a one-year cap on credit card interest rates at 10%, set to take effect on January 20, 2026. While details on enforcement mechanisms remain scarce, the announcement signals a significant potential shift in the cost of capital for businesses and individuals across Hawaii, necessitating an urgent review of current financial strategies.

The Change

Effective January 20, 2026, credit card interest rates are slated to be capped at 10% for a one-year period. This federal proposal, if implemented, overrides existing variable rates which often exceed 20% and even 30% APR. The immediate goal appears to be reducing the burden of debt on American consumers and businesses. However, the practicalities of implementation, compliance enforcement, and the exact legal framework for imposing such a cap are yet to be detailed.

Who's Affected

Small Business Operators: Businesses that utilize credit cards for operating expenses, inventory purchases, or managing cash flow will see a dramatic reduction in their cost of capital if they carry balances. This could free up operating margins, but may also lead lenders to tighten credit availability or impose stricter terms for new credit lines. Businesses that rely on credit card payments from customers will likely see more disposable income for consumers, potentially boosting sales.

Real Estate Owners: Property owners and developers who use business credit cards for construction materials, project financing, or property management expenses will benefit from lower interest costs on outstanding balances. This could improve project profitability. However, lenders may become more risk-averse, potentially impacting the availability of construction loans or other forms of credit related to real estate development.

Investors: Investors in credit card companies and financial institutions that derive substantial revenue from interest income will face significant valuation challenges. Companies heavily invested in consumer lending portfolios may see reduced profitability. Conversely, investors betting on increased consumer spending due to lower debt servicing costs could see opportunities in retail and other consumer-facing sectors.

Entrepreneurs & Startups: Startups and growth-stage companies often rely on credit lines and credit cards to bridge funding gaps and manage operational expenses. A lower interest rate cap directly reduces their cost of financing. However, this could also lead to a contraction in the readily available credit market for early-stage companies perceived as higher risk, potentially making it harder to secure initial or growth capital if lenders become more conservative.

Tourism Operators: Hotels, tour companies, and other hospitality businesses that carry credit card debt for operational expenses or seasonal inventory will benefit from reduced interest payments. Increased consumer purchasing power due to lower debt burdens could also translate to higher spending on travel and leisure activities in Hawaii. However, suppliers may face tighter payment terms from businesses that now have more cash available. Hawaii Tourism Authority

Second-Order Effects

Lower credit card interest rates could stimulate consumer spending, which is vital for Hawaii's tourism-dependent economy. Increased disposable income for residents and visitors translates to more spending on hotels, dining, and attractions. This increased demand, however, could exacerbate existing labor shortages in the service sector, potentially driving up wages as businesses compete for staff. Furthermore, a significant reduction in credit card interest revenue for financial institutions might lead them to increase fees on other services or tighten lending standards overall, impacting sectors beyond direct credit card users.

• Reduced borrowing costs for businesses → Increased cash flow → Potential for wage increases in high-demand sectors.
• Higher consumer disposable income → Increased tourism spending → Pressure on local businesses to scale operations and manage supply chains.
• Reduced profitability for credit card issuers → Potential for tighter credit availability for high-risk borrowers (e.g., startups, small businesses in vulnerable sectors).

What to Do

Given the immediate effective date of January 20, 2026, businesses and investors need to act swiftly.

Small Business Operators:

• Action: Immediately review all outstanding credit card balances. Prioritize paying down high-interest debt to a minimum before January 20, if possible, to capitalize on the lower rate for any remaining balance. For new credit needs, consult with your business banker to understand revised lending criteria. Assess if reduced debt service costs allow for reinvestment in operations or staff.

Real Estate Owners:

• Action: If carrying credit card debt for projects, factor the 10% cap into your project's cost-benefit analysis for the next year. Renegotiate payment plans with suppliers if your cash flow improves due to reduced interest expenses. Monitor lender communications for any shifts in credit availability or terms for real estate financing.

Investors:

• Action: Re-evaluate portfolios with exposure to credit card companies and consumer lenders. Consider hedging strategies or diversifying into sectors expected to benefit from increased consumer spending. Analyze the capital requirements and credit access for your portfolio companies to ensure they are not overly reliant on potentially restricted credit lines.

Entrepreneurs & Startups:

• Action: If you have outstanding credit card debt, ensure it is recognized under the new cap. For future funding needs, proactively engage with lenders and discuss alternative financing options sooner rather than later, as credit availability may tighten. Explore non-debt financing if possible, and update financial models to reflect lower interest expenses and potentially more conservative credit market conditions.

Tourism Operators:

• Action: Analyze current outstanding credit card balances and anticipate savings on interest payments. Adjust marketing and operational budgets to reflect potential increases in consumer spending power. Communicate with suppliers about potential changes in payment cycles or demand.

Action Details

For all affected roles: Review all credit card statements and financing agreements by January 17, 2026. For those with outstanding balances, focus on minimizing carry-over debt before January 20th. For any newly required financing, prepare to explore options with lenders who may adjust their risk assessment and credit availability policies on short notice, as the exact enforcement and lender reaction remain uncertain. Consult with financial advisors to model the impact on your specific situation and explore proactive strategies to leverage potential savings or mitigate new credit access challenges.