Hawaii Businesses Should Monitor Potential Credit Card Rate Cap Impact on Financing and Consumer Spending

Executive Brief

A proposed one-year cap on credit card interest rates at 10%, announced by former President Donald Trump on January 10, 2026, could significantly alter borrowing costs for businesses and consumer spending patterns across Hawaii. While the specifics of implementation remain unclear, businesses should prepare for potential shifts in credit availability, financing costs, and overall consumer purchasing power that may affect operations and investment strategies.

• Small Business Operators: Monitor credit line costs and consumer spending.
• Entrepreneurs & Startups: Assess impact on funding access and customer purchasing power.
• Investors: Watch for shifts in consumer debt markets and business financing.
• Real Estate Owners: Consider potential impact on buyer financing and tenant spending.
• Tourism Operators: Observe potential changes in tourist spending habits.
• Action: Watch for official policy details and consumer credit trends.

The Change

On January 10, 2026, former President Donald Trump announced a proposal to cap credit card interest rates at 10% for a one-year period, reportedly set to begin on January 20, 2026. The announcement lacked specific details on how such a cap would be implemented, enforced, or whether it would apply to existing or only new credit card agreements. Historically, credit card interest rates have fluctuated significantly and often far exceeded this proposed cap, especially for consumers with lower credit scores or for businesses utilizing business credit cards.

Who's Affected

Small Business Operators

Many small businesses rely on business credit cards or lines of credit for managing operational expenses, inventory, and cash flow. A mandated cap on interest rates could reduce the cost of financing for some, particularly those carrying balances. However, it could also lead to tighter credit availability if lenders perceive increased risk or reduced profitability. If consumer spending tightens due to reduced access to cheaper credit, businesses in retail, food service, and other consumer-facing sectors may see a slowdown.

Entrepreneurs & Startups

Startups often depend on credit lines for initial capital, bridging funding gaps, and managing growth. Lower interest rates on credit cards could ease some financing burdens. Conversely, a broad rate cap might cause lenders to reassess risk profiles, potentially making it harder for early-stage companies with unproven business models to secure funding. Furthermore, a reduction in consumer discretionary spending, if it occurs, could impact revenue for startups relying on direct sales.

Investors

Investors, particularly those focused on the financial sector, will need to monitor how this proposed policy impacts bank profitability and lending strategies. A significant reduction in interest income from credit card portfolios could affect financial institutions' bottom lines, potentially influencing their investment strategies or their willingness to lend to businesses. For venture capital and angel investors, the ripple effects on consumer spending and business financing could influence the types of ventures that appear most attractive for investment.

Real Estate Owners

While not directly financing real estate, many consumers and small businesses use credit cards for renovations, down payments, or related expenses. A change in credit card interest rates could influence consumer confidence and purchasing power, indirectly affecting demand for rental properties or sales of smaller commercial spaces. If lenders tighten credit overall, it could impact buyers' ability to finance purchases, potentially slowing down real estate transactions.

Tourism Operators

Hawaii's tourism industry is heavily reliant on consumer spending. If a 10% cap on credit card rates leads to broader credit tightening or reduces discretionary income for potential travelers, it could impact visitor numbers or their spending on accommodations, dining, and activities. Conversely, if it frees up disposable income for some consumers, it might provide a modest boost. The net effect will depend on the broader economic response and how consumers adjust their spending habits.

Second-Order Effects

A proposed cap on credit card interest rates, if implemented, could trigger a cascade of effects in Hawaii's unique economic landscape. Lenders, facing potentially compressed margins on credit card products, might reduce the availability of unsecured credit or increase rates on other forms of lending to compensate. This reduced credit availability could disproportionately affect small businesses and startups that lack robust collateral or established credit histories. Consequently, businesses that depend on consumer spending might face slower sales if consumers have less accessible credit or prioritize essential spending. In the long term, tight credit conditions, coupled with high operating costs in Hawaii, could stifle entrepreneurship and slow the expansion of local businesses.

What to Do

Small Business Operators

Action: monitor consumer credit trends and business borrowing costs.

• Action: If you utilize business credit cards, review your current balances and evaluate potential alternative financing options or strategies to pay down debt before any potential tightening of credit markets. Analyze your sales data for shifts in consumer spending patterns over the next 30-60 days.

Entrepreneurs & Startups

Action: assess the potential impact on funding and customer acquisition.

• Action: Review your cash flow projections and assess your reliance on credit financing. Connect with current and potential investors to gauge their perspective on these proposed changes and their implications for startup funding.

Investors

Action: track financial sector responses and consumer debt market adjustments.

• Action: Monitor reports from financial institutions and credit bureaus regarding changes in lending practices, interest rates on various credit products, and consumer credit utilization. Consider how these shifts might affect portfolio company valuations and investment risks.

Real Estate Owners

Action: observe trends in consumer financing and local spending.

• Action: Keep an eye on interest rate trends across mortgage and other loan products, as well as local consumer spending indicators. If significant shifts occur, re-evaluate lease terms or property financing strategies.

Tourism Operators

Action: watch for changes in traveler spending and booking behavior.

• Action: Analyze booking data and visitor spending patterns. Be prepared to adjust marketing strategies or pricing if consumer discretionary spending shows signs of contraction or shifts in preference.