Economic issues were top of mind for voters in the 2024 presidential election. A recent Associated Press poll found that 39 percent of voters believed the economy was the most important issue facing the country, nearly double the second most popular selection (immigration, at 20 percent).
Specifically among financial matters, inflation was the top concern expressed in Bankrate’s recent Politics and Economy Survey. Interestingly — and perhaps ironically — there isn’t much a president can do to fight inflation. That tends to be the domain of the Federal Reserve, which has worked to bring inflation down from a peak of 9.1 percent in June 2022 (the highest reading since 1981) to 2.6 percent in October 2024, according to the Consumer Price Index.
Impact on the Federal Reserve
The president appoints the Fed chairperson, but after that, the Fed prides itself on being politically independent. The current chair, Jerome Powell, was appointed by then-President Donald Trump in 2017 and reappointed by President Joe Biden in 2021, making him a rare high-level holdover from both administrations. Powell’s term as Fed chair expires in May 2026.
A Fed chairperson can be removed for cause, but there is a legal gray area regarding whether the president has the authority to replace that individual at will, PBS reports. Trump clashed with Powell toward the end of his first term and the president-elect has indicated a desire for unprecedented oversight over interest rate policy. During a press conference on Nov. 7, Powell insisted he will not step down and said the president does not have the authority to fire or demote him. One of the president-elect’s senior advisors told CNN that Powell is likely to serve out the remainder of his term.
Whether Trump attempts to influence interest rate policy decisions — a big question we’ll leave for another day — economists say several of his policy positions, including higher tariffs, reduced immigration and deficit-financed tax cuts, have the potential to reignite inflation. Although to be fair, inflation stayed below 3 percent for his entire first term.
Impact on the Capital One/Discover merger
A second Trump presidency is likely to be much lighter on regulation than the past four years under Biden. One of the first dominoes that’s likely to fall is the approval of the Capital One/Discover merger. It was announced back in February 2024, but has been twisting in the legal wind, awaiting sign-off from the Fed and the Office of the Comptroller of the Currency. As recently as September, there was some saber-rattling that the deal might not go through, but those concerns will likely go away after Inauguration Day in January. In fact, Capital One and Discover’s stocks both surged immediately following the election results.
The merger’s effects on consumers are still unclear. Proponents say the combined entity — which will be the largest U.S.-based credit card issuer in terms of outstanding loans — will be better equipped to compete with industry titans such as Chase and Citi. Additionally, Discover is both a card issuer and a card network, which could lead to more innovation on the network side of things where Visa and Mastercard currently dominate.
The impacts on rewards are less certain. Discover’s bread-and-butter has been cash back cards (a category it essentially invented in the mid-1980s) while Capital One has sought to move more upmarket into the premium travel rewards space after beginning with more of a subprime focus. My best guess is that these cards’ value propositions won’t change much if the merger is ratified.
Those concerned about the merger mostly focus on Capital One and Discover — despite efforts to diversify their respective businesses — both being prominent players in the subprime card space. Their worry is that, by joining forces, this could lead to higher fees and/or reduced access to credit for customers with lower credit scores.
Impact on the Consumer Financial Protection Bureau
Trump has long been an outspoken critic of the CFPB and took steps to de-fang the agency during his first term. Enforcement actions plummeted as the watchdog mostly sat idle. Unlike the Fed, a president can fire the CFPB director at will. It seems unlikely Trump will keep current director Rohit Chopra on the job.
The CFPB has been particularly aggressive in recent months, emboldened by a May 2024 Supreme Court ruling that validated its funding structure and attempting to make as much an impact as possible before the winds of change sweep through Washington. Still, the Trump Administration could seek to undo some of these recent decisions.
In particular, I expect the proposed credit card late fee cap to be scrapped. This would have reduced the typical late fee from an average of $32 to just $8. Banks fought the rule in court and won a temporary injunction from a federal judge. That hold will likely become permanent following the presidential transition.
Over the next four years, I doubt the CFPB will take an aggressive stance to police the financial industry. There are likely sighs of relief in conference rooms across the financial industry, but whether this is a good thing for consumers remains to be seen — and could even depend on your personal politics.
By the way, it’s not just the large, longstanding financial titans who stand to benefit from a lighter regulatory touch. Up-and-coming fintechs focused on earned wage access and buy now, pay later financing have chafed at some of the CFPB’s recent initiatives and could be among the biggest beneficiaries of reduced scrutiny. The cryptocurrency industry is another example; Trump has transformed from a crypto skeptic into a crypto supporter.
Impact on credit card rates
Trump seems to pride himself on being unpredictable, and one area where he has been talking surprisingly tough about the financial industry is on the subject of a credit card rate cap.
“We’re going to put a temporary cap on credit card interest rates at 10 percent,” he said during a Sept. 18 campaign stop. “We can’t let people have to pay 25 percent and 22 percent interest because they can’t afford to pay off their credit card.”
Shockingly, this is significantly more aggressive than the 15 percent cap proposed by Sen. Bernie Sanders and Rep. Alexandria Ocasio-Cortez in 2019. Payments Dive reports that an interest rate cap would require Congressional action and is likely to stall out quickly, just as the Sanders/Ocasio-Cortez bill did. The same inaction resulted from Republican Sen. Josh Hawley’s 2023 efforts to cap credit card rates at 18 percent.
Any of these rate caps — most of all Trump’s 10 percent idea — would significantly upend the credit card market. While lower rates would benefit the half of credit cardholders who carry debt from month to month, rate caps would greatly limit card issuers’ profit margins and would almost surely cause substantial cutbacks in access to credit and rewards.
Impact on the Credit Card Competition Act
A similar example is the Credit Card Competition Act, a piece of bipartisan legislation introduced in 2022. The brainchild of liberal Sen. Dick Durbin, it’s intended to give merchants more say over how credit card transactions are processed, with the implication that fostering more competition will cut into the Visa/Mastercard duopoly and reduce interchange fees (the 2 to 3 percent levy that merchants pay card companies every time a customer pays with a credit card).
Durbin found a surprising amount of Republican support — including from Sen. J.D. Vance, the vice president-elect, who signed on as a co-sponsor but has reportedly soured on the bill’s merits. The Credit Card Competition Act sounds friendly enough, but I fear unintended consequences, such as lower rewards, reduced access to credit and diminished data security. Further, merchants would likely just pocket any savings. That’s what happened after the Durbin Amendment capped debit card interchange fees in 2010. A mere 1 percent of retailers lowered prices, according to the Richmond Fed.
The bottom line
That Trump, Sanders, Ocasio-Cortez and Hawley find commonality on the subject of credit card rates is a potential indicator that the next four years may not follow the usual political script. American Banker notes that Trump’s populist leanings don’t always fit the traditional thinking that Republicans are all about free markets and laissez-faire approaches to financial regulation. It will be important to keep a close eye on these and other personal finance issues in the coming years, especially since voters named the economy as their top priority.
Have a question about credit cards? E-mail me at [email protected] and I’d be happy to help.
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