President Donald Trump took office on Jan. 20, and has spent his first several weeks issuing a flurry of directives that have major effects on consumers’ wallets. Let’s take a look at some of the biggest impacts for everyday consumers.
Have a question about credit cards? E-mail me at ted.rossman@bankrate.com and I’d be happy to help.
Tariffs
The most explosive economic development of Trump’s second term so far was the announcement of tariffs on Canada, Mexico and China, although the Canada and Mexico tariffs were quickly delayed until early March.
If fully implemented, these additional import taxes (25 percent on most Canadian and Mexican goods and 10 percent on Chinese products) are likely to lead to higher prices for everyday Americans, economists say. These tariffs will probably make it harder for the Federal Reserve to bring inflation down to its 2 percent target and could lead the Fed to keep interest rates higher for longer. The American tariff on Chinese goods has already taken effect and China rapidly retaliated with tariffs of its own.
Then, on Feb. 26, the president indicated that a 25 percent tariff is coming soon for goods produced within the European Union.
The vast majority of economists say trade wars are bad for consumers. Trump has acknowledged Americans could feel “some pain,” but he believes tariffs are a necessary negotiating tool that will promote U.S. manufacturing and enhance border security.
Why this matters to you
Inflation was Americans’ top economic issue during the campaign and prices have remained stubbornly high. Tariffs have the potential to make inflation worse. The University of Michigan’s widely-watched consumer sentiment index has fallen “in large part due to fears that tariff-induced price increases are imminent.”
Credit card rates
The average credit card charges 20.09 percent, a figure that has only come down slightly from a record-high 20.79 percent set in summer 2024. On the campaign trail, Trump called for a temporary 10 percent cap on credit card interest rates. In February, Senators Bernie Sanders (I-Vt.) and Josh Hawley (R-Mo.) introduced a bill which would do exactly that.
The financial industry will fight this vigorously, pointing out that such a cap would greatly limit their profitability and would likely lead to substantial cutbacks in access to credit and rewards programs. This issue is emblematic of the populist wave sweeping through Washington. Sanders (one of the most progressive members of Congress) and Hawley (one of the most conservative) rarely vote alike, yet they’re finding commonality on this issue. Trump’s role is surprising, too, since his administration is expected to offer a much lighter regulatory touch in most areas — credit card rates could be a big exception.
Why this matters to you
About half of credit cardholders carry debt from month to month, according to Bankrate’s Credit Card Debt Survey. With a current average interest rate of about 20 percent, it’s easy to see the appeal of a 10 percent cap. But, while it would be great to lower those bills, it could lead to unintended consequences including reduced access to credit for millions of people, higher card fees and the demise of rewards programs.
Without the protection of higher interest rates for less-qualified, lower credit score applicants, issuers could decide to stop approving these applicants for cards at all, leaving them less able to access needed credit.
Another unfortunate consequence could be cutbacks on credit card rewards programs. Issuers offset these lucrative travel and cash back programs in part with interest charges they collect.
Consumer Financial Protection Bureau (CFPB)
The only surprise surrounding Trump’s firing of Consumer Financial Protection Bureau Director Rohit Chopra was that it took place nearly two weeks after Inauguration Day, rather than on day one. Trump has long been a vocal critic of the CFPB’s policies and even its very existence. During his first term, he installed passive leadership at the organization and enforcement actions plummeted.
We probably won’t see much bite from the CFPB over the next four years, following an activist stretch during the Joe Biden presidency. In fact, on Feb. 8, interim CFPB director Russell Vought (who also serves as director of the Office of Management and Budget) essentially instructed CFPB staff to stop doing anything. Among other things, the CFPB is no longer pursuing an $8 credit card late fee cap (this Biden-era regulation had been halted by a federal judge and the bureau isn’t pushing for it anymore). Other recent regulations (concerning overdraft fees; buy now, pay later loans; and earned wage access products, among others) could well be rolled back or abandoned.
Jonathan McKernan has been nominated for the permanent CFPB director position. Assuming he is confirmed by the Senate, it’s possible that activity will pick up, but I wouldn’t count on it. The CFPB was rather toothless during Trump’s first term and the administration seems even less inclined to pursue these kinds of consumer protection initiatives this time around.
The CFPB has been a political lightning rod since its inception 14 years ago. Critics say it’s a rogue government bureaucracy with too much power and too little oversight. Proponents say it has protected Americans from greedy financial institutions and returned billions of dollars to wronged consumers. Right now, it appears to be on life support.
Why this matters to you
With the nation’s largest consumer protection agency apparently idled, who is watching out for your financial interests?
The “submit a complaint” page remains active on the CFPB website, but it’s unclear whether anyone is pursuing the resolution of submissions.
Federal Reserve
During a Jan. 23 speech to the World Economic Forum, Trump demanded that the Federal Reserve lower interest rates immediately. Shortly thereafter, he backed off that rhetoric, saying he agreed with the Fed’s decision to keep interest rates steady at its Jan. 28-29 meeting. It’s not surprising that Trump wants lower rates, given his prior career as a successful real estate developer and his current position as a president especially concerned about the fate of the stock markets (good luck meeting a developer or stock investor who wants higher rates).
During his first four years in office, Trump clashed at times with Fed Chairman Jerome Powell, a Trump appointee who was a rare holdover through the Biden years. Powell’s chairmanship isn’t scheduled to end until May 2026. The Fed prides itself on political independence and the president is not allowed to fire the Fed Chairman at will. Some say Trump could test that policy in court, but the expectation is that Powell will finish his term.
There’s some speculation, fueled by Treasury Secretary Scott Bessent, that Trump could appoint a “shadow Fed,” a high-ranking official or group of officials technically under Powell’s leadership who could advance a different agenda, including one who could perhaps be viewed as Powell’s successor-in-waiting.
Why this matters to you
The Fed is a deeply influential government agency, tasked with promoting maximum employment and stable prices. It effectively sets the price of money through its interest rate decisions.
Those decisions have an impact on everything from inflation rates to how much you pay in loan interest, both of which can have dramatic implications for your wallet.
Capital One/Discover merger
It has been just over a year since Capital One announced its intent to acquire Discover for $35.3 billion, a move which would make Capital One the largest U.S. credit card issuer. The deal has been stalled in regulatory review ever since, although Capital One recently revealed that it expects the transaction to close in early 2025.
Details of the integration remain sparse. Capital One has said it will gradually move some of its existing Visa- and Mastercard-branded cards over to the Discover network, and it has signaled plans to expand Discover’s international acceptance.
Effects on rewards and specific cards are less certain. Discover’s credit card strategy has traditionally focused on cash back rewards and “prime revolvers” (people with good credit scores who carry debt from month to month). Capital One has moved upstream from its subprime roots (although it and Discover both still have sizable subprime business lines, which has been a sticking point in the merger approval process). In recent years, Capital One executives have espoused a “heavy spenders” philosophy, looking to court more affluent rewards chasers with premium travel rewards cards and benefits such as proprietary airport lounges.
Once the merger closes, I’m not expecting big changes to card offerings or rewards structures right away. I believe the Discover network is the most attractive component of the acquisition, from Capital One’s perspective. I suspect they’re trying to become more like American Express, in trying to attract a higher-end clientele and serving as both a lender and a card network.
Why this matters to you
Combined, Capital One and Discover will be America’s largest credit card issuer. There’s a good chance you have an account with one or both of these organizations. Will your Discover card become a Capital One card? We don’t know yet, but it’s safe to say that this merger could have significant impacts on the millions of cardholders across both issuers.
No taxes on tips
Another popular campaign talking point was no longer charging federal income taxes on tips. The Trump Administration seems to be following through, planning to include this proposal in the budget reconciliation process that can implement broad changes with a simple majority in Congress (taxes, energy and the border seem to be at the top of the present wish list). This is potentially a big win for tipped employees such as restaurant waitstaff, although I am concerned about the unintended consequences.
There has been a tipping backlash in recent years, with about six in 10 Americans holding at least one negative viewpoint toward the practice. More than a third believe tipping culture has gotten out of control, lamenting “tip creep” (being asked to tip in previously unconventional settings) and pre-entered tip prompts that pop up on checkout screens. Since 2021, Americans have steadily tipped less frequently for services ranging from restaurant dining to haircuts, taxis/rideshares, food delivery and more. They’re annoyed about tipping and inflation has cut into their purchasing power.
Tipped workers are in a precarious position. The federal tipped minimum wage is just $2.13 per hour. It hasn’t changed since 1991, although some states and cities have enacted higher thresholds. Service industry workers often have difficult jobs and relying on the whims of your customers isn’t an easy way to make a living. If people tip less or if business is slow, workers lose out.
No longer taxing tips could also encourage more businesses to classify their employees as tipped workers, perhaps trading a more stable salaried income for a more whimsical tipped income. Paying fewer taxes sounds great, but that doesn’t necessarily work out in the worker’s favor if the overall pot of money is shrinking. Also, could high-paid executives exploit a potential loophole and receive large tax-free bonuses disguised as tips, adding to the federal deficit? A lot still needs to be sorted out here.
Why this matters to you
Tens of millions of Americans receive tips as part of their wages. If you’re among them, your tax situation might be about to change in a big way.
Credit card interchange fees
The Credit Card Competition Act is a bipartisan piece of legislation first introduced in the Senate and the House of Representatives in 2023. It seeks to lower credit card processing (interchange) fees paid by merchants by giving retailers more choice over card network selection. Senator Dick Durbin (D-Ill.), the primary architect of the bill, believes Visa and Mastercard operate a duopoly that forces merchants (and in turn consumers) to pay higher fees. The CCCA, if enacted, would mandate that at least two card networks are enabled for each transaction and merchants can choose which one to use.
The financial industry is against the proposal, saying it could undermine rewards programs, access to credit, data security and consumer choice. The bill has been twisting in the wind for a couple of years. It seemed to gain momentum in late 2024, headlined by a November hearing in which senators from both parties warned Visa and Mastercard that they need to play nicer with merchants — or else. They implied that, without an agreement that is palatable to all sides, the CCCA or similar legislation could bring substantial changes within the next few years.
There haven’t been any notable public-facing developments since the November hearing, but I believe the card networks would be wise to heed the politicians’ warnings. Some relatively small concessions now could ward off bigger changes in the future. Similar to the effort to cap credit card rates, there’s a surprising amount of bipartisan agreement on this issue. There is a perception among many politicians and voters that Wall Street is ganging up on Main Street.
Why this matters to you
Merchants say they will lower prices if interchange fees fall, but only 1 percent did so when debit interchange fees declined in 2010, according to the Federal Reserve Bank of Richmond. Lower interchange fees could save retailers money but cut into rewards and other consumer benefits.
The bottom line
Trump seems to pride himself on being unpredictable, and that’s exactly what’s happening with many of these financial issues. They aren’t playing out according to traditional party lines. The next four years won’t be boring, that’s for sure. Issues such as inflation, interest rates, taxes and payment methods impact all Americans and there are a lot of balls in the air. At Bankrate, we’ll continue to track these important developments to interpret what it all means for your wallet.
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