How Would a 10% Cap on Credit Card Rates Impact the Travel Industry?

For the past few years, momentum has been building from some corners of politics around the idea that a cap on credit card interest rates would help increase affordability for Americans—a population that is increasingly struggling with it.

The most concrete move in that direction came in early 2025, when bipartisan legislation was introduced by Senator Bernie Sanders (I-VT) and Senator Josh Hawley (R-MO) that proposed a five-year cap on interest and fees. While the proposal has not passed the Committee on Banking, Housing, and Urban Affairs since its introduction, the topic surged to the forefront again last month.

In January 2026, nearly a year after that legislation was first introduced to cap credit card annual percentage rates (APR) at 10%, momentum began to build again following a social media post from President Trump calling for a one-year, 10% cap on credit card interest.

For the travel industry, a hypothetical 10% cap on credit card interest rates could have a monumental impact on spending. Experts speaking to TMR this week said that the consequences might not only damage American travel spend, but could also cut into the rewards programs that make travel more affordable for so many.

How Would Banks React?

Speaking to Travel Market Report, Ano Kuhanathan, Head of Corporate Research at Allianz Trade, explained that a 10% APR cap (down from today’s average of roughly 21%) would fundamentally change how banks view their customers. Instead of just lowering the cost of debt, Kuhanathan warns that banks would likely “ration” credit to mitigate their own risk.

“The first casualty would be deferrable discretionary spending,” Kuhanathan told TMR. “Mid-market international trips would get postponed, shortened, or swapped for cheaper domestic alternatives.”

To understand why a 10% cap is so threatening to travel, Kuhanathan told TMR it is important to look at the two economic engines of a credit card: the transaction function (swipe fees) and the credit function (interest).

While the transaction side barely breaks even for most issuers, the credit function—the interest paid on balances—is the big profit driver. By capping that interest at 10%, Kuhanathan explains, banks would likely be forced to re-balance their business models in ways that directly hit the traveler’s wallet.

“Issuers have to re-balance the P&L elsewhere: fewer/lower-risk accounts, lower limits,” Kuhanathan told TMR. For the travel industry, this means the “credit bridge” that many families use to finance a big-ticket vacation could be dismantled almost overnight.

Kuhanathan predicts that if banks are forced to lower their delinquency rates to compensate for lost interest income, the vast majority of credit reductions will fall on the bottom 60% of earners.

How Would Reward Programs Change?

Beyond the tightening of credit, a 10% cap threatens the rewards programs that many Americans now view as a lifeline to pay for their travel. Recent data shows that 31% of travelers specifically plan to use rewards and points to fund their 2026 trips.

Kuhanathan explained to TMR that because the swipe fees rarely cover the cost of today’s premium travel points on their own, banks rely on interest income to subsidize those perks. And, “when interest income is compressed, rewards become one of the fastest levers to restore unit economics.”

For travelers, this could mean reduced reward rates, higher annual fees, or perks being “gated” behind higher spending tiers. The scale of this shift could be enough to fundamentally alter travel volume in the U.S. According to the U.S. Travel Association, a 10% decrease in the value of travel rewards could result in 1.5 million fewer annual trips taken by Americans.

“Given the very large number of trips that are booked with points currently, even a 10% cut in rewards could lead to a drop of over a million trips,” Kuhanathan warned.

What Traveler Would this Hit the Hardest?

The cap’s burden would likely be “regressive” within the travel market, too. While high-net-worth credit card holders who pay their monthly balances in full would likely be protected as banks fight to keep their business, middle-class families who rely on both credit availability and rewards to bridge their “affordability gaps” would be hit from both sides.

In 2026, the ‘middle quintile’ of earners consists of households making between roughly $62,000 and $101,000 annually—the group Kuhanathan suggests would be most affected by a contraction in credit and rewards

“High-net-worth ‘transactors’ would be relatively insulated on access,” Kuhanathan noted. “But middle and lower-middle consumers…would be hit by both tighter credit and weaker earn rates.”