ATLANTA — Add Delta Air Lines CEO Ed Bastian to those warning that a proposal floated by former President Donald Trump to temporarily cap U.S. credit card interest rates at 10% just won’t fly.
As The CU Daily has reported, Trump’s credit card APR cap proposal is supposed to go into effect Jan. 20, but with no guidance on how it would work — and with many analysts saying the president lacks the authority to implement such a cap — few expect the proposal to have much effect.
Speaking in an interview with Bloomberg, Bastian said the proposal could fundamentally disrupt the credit card industry and the financial partnerships that support airline loyalty programs.
“I think one of the big issues and challenges with the potential order is the fact that it would actually restrict the lower-end consumer from having access to any credit — not just what interest rate they’re paying — which would upend the whole credit card industry,” Bastian told Bloomberg.
Interest Pays for the Rewards
Airline loyalty programs are closely tied to co-branded credit cards issued by major banks, which rely on interest income and fees to fund rewards such as miles, upgrades and elite status benefits.
Those partnerships have become a critical source of revenue for airlines, in some cases generating income comparable to passenger ticket sales.
Industry executives have told numerous media outlets that a sharp reduction in allowable interest rates could force banks to reconsider how much credit they extend and how generous rewards programs can be. That, in turn, could weaken airline loyalty programs and reduce a stable and predictable revenue stream.
While its prospects are unclear, Bastian and other airline leaders say even a temporary cap could trigger lasting changes across both the aviation and financial sectors, according to Bloomberg.
