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Klarna CEO backs Trump’s year-long plan to cap credit card interest rates.
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Sebastian Siemiatkowski says high rates trap low-income borrowers in costly debt.
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He says credit card rewards primarily benefit wealthier consumers.
Klarna CEO Sebastian Siemiatkowski has expressed support for President Donald Trump’s call to cap US credit card interest rates at 10% for a year.
“I think Trump is wise here and is proposing something that makes a lot of sense,” Siemiatkowski told CNBC on Monday.
Siemiatkowski said traditional credit cards are designed to pressure consumers to put most or all of their spending on credit and carry large balances at high interest rates. That structure, he said, incentivizes people to borrow as much as possible and leads to greater losses, particularly among low-income borrowers.
“Capitalism is great, but anarchy is not,” Siemiatkowski said, arguing that some limits are needed to protect consumers.
While some critics argue that buy now, pay later services can still encourage overspending, Siemiatkowski said Klarna relies on smaller purchases with fixed, interest-free payments.
He added that Klarna approves purchases in real time based on the customer’s current spending behavior, rather than income data that may be outdated. That approach, he said, leads customers to borrow less and miss payments less frequently.
In a separate interview with CNN, Siemiatkowski criticized credit card rewards programs, such as cash back and airline miles, saying they primarily benefit wealthier consumers, while lower-income borrowers bear more of the costs.
Even people who don’t use credit cards, he said, pay more for everyday products because merchants mark up prices to cover card fees, while wealthier shoppers get that money back through rewards.
“This is the most effective income redistribution program in the world,” Siemiatkowski told CNN.
Trump’s weekend call to cap interest rates for a year sparked a liquidation of major financial stocks on Monday, including Capital One, Synchrony Financial, JPMorgan and Citigroup.
Analysts at UBS and Goldman Sachs have warned that a 10% cap on credit card interest rates could backfire as lenders would reduce the availability of credit, making it harder for some consumers to get loans.
But there could also be some winners.
SoFi CEO Anthony Noto said Saturday that the proposal could steer consumers away from credit cards and toward personal loans.
Read the original article on Business Insider