Senators Bernie Sanders and Josh Hawley have introduced a bill that would cap credit card interest rates at 10% for five years. The legislation aims to provide relief to consumers facing high interest rates, which currently average around 21.5%. The senators argue that working Americans are struggling with record credit card debt while card issuers continue to raise interest rates.
Senator Hawley stated, “Capping credit card interest rates at 10%, just as President Trump campaigned on, is a simple way to provide meaningful relief to working people.”
However, the banking industry opposes the bill, claiming it could restrict access to credit for millions of consumers. They argue that high interest rates are necessary to offset the risk posed by borrowers with poor credit histories. If the cap is implemented, companies might stop approving credit cards for individuals with unstable credit, potentially affecting lower-income and financially fragile Americans.
Greg McBride, a senior industry analyst at Bankrate, noted, “The truth is, a 10% cap would be really, really restrictive.
Credit card interest cap debated
Frankly, it just wouldn’t be profitable for card issuers.”
Without access to credit cards, consumers might turn to alternative forms of credit, such as “buy now, pay later” schemes or payday loans, which could lead to further debt accumulation and higher fees.
Critics argue that the credit card industry has previously exaggerated the negative consequences of regulatory measures. The 2009 Credit CARD Act, which restricted punitive fees and required advance notice for rate hikes, ultimately saved consumers money while still expanding access to credit. While a 10% cap might be overly ambitious, the proposal could catalyze discussions about more feasible caps, such as 20% or 30%.
Federal credit unions already have a cap on interest rates at 18%, and a 36% cap is in place for active-duty service members and their dependents. As the debate continues, lawmakers and industry leaders must balance consumer protection with the realities of financial risk and profitability. The proposed interest rate cap aims to provide financial relief to consumers but also raises concerns about the future availability and accessibility of credit cards.
