President Trump is floating a new proposal to cap credit card interest rates at 10%, giving companies until January 20 to comply. While supporters argue it could provide relief for consumers struggling with high-interest debt, banks and economists warn the plan could come with major trade-offs, including tighter access to credit.
Today, the average credit card interest rate in the United States is 23%, according to LendingTree. For many Americans carrying balances, that means they aren’t just paying down what they owe, but they’re also battling costly interest charges month after month.
Some consumers say the high rates aren’t a concern for them because they pay their balance immediately.
“Since I paid mine off immediately, I don't really think about the 26% interest rates on it,” Thomas Black, a consumer in Mesa, Arizona, said.
Others say emergencies and unexpected expenses can quickly push people into debt they never planned for.
“It’s stuff like air conditioning, you know, things that happen to your home that you've got to fix,” Cheryl Munoz, of Chandler, Arizona, said.
Trump’s proposal echoes similar calls from progressive lawmakers in past years, including Bernie Sanders and Elizabeth Warren. Some consumers say the idea of a cap is long overdue.
“I would think it would be amazing if that could be done,” Tomas Martinez, a consumer from Tempe, Arizona, said. “I think that the consumers, and, you know, the American people, would deserve to have a nice capped consumer rate. Ten percent sounds fair.”
Others question whether such a cap is realistic in today’s credit market.
“How do you do that, 10%, really? It’s not realistic,” Valerie Dirks of Chandler said.
Ted Rossman, senior financial analyst at Bankrate, says many Americans are already leaning on credit cards to cover essentials, and more people are carrying balances for longer periods of time.
“Roughly half of cardholders carry debt from month to month,” Rossman said. “Among those with debt, 61% have had it at least a year. That's up eight percentage points from a year ago. That's a pretty big one-year jump, and it really speaks to the overall affordability concern.”
Rossman warns that a rate cap could lead banks to dramatically tighten who qualifies for credit, potentially leaving the most vulnerable consumers with fewer options.
“I actually worry this 10% cap sounds better than it is, because the banking industry says that there would have to be dramatic cutbacks in access to credit,” Rossman said.
“If you're using credit cards to pay for that car repair or grocery bill, not that we want you paying 20% interest forever and ever, but if that credit card goes away, well, are you turning to a payday loan with a 400% APR?” he added.
Arizona State University economist Dennis Hoffman agrees the market could shift quickly and sharply if a cap were implemented.
“It’s likely to mean a lot less credit available to those folks,” Dennis Hoffman, an ASU W.P. Carey School of Business Professor of Economics, said.
Hoffman says the reduced access to credit could hit the hardest for families who rely on it for emergencies.
“It’s tough to pay higher rates for credit,” Hoffman said. “It's tougher if you don't have any access to credit.”
As Scripps News Group has reported, major banks, including JPMorgan Chase, Citibank, and Bank of America, have opposed the President’s demand. Hoffman says the proposal represents a shift away from how markets have traditionally been regulated in the U.S.
“This type of intervention, that's not typically what we have done in a free market capitalist economy known as the United States, historically,” Hoffman said. “So it's a new world for sure.”
For some consumers, the proposal sounds promising, but they remain skeptical about whether it will actually happen.
“In theory, it sounds good. We'll see!” Holly Solis, of Mesa, said.
While policymakers debate what’s possible, experts say consumers should still focus on creating a plan to pay down debt and use credit carefully.
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