The debate over credit card interest rates has intensified as lawmakers propose a significant cap to alleviate the financial burden on consumers. With millions of Americans struggling under high-interest debt, this legislation aims to offer relief while sparking discussions on broader financial reforms.

A Bold Step Toward Consumer Protection and Economic Stability

Amidst rising concerns about consumer debt, Senators Bernie Sanders and Josh Hawley have introduced a bipartisan bill that proposes capping credit card interest rates at 10% APR. This initiative, supported by President Donald Trump during his campaign, seeks to provide meaningful relief to working families. However, experts caution that such a cap could have unintended consequences, including reduced access to credit for higher-risk borrowers.

The Current State of Credit Card Debt

Credit card interest rates remain near record highs despite recent Federal Reserve cuts. According to LendingTree, the average APR on credit cards in January 2025 was 24.26%. These elevated rates have led to substantial financial strain for many households. A Bankrate survey revealed that nearly half of credit card holders carry debt from month to month, contributing to the $105 billion in interest charged by credit card companies in 2022. Additionally, fees exceeding $25 billion further exacerbate the financial burden on consumers.

Historical Context and Public Support

The idea of capping credit card interest rates is not new. In previous years, both Sanders and Hawley proposed rate caps—Sanders at 15% in 2019 and Hawley at 18% in 2023. While these proposals did not gain enough support to advance, public sentiment remains largely favorable. A LendingTree survey found that 77% of Americans support a cap on credit card interest rates. However, this support has waned slightly from 80% in 2022 and 84% in 2019, indicating a shift in public opinion.

Implications of a Rate Cap

While the concept of a 10% rate cap may seem appealing, experts highlight the importance of considering the broader structure of credit products. Chi Chi Wu, a senior attorney at the National Consumer Law Center, warns that even with zero interest, other factors like fees can make credit expensive. Moreover, the proposal seems inconsistent with efforts to eliminate the Consumer Financial Protection Bureau (CFPB), which plays a crucial role in safeguarding consumers from predatory lending practices.

Industry Opposition and Alternative Solutions

The banking industry strongly opposes the rate cap proposal, arguing that it could limit access to credit for higher-risk consumers. Lindsey Johnson, president and CEO of the Consumer Bankers Association, asserts that there is no evidence that APR caps benefit consumers or save them money. Instead, they might be pushed into less-regulated, higher-priced alternatives like payday loans, which can have APRs exceeding 400%. Existing federal caps, such as the 36% limit under the Military Lending Act and the 18% cap for federal credit unions, illustrate the complexity of regulating interest rates effectively.

Challenges and Future Prospects

The path to enacting this legislation is fraught with challenges. Experts like Jaret Seiberg, a policy analyst for TD Cowen, suggest that stable pricing could hinder the advancement of such measures. Furthermore, the proposal may not provide immediate relief to those already burdened by existing debt, as the cap would likely apply only to new purchases. The fate of this legislation will depend on various factors, including inflation trends and continued political support.

Balancing Consumer Relief and Financial Stability

As policymakers weigh the benefits and drawbacks of capping credit card interest rates, the focus remains on finding a balance between offering financial relief to consumers and maintaining a robust credit system. This debate underscores the need for comprehensive financial reforms that address the root causes of consumer debt while ensuring fair and accessible credit options for all Americans.