President-elect Donald Trump during his election bid vowed to cap credit card intertest rates at around 10%. Independent Sen. Bernie Sanders and Democratic Sen. Elizabeth Warren have said they support Trump’s proposal and are ready to work with him.
“While working Americans catch up, we’re going to put a temporary cap on credit card interest rates. We’re going to cap it at around 10%. We can’t let them make 25 and 30%,” Trump said.
Sanders, a long-time advocate for financial reform, said he also wants to cap credit card interest rates at 10%, a measure he argues is long overdue to protect consumers from predatory lending practices.
Warren, who is well-position to work on Trump’s proposal as the incoming top Democrat on the Senate Banking Committee, told reporters she sees this as an opportunity to work with Trump. “Bring it on,” she said.
Trump’s administration, according to insiders, is reportedly open to work with Sanders as part of a broader effort to address economic grievances among working- and middle-class voters.
Trump: make good on your campaign promise, it could save Americans thousands each year
Trump’s proposal is much welcomed to millions of Americans who are struggling to make payments on high credit card interest rates. Americans are holding Trump on his words and expecting that he makes good on his proposal, and that it doesn’t just end up in the dustbin of election empty-promises.
Trump ran on a populist platform to help raise some of the economic burdens and grievances among working- and middle-class voters. Keeping this campaign promise will show how sincere he is to this sector of Americans who voted for him.
Take a look at how this could help: the average American has racked up $6,500 in credit card debt, according to Experian data from the third quarter of last year. This means they’re paying $116 a month in interest rate payments at May’s average rate of 21.5%. But if interest rates were capped at 10%, they’d pay $54 a month in interest rate payments.
For millions of Americans, a 10% cap on credit card interest rate could translate to thousands of dollars in savings each year, which could be bigger than any tax break or tax credit the government offers – this is how monumental this proposal is, if passed. And it doesn’t cost the government a single cent.
Credit Cards: A mammoth business
Credit card debt is a widespread problem in the U.S. that often can lead to poor credit scores and even bankruptcy. Typically, people complain of high interest rates that can hover as high as 30%. The average credit card interest rate is 21.51% as of May 2024, according to the Federal Reserve.
The Federal Reserve Bank of New York reported a $27 billion surge in credit card balances in the second quarter of 2024, pushing the total outstanding balance to $1.14 trillion.
It’s a big business for banks. The Consumer Financial Protection Bureau estimates that, each year, Americans pay a whopping $120 billion in credit card interest and fees.
Lobbying against the possibility
While its clear how Americans clearly stand to benefit from an interest rate reduction, banks are already spinning the proposal as an impossible feat to pass Congress, that it could not pass legal muster or that it is counterproductive and could hurt lower income Americans.
Peter Schiff, chief economist and global strategist at Euro Pacific Asset Management, warned that the 10% interest rate cap would “destroy the entire industry.” “Trump just proposed his own version of price controls… Millions of Americans would lose their credit cards,” Schiff wrote on X.
“Government-imposed price controls on credit card interest rates would harm all cardholders, especially the lowest income Americans who these measures are intended to help,” an insider from the Consumer Banking Association told the New York Post. “This will result in credit cards only being given to consumers who have high income and credit scores who post little risk to card issuers.”
Not a risk to banks
While data shows credit is getting harder to come by, there is no direct correlation of it being linked to interest rates and it’s doubtful that banks will want to lose any business because there is little added risk for banks to offer lower interest rates than their current rates.
Furthermore, consumer advocates say that banks are making billions in profits each year and lowering interest rates will only cut into how much profit they would be making annually and not result in losses.
It’s smoke and mirrors – this argument against lowering interest rates to 10%. Americans are tired of exploitation and unfairness by major financial institutions that will charge high interest rates off credit card draws then at the same time, hand out super low interest rates on savings deposits, of which they use Americans’ money to make investments.
If enacted, a 10% cap on credit card interest rates would represent one of the most significant consumer protection measures in recent history. It would also be a victory for bipartisanship in Congress. The hope is that Trump will have the desire and fortitude to pressure conservatives within his own party to go against the Bank lobby that’s against this proposal. This same challenge applies to Sen Warren to rally Democrats to come on board.
This is a rare opportunity for these leaders, as well as both political parties and independents, to side with the American people. Call your congressional representatives and say that you support a 10% cap on credit card interest rates.
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