With millions of Americans resorting to pay basic necessities like food and utilities with credit cards, a new bipartisan push to cap interest rates at 10% could save consumers as much as a $1,000 a year on interest and be a needed boost for struggling Americans. Vanderbilt Policy Accelerator estimates collective savings could total $100 billion per year.
The goal of lowering high APRs will not only help consumers save but potentially reduce the time needed to pay off debt. The bill, introduced by Sens Bernie Sanders (I) and Josh Hawley, has a fighting chance to pass because it is supported by President Donald Trump. However, the senators want the 10% cap to be at least 5 years while Trump favors a 1-year cap. The senators also want a transition to a permanent cap at possibly 15% but Trump backs only a temporary cap.
Clearly the senators’ version is more substantial than Trump’s temporary 10% for one-year because many credit cards already offer 0% interest for the first year then it goes up to 20% or higher. Still, the decades-long drive to cap credit card interest rate – without success – is long overdue especially at this time while the political winds favor affordability initiatives.
Critics are doubtful if Trump will put his full weight behind it and see his support as a political ploy to boost his record-low approval ratings. They say he’s already made this proposal as a campaign promise but hasn’t acted on it since taking office.
Could this time be different. We are hoping.
Sen. Elizabeth Warren, D-Mass., a longtime advocate of consumer protections for credit cards, told Trump that Congress could pass the proposed cap “if he will actually fight for it.”
Sen. Hawley said, “President Trump is right: working Americans are drowning in record credit card debt while the biggest credit card issuers get richer and richer by hiking their interest rates to the moon.”
APR rates are too high
Americans are drowning in a record $1.2 trillion in credit card debt which high interest APRs many consumers view as predatory lending. According to Federal Reserve data, credit card interest rates have skyrocketed since 2022, hitting an all-time high in the summer of 2024. Average credit card interest rates were at 19.65% as of Jan. 7, according to Bankrate’s tracking of weekly national average rates.
Banks’ warnings
It’s not surprising that the four largest banks JPMorgan Chase, Citigroup, Bank of America, and Wells Fargo — all are against the cap. They said they agree that affordability is an issue, but that limiting credit card interest rates isn’t the right approach to solve it. They say a cap could significantly restrict credit availability, force lenders to close millions of accounts, and diminish rewards programs.
Consumer protection groups say these warnings are scare tactics and that the banks would still be making large profits. Sen Sanders gave an example. A 28% interest rate on a credit card balance of $5,000 can cost a consumer as much as $11,000 in interest and take up to 24 years to pay off. With a 10% credit card interest rate cap, that consumer would save more than $7,200 in interest. The bank would still be able to make over $3,700 in profit from that consumer. It just wouldn’t be able to gouge them.
With a lower APR, it’s also a possibility that consumers would be more likely to use their credit card since they’d have an easier time paying down the interest.
Bank of America CEO Brian Moynihan told analysts, “We’re all in for affordability,” while presenting the argument why limiting credit card interest rates would have adverse effects.
It’s hard to believe that Bank CEOs are “all for affordability” when bank profits have consistently been between 15-30%, and in 2024 it surged to a whopping 79.5%. High interest rates have been largely responsible for those huge profit margins. If banks were “all for affordability” they should stop with the insincere rhetoric and lower their interest rates. Clearly, they can afford it.
It is true that banks could act on some of those warnings they’re threatening but that’s where federal bank regulators can make a difference and advocate for consumers.
Banks borrowing held to different standard than their customers
Banks can borrow money at less than 4% interest from the Federal Reserve yet the average interest rate consumers are forced to pay for credit cards is nearly 24%. Americans should also be reminded that when banks were on the verge of collapse in 2008 that caused millions of Americans to lose their homes, jobs and life savings, the taxpayers came to the rescue. The Federal Reserve gave these huge banks trillions of dollars in emergency loans at virtually zero interest.
Everyday Americans are struggling and it’s time that our politicians on both sides act on this bipartisan bill.
Americans pushed for years to get the powerful pharmaceutical industry to lower prescription drugs. Each year big pharma would come up with excuses after excuses. It was always a pipe dream, but Americans prevailed by exacting relentless public pressure.
We can do the same again with the powerful banking industry that for decades resisted any attempts at interest caps. Call your senators and representatives in Congress and say you support the 10% cap on interest for credit cards.
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