Proposed 10% Cap on Credit Card Rates Gains Bipartisan Support in U.S. House

The American consumer has a problem with credit card debt. Credit card balances grew by $45 billion during 2024’s fourth quarter to reach a total of $1.21 trillion, according to a report from the Federal Reserve Bank of New York. The quarterly increase in credit card debt was more than four times the increase the Fed observed in any other debt category, including mortgage, auto, and student debt.

Rather than addressing the drivers that can cause consumers to go into debt, such as inflation and stagnating wages, some lawmakers are targeting the tools people use to make payments — namely, credit cards — to remedy consumer debt problems.

Earlier this year, Senators Bernie Sanders (I-VT) and Josh Hawley (R-MO) introduced a bill to cap credit card interest rates at 10%. They’ve found bipartisan support in the House of Representatives, where Alexandria Ocasio-Cortez (D-NY) and Anna Paulina Luna (R-FL) have introduced legislation that would immediately place a 10% cap on card interest rates.

“Credit cards with high interest rates regularly trap working people in endless cycles of debt,” Ocasio-Cortez said in a press release announcing the bill. “At a time when families are struggling to make ends meet, we cannot allow big banks to shake down our communities for profit.”

President Donald Trump expressed support for a cap on card interest rates while campaigning in the fall of 2024, which Ocasio-Cortez highlighted in her press release.

But nearly two months into his second term, it remains unclear where the cap stands on Trump’s list of priorities and whether he still supports it.

The average interest rate on a new credit card is 24.2%. Slashing that rate by more than half, to 10%, would realize savings for consumers who don’t pay off their card balances in full in a given month. 

“For too long, credit card companies have abused working class Americans with absurd interest rates, trapping them in an almost insurmountable amount of debt,” Luna said via a press release. “We need a fair solution — and that means getting rid of the status quo and putting a reasonable cap on interest rates.”

These comments by Luna and Ocasio-Cortez take a one-sided view of the issue. Neither lawmaker mentions the fact that card issuers aren’t in the practice of advising cardholders to avoid paying their card balances in full each month, which would allow them to sidestep interest rate charges. They also fail to mention the benefits cards bring to consumers.

Credit card companies can use the revenue they collect from interest payments to offer benefits such as rewards that provide consumers with travel perks and cash back on purchases. If card issuers are forced to comply with an interest rate cap, those benefits could shrink or go away altogether. 

Credit card issuers extend value to those looking to buy something today and pay for it later, and they require compensation for the services they provide. In the wake of a 10% cap, issuers may evaluate their underwriting practices and determine that it isn’t profitable to offer cards to many people who use them today.

We caught up with Mark Voronov, CEO and Co-Founder of SocialPlug, to gauge his thoughts on how a cap on interest rates could impact the card industry.

“If credit card interest rates were limited to 10%, the largest change won’t be in banking — it’ll be in consumer spending and how companies rethink their marketing strategies,” Voronov said. “When banks can’t raise more interest, they will be more selective in who they issue a credit card to. That means fewer approvals, lower credit limits, and less spending power in the market.”

Merchants may also struggle should a 10% interest rate cap come to fruition.

Under that scenario, banks may raise transaction fees to recoup lost revenue, Voronov told us.

“That means merchants — especially small eCommerce retailers — might have to raise prices or eat the cost,” Voronov said.

That said, Luna and Ocasio-Cortez — and Sanders and Hawley — may be onto something with their bill proposals. Until 2023, average credit card interest rates in the 21st century were less than 20%, per Federal Reserve Bank of St. Louis data.

Sanders and Ocasio-Cortez previously teamed up on an effort to limit card interest rates to 15% in 2019. Perhaps lawmakers can collaborate with credit card issuers to develop a solution for interest rates that ensures access to credit cards remains available for as many consumers as possible without negatively impacting cardholders who manage their credit responsibly.