A proposed 10% federal credit card interest rate cap would significantly reduce access to credit for millions of consumers nationwide, and even those with good credit scores who pay their bills on time will be affected by the rate cap, according to a new analysis of credit card data by the American Bankers Association.
The 10% Credit Card Interest Rate Cap by Sens. Josh Hawley (R-Mo.) and Bernie Sanders (I-Vt.) has made little progress in Congress, but the idea recently received a boost when President Trump proposed a one-year, 10% cap on credit card interest rates. To understand the effects of a cap, ABA analyzed data from credit card issuers accounting for about 75% of the market. Among the findings:
- 74%–85% of open credit card accounts nationwide would be closed or have their credit lines drastically reduced.
- At least 137 million cardholders – and up to 159 million – would no longer be able to use their cards.
- State-by-state analyses are consistent with the national data, indicating the pain from price caps would be felt in every corner of the country.
While the proposed rate cap aims to lower consumer costs, the new data demonstrates that it would instead undermine affordability by effectively eliminating the credit card as a spending tool and vital source of liquidity for tens of millions of Americans, according to ABA
“This new data is clear: interest rate caps lead to fewer options, higher costs and reduced access — especially for those who can least afford to lose their credit card.” ABA President and CEO Rob Nichols said. “We urge the administration and Congress to carefully consider the significant harm a rate cap would have on U.S. households and the broader economy. This is not the solution to the affordability challenge.”
Effects on cardholders
The impact of a 10% APR cap would go far beyond riskier borrowers, according to the ABA analysis. Most cardholders — including those who pay their balances in full each month — would face negative consequences such as tighter credit standards, lower credit limits, higher fees, reduced benefits and rewards, and fewer low-rate promotional offers.
Even cardholders with high credit scores would be affected:
- Among cardholders with VantageScores above 600, between 71% and 84% would see their accounts either closed or experience a sharp reduction in their credit limit.
- Many so-called “super-prime” borrowers with VantageScores above 780 also would be negatively impacted by a 10% APR cap.
Effects on affordability
While a 10% credit card interest rate cap may sound appealing on the surface, the data indicates that it would harm, not help, affordability for most Americans, ABA said. Key concerns include:
- Loss of access to highly regulated credit during emergencies, forcing consumers to less-regulated, and in many cases more expensive alternatives
- Reduction of rewards and benefits that help cardholders manage their finances responsibly
- Reduction in consumer spending power
- Harm to small businesses and the broader U.S. economy that depend on the nearly $3.6 trillion in annual spending on consumer credit cards.
