Proposal To Cap Credit Card Interest Rates At 10-Percent Causing Concern

President Trump has put making things affordable again at the top of his list recently, as he and Republicans brainstorm ways to bring down costs for Americans. A major problem in recent years has been credit card interest rates, and a massive increase in credit card debt. Wages have not risen as much as costs, interest rates have soared, and people have dug themselves under rocks from which they cannot dig out.

So, the President and Republicans have floated an idea of capping credit card interest rates at 10-percent. The idea on the surface is good, capping the rates helps people try to catch up from the massive mountains of debt they have accrued. But there are some issues with it as well, and concerns have been voiced by multiple people, including a former Texas congressman.

That would be former Woodlands-area Representative, and Chairman of the House Ways and Means Committee, Kevin Brady. In an article on Fox recently, Brady laid out why the idea could be a problem for working class Americans, especially younger people or people with bad credit.

"Price caps basically make it harder for those folks to get credit cards and to have access at all," Brady says.

In short, interest rates are there to counter the risks of issuing these loans essentially to people. They cover infrastructure cost, security, rewards programs, and tons of other minute details that would bore most people. They do this because many people default on credit cards. In 2024, U.S. banks wrote off around $46 billion in credit card debt. That was a 50-percent jump from 2023.

When you cap the rates at 10-percent, banks have to make up the money somewhere. They are a bank, after all. Their job is to make money, not lose it. That means higher fees, or the discontinuation of issuing cards too high-risk or low-income Americans. So, those higher-risk people then lose access to cards and a chance to build credit altogether.

But the solution is here, at least somewhat. It is called the free market. If the administration can have a little patience, and let the system work, it might correct itself in time.

"The free markets are working...these are basically unsecured loans with a high risk of default," says Brady. "But the market is working, and now there are dozens of cards with zero interest rates for as long as a year and a half."

Because without access to credit cards and an ability to build credit, people cannot begin to build a life. They cannot really build credit to buy a home or start a business. If they do have any credit, they likely get boxed into high rates.

So, letting the free market and zero-interest rate offers take over is the play. Instead of taking too big a step.

"It will allow people to build credit and start their lives after school, or launch that small business, without interest rate costs at all," Brady says.

But it is not just all on the free market. Brady adds financial literacy is very important and it starts by gaining it at a young age.