- A federal cap on credit card interest rates would reduce access to credit, not make it cheaper, as lenders respond by tightening standards and limiting availability for higher-risk borrowers
- Lower-income households, rural communities, and seniors would be hit hardest, since they rely most on unsecured credit and have the fewest alternative financial options
- Rate controls may promise large headline “savings,” but those benefits accrue only to borrowers who keep their credit, while many others are pushed out of the mainstream financial system
In a Jan. 9 post on Truth Social, President Donald Trump called for a one-year federal cap of 10 percent on credit card interest rates, declaring that Americans would no longer be “ripped off” by lenders charging rates of 20 percent to 30 percent or more. The proposal, which has since drawn widespread national media coverage and bipartisan interest on Capitol Hill, is being framed as a consumer-affordability measure — but its real-world consequences warrant closer scrutiny.
That tradeoff deserves far more attention than it is currently receiving. Lower-income families, rural communities, and elderly Americans would be the ones paying the price.
Recent Federal Reserve data show that average credit card interest rates are now slightly above 21 percent, with borrowers who carry balances typically paying effective rates of 22–23 percent. Some subprime borrowers and penalty-rate accounts can face substantially higher rates, in some cases approaching the mid–30 percent range. Against that backdrop, a 10 percent cap may appear to provide substantial relief. On a $5,000 balance, interest costs at today’s typical rates can run around $90 per month, compared with roughly $40 under a 10 percent ceiling.
But this arithmetic assumes a crucial condition: that the borrower still has access to the credit card.
Credit card debt is unsecured. There is no collateral — no house, car, or other asset — backing the loan. Like insurance, consumer credit is a business built on assessing and pricing risk. Higher interest rates reflect the real costs of defaults, fraud, servicing, and regulatory compliance. When the government suppresses those price signals by imposing a rate cap, lenders cannot accurately assess risk. The predictable result is not generosity but retrenchment: tighter standards, lower credit limits, and fewer consumers able to access mainstream credit.
Credit does not become cheaper. It becomes harder to obtain.
Credit rationing hits vulnerable Americans first
Even analysts explaining the proposal’s appeal to consumers have warned that it could make access to credit more difficult for lower-income borrowers. That concern is not speculative. When interest-rate caps bind, a broad body of research and historical experience shows that lenders respond by tightening standards, reducing credit limits, and withdrawing from higher-risk segments.
Affluent households with strong credit histories are least likely to be affected. They remain profitable even under restrictive rules. The borrowers pushed out are those with thinner credit files, volatile incomes, or past delinquencies — precisely the Americans most likely to rely on credit cards for emergencies.
Rural communities face fewer alternatives
Rural Americans are especially exposed to the unintended consequences of financial regulation. Federal Reserve research shows that many rural counties have experienced substantial declines in local bank branches and bank headquarters, leaving residents with fewer nearby community banks and fewer locally tailored credit options. When local institutions disappear, households and small businesses often must rely on more distant, online, or nonbank providers, which frequently come with higher costs, reduced convenience, and less flexibility.
In many rural communities, access to flexible, unsecured credit serves as an important financial buffer. Consider a family in Bladen County. The husband works at a local manufacturing plant. The wife is a nurse. They have two children and maintain a small part-time farm on 12 acres — selling produce when they can and absorbing the ups and downs that come with weather, equipment repairs, and fluctuating income. Their access to revolving credit is not a luxury; it helps cover emergency expenses, unexpected bills, or short gaps between paychecks.
Federal Reserve listening sessions in rural communities consistently find that when local banking options shrink, residents face fewer alternatives and greater financial strain. If a federal rate cap leads large issuers to tighten credit standards or reduce availability for higher-risk borrowers, rural families with limited local options may be hit hardest. In markets already marked by thin competition, price controls risk reducing access rather than expanding it. What appears as consumer protection in Washington can translate into fewer options and less financial resilience in rural North Carolina.
Seniors would quietly lose flexibility
Older Americans also stand to lose from a federal rate cap, though they are rarely mentioned in the debate. North Carolina’s mountains, coastline, and Sandhills region are popular retirement destinations, drawing seniors who often live on fixed incomes but remain active and independent. Many rely on credit cards not for discretionary spending but as a financial buffer for medical bills, home maintenance, or caregiving expenses that do not follow a predictable schedule.
Some of these seniors hold longstanding credit cards with higher interest rates but stable repayment histories. Under a strict rate cap, issuers are likely to reassess and close accounts that appear less profitable or carry perceived risk, even when balances are modest. The result would be fewer options for retirees at precisely the stage of life when financial flexibility matters most.
A “temporary” cap magnifies the disruption
Supporters often emphasize that the proposed cap would last only one year. In reality, that would make the disruption more severe. Credit card portfolios are designed for long-term risk management. Issuers cannot realistically reprice, redesign, and re-underwrite their products for a 12-month window.
The rational response to temporary price controls is to pause lending, cut exposure, and wait. That kind of sudden contraction harms marginal borrowers immediately.
Proponents of a 10 percent cap point to estimates suggesting it could reduce consumer interest payments by up to $100 billion per year. But aggregate savings figures obscure who benefits and who does not. Savings accrue only to borrowers who retain access to credit. For households that lose access entirely, those projected “savings” exist only on paper.
Worse, many displaced borrowers will turn to inferior alternatives, such as overdrafts, late bill payments, rent-to-own arrangements, or informal debt. These options are often less transparent and more damaging than the credit cards they replace.
Good intentions are not enough
There is no question that many Americans are struggling with high interest rates. But price controls are a blunt instrument. They tend to help those already in the strongest financial position while excluding those on the margins.
If policymakers genuinely want to ease the burden on struggling households, there are better options than government price controls. Removing barriers to competition, expanding consumer choice, and encouraging voluntary hardship and repayment programs can provide relief without shrinking access to credit. Policies that promote transparency and income stability — rather than mandating prices from Washington — are far more likely to help consumers without driving them out of the mainstream financial system.
C.S. Lewis offered a timeless warning about well-intentioned coercion in his 1949 essay “The Humanitarian Theory of Punishment”:
“Of all tyrannies, a tyranny sincerely exercised for the good of its victims may be the most oppressive. … Those who torment us for our own good will torment us without end, for they do so with the approval of their own conscience.”
A 10 percent cap on credit card interest rates may be motivated by concern for consumers, but good intentions do not override economic reality. Its real-world effects would fall hardest on lower-income families, rural communities, and seniors. Protecting consumers should not mean pushing them out of the financial system altogether.
