President Donald Trump recently proposed a one-year cap on credit card interest rates at 10 percent to shield Americans from high borrowing costs in an effort to address affordability. The proposal is well-intentioned for policymakers seeking to address rising debt burdens.
Yet this idea has already faced scrutiny in Congress. Last year, Senator Josh Hawley proposed attaching a similar 10 percent cap to the unrelated GENIUS Act (a stablecoin regulatory bill), but the Senate rejected it as a “poison pill” amedand passedassing the legislation without it. The warnings then were that such measures would harm consumers far more than help them. History and data suggest the same outcome: government-imposed price controls on credit do not lower costs, but create shortages, reduce access, and push vulnerable borrowers to worse options.
Credit cards power much of American economic life. In 2024, consumer credit cards accounted for $3.6 trillion in spending, roughly 12 percent of U.S. GDP, and broader credit card activity accounted for 16 percent of GDP in 2015 to 22 percent in 2022, fueling America’s post-pandemic recovery.
Credit cards often serve as a lifeline of flexible liquidity when savings fall short. A recent Federal Reserve survey found that 37 percent of adults could not cover a $400 emergency with cash, with consumers frequently turning to credit cards.
But capping interest rates would do the most damage to low-income and higher-risk households, which are most likely to rely on credit cards for such emergencies. When lenders are unable to charge rates that match the risk, they tighten standards or simply deny access. The evidence on this has been clear:
- In Illinois, a 36 percent rate cap on unsecured installment loans led to a 38 percent decline in loans to subprime borrowers and worsened their financial well-being.
- In Oregon, research found that interest rate caps “caused deterioration in the overall financial condition of Oregon households,” and that “the results are consistent with restricted access harming, not helping, consumers on average.”
- A December 2025 study by the New York Federal Reserve found that rate caps sharply reduce credit to the riskiest borrowers without curbing delinquencies.
Roughly one-third of Americans are considered “subprime borrowers.” These are individuals who may have a limited credit history, lower income, or have a history of late payments or bankruptcies. For those who fall into this category, an interest rate cap would likely mean losing a regulated, convenient lifeline. Frequently, these consumers use cards to build better scores to access future opportunities, but a cap would close that door. A 2020 analysis from the American Bankers Association projected a 15 percent cap would jeopardize 95 percent of such accounts.
Without access to mainstream credit, these consumers would increasingly turn to payday lenders, pawnshops, or other unregulated sources, which undoubtedly charge effective interest rates far above those of their current credit cards, with fewer protections and a greater risk of a debt spiral.
A 2022 report by Republicans on the Joint Economic Committee noted that price controls on credit can cause shortages, reduce quality, and worsen long-term inflation. Prior attempts to cap rates failed to deliver the intended relief. Price controls haven’t worked, but they did succeed in distorting markets and creating unintended consequences. Rejecting the GENIUS Act amendment was wise then, and policymakers should apply the same caution now. Relying on market forces preserves broad and safe access to credit for hardworking Americans.