Even though the Federal Reserve has been cutting interest rates, credit card interest rates are still sticking close to historic highs. A fresh bipartisan bill aims to lower these rates significantly, but some experts believe it might not be all that beneficial for consumers.
This week, Senators Bernie Sanders from Vermont and Josh Hawley from Missouri introduced a bill proposing to cap credit card interest rates at a 10% annual percentage rate (APR) over the next five years. President Donald Trump had previously mentioned a similar idea during a campaign rally in New York last September.
“Capping credit card interest rates at 10%, as President Trump suggested, is a straightforward way to offer substantial relief to working folks,” stated Hawley.
As of January 2025, LendingTree reported an average credit card APR of 24.26%. According to a recent Bankrate survey, nearly half of credit card holders carry debt month-to-month. In 2022 alone, credit card companies collected over $105 billion in interest and more than $25 billion in fees, according to a 2023 report by the Consumer Financial Protection Bureau.
“We need to stop big banks from making enormous profits by taking advantage of the American public. This bill is designed to give working families the financial break they need,” Sanders commented.
Restricting credit card interest rates isn’t a novel notion. In 2023, Hawley proposed an 18% cap, and back in 2019, Sanders suggested a 15% cap. Both efforts didn’t gather enough backing to move forward.
LendingTree’s survey indicates that about 77% of Americans favor limiting the interest rates banks can charge on credit cards. However, that support has slightly dropped from 80% in 2022 and 84% in 2019.
The journey to making this legislation a reality is long, and its outcome might hinge on inflation trends and whether Trump maintains his endorsement of the measure. “If pricing remains stable, advancing such legislation could become much more challenging,” noted Jaret Seiberg, a policy analyst at TD Cowen.
Although a 10% cap sounds appealing, experts warn that the specifics matter, including the structure of periodic interest rates, fees, and how repayment is organized. “Even with zero interest, the product can still be very pricey,” observed Chi Chi Wu, a senior attorney at the National Consumer Law Center.
The proposal conflicts with the Trump administration’s stated goal of dismantling the Consumer Financial Protection Bureau. “If policymakers genuinely care about protecting consumers from high-cost credit’s harm, they’d ensure a robust Consumer Financial Protection Bureau exists,” Wu added.
The banking sector opposes the cap, as seven financial groups, covering banks and credit unions of all sizes, argue it would restrict credit access, pushing people towards costlier, unregulated options like payday loans, which often come with exorbitant APRs averaging around 400%.
“No evidence suggests that APR caps save money for consumers or improve their situation,” mentioned Lindsey Johnson, president and CEO of the Consumer Bankers Association.
There are already a few federal caps, such as the Military Lending Act’s 36% rate for service members and families, and federal credit unions adhering to a 15% cap—which can temporarily be lifted to 18% under special circumstances, staying in effect until March 2026.
Bankers argue that a rate cap would hinder lenders and restrict credit for consumers considered higher-risk. “Using an all-in APR to gauge a loan’s true cost is flawed. To ensure lenders stay safe and offer credit to a wide consumer range, banks must price their loans according to each borrower’s risk,” Johnson explained.
For people already facing debt issues, the new proposal might not be as beneficial as it appears. “If you’re burdened with debt, this bill likely won’t help much,” Seiberg said. The reason being that the cap on interest rates would only apply to new purchases, not existing debt.
