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Regardless of the Federal Reserve‘s current cuts, bank card rates of interest have been hovering close to file highs. A brand new bipartisan invoice would cap them at a dramatically decrease determine, however specialists say it might not be a win for customers.
Senators Bernie Sanders, I-Vt., and Josh Hawley, R-Mo., launched a invoice this week that might cap bank card rates of interest at a ten% annual share fee (APR) for 5 years. It is an concept President Donald Trump floated at marketing campaign rally in New York in September.
“Capping bank card rates of interest at 10%, identical to President Trump campaigned on, is a straightforward approach to offer significant aid to working folks,” Hawley mentioned in a press release.
The common APR on bank cards for January 2025 was 24.26%, in line with LendingTree.
Virtually half of bank card holders carry debt from month to month, in line with a current survey by Bankrate. In 2022, bank card corporations charged customers greater than $105 billion in curiosity and greater than $25 billion in charges, in line with a 2023 research by the Shopper Monetary Safety Bureau.
“We can not proceed to permit huge banks to make big income ripping off the American folks. This laws will present working households struggling to pay their payments with desperately wanted monetary aid,” Sanders mentioned in a press release.
Limiting bank card rates of interest isn’t a brand new concept
This is not the primary time these senators have proposed the thought of a fee cap. In 2023, Hawley proposed an 18% fee cap, whereas Sanders proposed a 15% fee cap in 2019. Neither had ample assist to advance the proposals.
Round three-quarters, or 77%, of Individuals surveyed mentioned they assist a cap on the rates of interest monetary establishments can cost on a bank card, in line with a current survey by LendingTree. However that assist is down from 80% in 2022, and 84% in 2019.
The laws has a protracted strategy to go earlier than it may change into regulation, and specialists say its destiny might rely partially on what occurs with inflation, and whether or not Trump continues to assist the measure.
“If pricing stays steady, I feel it is going to be a lot harder to advance this sort of laws,” mentioned Jaret Seiberg, a coverage analyst for TD Cowen.
Charges, fee construction should make credit score costly
Whereas a ten% fee cap might sound interesting, specialists say the intricacies of how it’s structured are essential, with consideration for periodic rates of interest, charges and the compensation construction.
“You might have zero curiosity and nonetheless have an extremely costly product,” mentioned Chi Chi Wu, a senior lawyer on the Nationwide Shopper Legislation Middle.
The proposal additionally appears at odds with the Trump administration’s curiosity in eliminating the Shopper Monetary Safety Bureau, she mentioned.
“If coverage makers need to present that they really care about defending customers’ wallets and preserving them from being abused by high-cost credit score, they might be sure we’ve got a powerful Shopper Monetary Safety Bureau,” Wu mentioned.
Charge caps may restrict entry to credit score
The banking trade opposes the thought of a fee cap. Seven monetary teams representing banks and credit score unions of all sizes have joined forces to oppose the measure. They are saying it should restrict customers’ entry to credit score and push them into higher-priced, less-regulated merchandise like payday loans, which may have a mean APR of 400%.
“There isn’t any proof that APR caps make customers higher off or save them cash,” mentioned Lindsey Johnson, president and CEO of the Shopper Bankers Affiliation.
There are already just a few federal caps on rates of interest. In 2006, Congress handed the Army Lending Act, which put a 36% curiosity cap on revolving loans for lively obligation service members and their households.
Federal credit score unions are usually restricted to a 15% APR most, however the fee may be elevated to guard the protection and soundness of the credit score union. The utmost is at present 18% by way of March 10, 2026.
Bankers say a fee cap inhibits lenders and reduces entry to credit score for higher-risk customers.
“Offering an all-in APR is a flawed device for measuring the true value of the mortgage, as a result of to take care of the protection and soundness of the lender and be certain that credit score availability is obtainable to a broad vary of customers, banks have to cost their mortgage merchandise commensurate with a danger for every borrower,” Johnson mentioned.
New invoice might not apply to present debt
For customers who’re already carrying debt, this proposal might not be the lifeline it seems.
“If you have already got a whole lot of debt, this laws in all probability would not enable you to,” mentioned Seiberg.
That is as a result of the rate of interest cap would not be utilized retroactively, he mentioned: “It is more likely to solely be on new purchases.”