President Donald Trump has proposed a one-year cap on credit card interest rates, limiting them to 10% starting January 20. This initiative aims to protect consumers from high interest rates, which can exceed 20% for some borrowers. The proposal echoes a bipartisan bill introduced last year by Senators Bernie Sanders and Josh Hawley, which also seeks to impose a similar cap.
The Electronic Payments Coalition (EPC) has analyzed the potential impact of such a cap, concluding that it could significantly restrict access to credit for a substantial number of Americans. Their findings suggest that between 82% and 88% of credit card holders might face account closures or drastic reductions in credit limits, particularly affecting low to moderate-income consumers. The analysis indicates that nearly all credit card accounts linked to credit scores below 740 would likely be closed or limited, which could affect between 175 million and 190 million cardholders.
EPC’s executive chairman, Richard Hunt, emphasized that the cap could have severe consequences for both consumers and small businesses. He indicated that these changes would not only limit access to credit but also reduce the rewards that many consumers, especially those with lower incomes, rely on. Furthermore, consumers might turn to riskier credit options, such as payday lenders and unregulated online loans, if traditional credit avenues are diminished.
Overall, while the proposed cap aims to provide relief to consumers facing high interest rates, experts warn of significant unintended consequences that could affect access to credit and financial stability for many Americans, especially those in lower income brackets and small business owners who utilize personal credit cards for business purposes.