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How a 10% Credit Card Rate Cap Could Impact Banks and Consumer Debt

  • Writer: Peyton Widen
    Peyton Widen
  • 2 days ago
  • 2 min read

 

Credit Card interest rates have been on the rise for years.  Many Americans have felt the impact on these high APR rates causing interest to pile up as people miss payment deadlines. While there should still be a penalty for not paying back the barrowed money for these credit cards, President Trump and many consumers believe the rates have gotten out of control and a rate cap should be implemented. That's why On January 9th President Trump posted on social media calling for a one-year one-year 10 percent cap  on credit card interest rates.  

 


According to Bankrate, the average credit card interest rate is 19.64% as of January 14th, with the highest credit card interest rates hovering around 36%.  For the credit card consumers who carry a balance from month to month, the repayment and interest add up fast. The cap that was purposed would instantly lower interest costs for millions of borrowers, especially those with high balances or lower credit scores. A 10% rate cap could offer major savings for the 46% of American households with credit card debt.



On the other hand, banks see things differently. These major lenders are pushing back hard, arguing that a 10% cap would force them to limit who qualifies for credit. Those fees are a big way credit card companies make money, and a rate cap would instantly decrease the cash flow for these banks. It would also backfire on the consumers as the lenders would start to tighten lending standards, making it harder for people with average or below‑average credit to get approved. 

 

While this proposal would cause a big shake up for consumers and lenders, the President’s proposal is not an official mandate as of now, and Congress has shown little interest in heeding his request. If this policy gets mediated it could completely reshape how credit works in the U.S. It would help people pay down balances faster and avoid long-term debt traps, but it could limit who has access to credit cards while decreasing earnings for the credit card issuers.  

 

 

 

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