Proposed Bill Caps Credit Card Interest Rates at 10%: What You Need to Know

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Despite recent reductions by the Federal Reserve, credit card interest rates remain at or near all-time highs, prompting new legislative action. A bipartisan proposal introduced in Congress aims to impose a cap on these rates, although experts caution that the measure may not necessarily benefit consumers.

Senators Bernie Sanders (I-Vt.) and Josh Hawley (R-Mo.) recently announced a bill that would limit credit card interest rates to a maximum of 10% annual percentage rate (APR) for a five-year period. This proposal echoes suggestions made by former President Donald Trump during a campaign rally in New York last September.

“Capping credit card interest rates at 10%, just like President Trump campaigned on, is a straightforward way to provide significant relief to working individuals,” Hawley stated in a recent announcement.

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As of January 2025, the average APR on credit cards stood at 24.26%, according to data from LendingTree. Furthermore, a Bankrate survey revealed that nearly half of credit card holders consistently carry debt. In 2022, credit card companies collected over $105 billion in interest and an excess of $25 billion in fees, as reported by the Consumer Financial Protection Bureau.

“Allowing major banking institutions to accrue substantial profits from American consumers’ hardships is unsustainable. This legislation aims to deliver essential financial relief to families grappling with bill payments,” Sanders remarked in a statement.

A Longstanding Proposal

This isn’t their first attempt at implementing a rate cap. In a previous legislative session, Hawley suggested an 18% cap while Sanders proposed a 15% cap in 2019. Both efforts failed to gain sufficient traction.

Support for capping credit card interest rates remains significant, with around 77% of respondents in a recent survey by LendingTree endorsing the idea. This reflects a slight decrease from 80% in 2022 and 84% in 2019. However, the proposal’s success hinges on factors such as inflation trends and the continued endorsement from Trump.

“If inflation remains stable, advancing this legislation could become increasingly challenging,” noted Jaret Seiberg, a policy analyst at TD Cowen.

Concerns Over Fees and Structures

While capping rates at 10% may seem advantageous at first glance, experts emphasize the importance of understanding how these caps are structured, considering additional periodic interest rates and associated fees.

“It’s possible to have a product with zero interest yet still incur significant costs,” explained Chi Chi Wu, a senior attorney with the National Consumer Law Center.

Additionally, the proposal may conflict with the broader agenda of the Trump administration, particularly its interest in eliminating the Consumer Financial Protection Bureau. Wu commented, “If policymakers genuinely care about consumer protection against exploitative credit practices, they would ensure the Consumer Financial Protection Bureau remains intact.”

Impact on Credit Accessibility

Seven financial organizations representing banks and credit unions have collectively expressed their concerns, arguing that such caps could restrict consumer access to credit, pushing borrowers towards higher-cost, less-regulated alternatives like payday loans, which can carry an average APR of 400%.

“There is no evidence that APR caps actually benefit consumers or offer savings,” commented Lindsey Johnson, president and CEO of the Consumer Bankers Association.

Current federal legislation already includes some interest rate caps. The Military Lending Act, established in 2006, caps interest on revolving loans at 36% for active-duty personnel and their families. Moreover, federal credit unions generally cap their APR at 15%, though this can be raised under certain conditions, with the current maximum set at 18% until March 10, 2026.

Bank advocates argue that imposing a rate cap could stifle lending to high-risk individuals. “Using an all-inclusive APR to gauge loan costs is flawed, as lenders must price their products according to the associated risks for each borrower to sustain their operations,” Johnson stated.

Potential Limitations for Existing Borrowers

For consumers already burdened with debt, the proposed bill might not offer the relief it promises.

“For individuals who are currently in significant debt, this legislation likely falls short of providing assistance,” Seiberg pointed out.

This is largely because the proposed interest rate cap would not be retroactive; it is expected to apply solely to new transactions rather than to existing balances.

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