The Case Against Credit Card Rate Caps
Unintended Consequences. Proven Harm. Better Alternatives.
Washington is debating whether to cap credit card interest rates. But here's the truth: this kind of government price control would backfire—limiting access to credit for hardworking Americans and punishing those who play by the rules.
Credit Cards Are a Lifeline, Not a Luxury
This isn’t about luxury or rewards—it’s about making ends meet and managing life’s challenges.
Government Price Controls Don’t Work
Capping interest rates may sound like a way to protect consumers—but history and research tell a different story.
The Market Already Offers Options
Americans don’t need Washington to cap their credit—they need the freedom to choose what works for their family. Protect their options—not take them away.
What Congress Should Do
Instead of limiting choice, Congress should…
Protect responsible credit products that work for working families.
Trust consumers to make the best decisions for themselves.
Educate—not legislate—so Americans understand the full range of credit options available.
Why Credit Cards Are Essential for Hardworking Americans
Credit cards are critically important for building credit and participating in the economy.
0 million Americans lack sufficient credit histories for scoring.
These “credit invisible” are essentially shut out of many mainstream financial services. According to the CFPB, credit cards are the most common way they became visible to credit bureaus.
For millions of Americans, credit cards are more than just plastic. They offer opportunity to:
Bridge the gap between paychecks.
Cover emergency expenses like car repairs, medical bills, or school costs.
Build a credit history that unlocks better financial opportunities in the future.
In fact, research shows credit cards are the number one way people who are “credit invisible” become “credit visible.” That’s a crucial step toward accessing other financial tools like mortgages, auto loans, and small business credit.
Credit cards also offer an unmatched level of built-in protections, including:
Fraud prevention and liability protection.
Chargeback rights for disputed purchases.
Clear disclosures through the existing CARD Act and Truth in Lending Act.
“Ability to pay” checks during application.
This makes credit cards one of the safest, most transparent credit tools available. For working Americans navigating tight budgets, credit cards offer both flexibility and guardrails – especially compared to the unregulated alternatives consumers often turn to when credit dries up. No other credit product offers the same combination of opportunity, access, and protection.
Credit Cards Are a Lifeline—Not a Luxury
For millions of Americans, credit cards are more than a payment method—they’re a financial tool.
Credit cards help working people cover everyday expenses, manage cash flow, and handle emergencies.
They’re often the first step to building credit, especially for Americans with limited credit histories.
Credit cards are one of the most regulated financial products, offering fraud protection, chargeback rights, and clear disclosures.
“
Unfortunately, a recent proposal to cap credit card interest rates will inadvertently deny temporary financial resources to families dealing with price hikes that outpace pay increases. Expect more defaults, bankruptcies, ruined credit histories, and reliance on disreputable black-market lenders — that is, loan sharks — as government moves to dry up the supply of credit.”
Heritage Foundation Research Fellow in the Thomas A. Roe Institute for economic policy studies Joel Griffth
“
Senator Hawley’s proposal to put crippling price controls on consumers who use credit cards and the banks and credit unions that issue them should not be seen as ‘populist.’ Rather, the measure is an elitist attempt to substitute Hawley’s judgment of how much debt is appropriate in place of that of consumers weighing options for their families.”
Competitive Enterprise Institute Director of Finance Policy John Berlau
People who make regulatory decisions on behalf of borrowers are likely well intentioned, but many do not understand how small-dollar installment loans can help borrowers who face difficult financial circumstances. In Illinois, we found that the immediate effect of a 36 percent interest rate cap was to deny much-needed credit. Academic research like this study is essential for creating well-informed and effective regulation. Responsible lawmakers must fully understand and accept that their actions have consequences for consumers.”
Professor of Finance at Missouri State University Thomas Miller
“
Government Price Controls Don’t Work
Capping interest rates may sound like a way to protect consumers—but history and research tell a different story.
📉 In Illinois, a 36% rate cap led to a 38% drop in loans to subprime borrowers.
📉 In Oregon, rate caps led to worse financial outcomes across households.
Eliminate access to responsible credit for families with lower credit scores
Force borrowers into high-cost payday loans, pawn shops, or cash advances
Shrink the availability of small-dollar loans—especially when they’re needed most