Credit card interest rate cap may be too good to be true

OPINION:

Affordability is the new buzzword in Washington.

After years of Biden-era inflation, the Trump administration is focused on bringing down costs on energy, groceries and everyday borrowing. The latest idea? Capping credit card interest rates at 10%. It’s a bold move aimed at easing the burden on millions of people carrying balances, and it makes sense in an era when average rates hover around 23%. Although I understand why the administration wants to do this, it should proceed carefully. Rushing in could backfire, limiting access to credit and hurting the very people we’re trying to help.

Let’s be clear: Families are still paying through the nose just to cover basics. The Biden administration’s Inflation Reduction Act did nothing to address inflation and, in fact, accomplished the opposite: a big payout to environmental groups that increased energy costs and contributed to the mess. President Trump’s team is right to take it on by building on efforts such as lowering prescription drug prices and cracking down on institutional investors buying up single-family homes. A 10% cap sounds like relief, a way to make borrowing fairer and put money back into pockets.

Although I understand why the administration is doing this, there’s a big question we need to ask. What is the possible backlash? Credit card companies aren’t charities; they lend based on risk. If rates are forced down to 10%, then banks might stop lending to riskier borrowers: those with lower credit scores or spotty histories.

Industry estimates suggest a cap could mean 47 million people lose access to regular credit cards. Even folks with solid credit could have their limits slashed or accounts closed. That pushes people toward worse options, such as payday loans, where rates can hit 300% to 400%. Suddenly, a short-term fix turns leads to higher total costs and more debt. I remember the first credit card I got my freshman year in college: It had a $500 credit limit and an interest rate close to 30%. Although outrageous by some standards, it taught me fiscal responsibility and helped me build a credit history.

Fees also could spike. To offset lost interest revenue, banks often increase annual fees, late charges or cash-advance costs. Rewards programs — cash back, travel points, airline miles — could vanish. Even responsible users who pay off balances monthly would lose those perks. Americans spend more than $3.6 trillion a year on credit cards, supporting stores, restaurants and small businesses. Consumer spending drives about 70% of the U.S. economy, so big cuts in available credit could slow growth and hurt jobs. We’ve seen it before: When states cap rates, borrowing shrinks and the economy feels the pinch.

The U.S. payments system has long been one of the most convenient and secure in the world. Imposing strict price controls, such as a hard 10% rate cap or mandated swipe fee reductions, carries the risk of unintended consequences. These could include job losses in the financial sector, billions of dollars in lost revenue, and pressure to route transactions through cheaper, less secure networks. Large merchants could realize savings, but history shows those gains often don’t fully reach consumers.

This isn’t about killing innovation or punishing success; it’s about smart reform. The administration needs to ensure it pursues reform without adversely affecting people’s access to credit, especially those who need it most: young people and first-time homebuyers. President Trump has the right instinct, but instead of government price caps and mandates, we should encourage more competition among lenders to keep rates reasonable without heavy-handed regulations.

Republicans now have the majority and the mandate to deliver real relief. They should do so thoughtfully by balancing the desire for lower rates with the need to protect credit access and economic stability. Get it right, and families win. Get it wrong, and the cure could hurt more than the disease.

Capping credit card rates at 10% is a tempting tool in the affordability fight, but rush it, and we risk backlash: less credit for those who need it, higher fees and a hit to the economy. Get it right, and we can ease the burden without creating new problems, delivering smart change and real wins for Americans.

• Sean Spicer served as President Trump’s first White House press secretary. He now hosts “The Sean Spicer Show.”