OPINION:
President Trump wants to cap interest on credit cards for one year at 10 percent — and now banks, Wall Street executives and businesses are warning of economic devastations, particularly for the poor.
Cue crocodile tears.
For far too long, banks have been issuing credit cards with interest rates in the double digits, upwards of 20 percent, even for those with excellent financial scores. They’ve behaved as loan sharks, without the threat of broken legs.
It wasn’t so long ago that credit cards capped at around 12 percent. It wasn’t so long ago that it was actually a bit of a challenge for a consumer to obtain a credit card. Banks would consider income levels, length of employment, financial stability and repayment history before issuing a card — and sometimes the answer was actually “no.” But the lure of easy money is powerful. In the 1990s, banks actually began soliciting college students as customers, offering and providing credit cards with thousands of dollars of credit, despite the fact that these kids only worked five hours a week. Debt came early for these youth.
Nowadays, credit card interest rates average around 23 percent. It’s been 30 years since the rate was below 10 percent.
From Yahoo!Finance: “People with lower credit scores can pay rates of up to 36 percent, according to Bankrate. The average store credit card charges more than 30 percent. Interest rates at federal credit unions are already capped at 18 percent by law.”
Meanwhile, at WalletHub, one credit card analyst reported that one credit card from First Premier Bank in 2010 actually fixed the rate at 79.9 percent. And while that card is no longer available, the First Premier Bank Mastercard Credit Card carries a 36 percent rate. Next in line is a 35.99 percent rate charged by the Total Visa card and the Milestone Mastercard. These cards also charge fees to enroll; the Total Visa card, for example, charges customers a one-time fee of $95, plus an annual fee between $50 and $125 for the first year, followed by $48 for subsequent years. All that — plus the 35.99 percent interest rate.
It’s a card that’s “designed for people with bad credit,” WalletHub wrote.
Destiny Mastercard charges 35.99 percent interest, an annual fee of $175 for the first year, and $49 each following year. Milestone Mastercard, also at 35.99 percent interest, charges similar annual fee amounts.
Those are exorbitant charges.
But then again, the average credit card rate today, for all accounts, is 21.39 percent, WalletHub wrote.
“The margin between prime rate and the average credit card interest rate has increased by 9.71 percentage points since May 2000, reaching a peak of 14.99 percent in November 2024,” WalletHub found, in its analysis of year-over-year data.
That’s because risk has skyrocketed.
The cycle of debt has become a snare for Americans, and the only clear winners have been the banks.
As access to credit cards has expanded, and banks started giving out cards to those with low incomes and barely enough income to guarantee repayment, default rates have risen.
“Credit Card Charge-Offs and Delinquencies Hit 13-Year High,” the National Creditors Bar Association reported in December of 2024.
“Third-quarter 2024 data reveals that credit card charge-offs increased to 4.65 percent, up from 4.36 percent in the previous quarter, marking the highest level since the third quarter of 2011,” the National Creditors Bar Association wrote.
Lenders then use these rising default rates as justification to hike interest rates — which is why the margin between the prime rate and average credit card interest rate has jumped.
But high rates hit the lower income hardest.
High rates just add more debt burdens on those who already have limited ability to repay.
The truth is some people just shouldn’t have credit cards.
Banks know this. But they also know the formula of what percentage of defaulters they can absorb while still profiting — and higher rates on even those with great credit ratings provide them even more of a cushion. And profit. There’s a reason retailers, in addition to accepting Mastercard and Visa and American Express, started offering their own brand credit cards in recent years.
From Consumer Finance in August of 2022: “Interest income makes up the majority of revenue on credit cards, totaling about $100 billion per year.”
From Motley Fool Money in February of 2025: “Credit card companies were able to bring in $176 billion in 2020, despite the COVID-19 pandemic creating an economic shock. … Interest fees accounted for $76 billion and interchange fees accounted for $51 billion in 2020.”
It’s not just interest on cards that brings in big money for banks. It’s all the accompanying fees, as well.
From the Merchant Payments Coalition, in February of 2024: “New Data Shows Banks ‘Triple Dipping’ By Increasing Credit Card Interest, Annual Fees and Swipe Fees.”
The bottom line is this: America’s addition to debt has become problematic, not just for the individual or household, but for the entire national economy. And debt is slavery.
The financial sector may cry about risk and the need to keep rates high so they can continue to lend to those who are high risk. But the better path is to tighten the standards for loaning, so as not to entrap those with the least financial means into a cycle of debt that will cripple their ability to live freely and move up the economic scales for years, and maybe generations. The model, as is, seems rigged.
It’s time to inject some accountability into the debt world and level the playing field a bit so the lenders aren’t the only ones profiting from the system. A 10 percent cap seems a good place to start.
• Cheryl Chumley can be reached at cchumley@washingtontimes.com or on Twitter, @ckchumley. Listen to her podcast “Bold and Blunt” by clicking HERE. And never miss her column; subscribe to her newsletter and podcast by clicking HERE. Her latest book, “God-Given Or Bust: Defeating Marxism and Saving America With Biblical Truths,” is available by clicking HERE.
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