WASHINGTON, Jan. 12, 2026 — America’s credit markets are among the most developed in the world, giving millions of consumers, especially those in modest-income households, access to flexible tools that smooth daily spending, cover emergencies, and support higher living standards. The average American can access nearly $30,000 in credit, offering significant financial flexibility.

Yet credit cards carry costs. According to the Federal Reserve, the average U.S. household carries a balance of $6,523 with an average interest rate of 21.4 percent APR. While Americans are less indebted than many industrialized countries, carrying credit card debt can still strain households.

In response to concerns about growing debt, some legislators have proposed strict federal limits. The Sanders-Hawley Credit Card Interest Rate Cap Bill would impose a 10 percent APR on all credit cards, and President Donald Trump has signalled that he will move to enforce this limit starting January 20, 2026. While well-intentioned, this policy risks harming the very consumers it is intended to protect.

Capping Rates Threatens Access to Credit

Credit Restrictions Disproportionately Affect Lower-Income Households: Credit cards provide unsecured, instant borrowing that households rely on for groceries, utilities, medical bills, and income gaps between paychecks. Interest rates reflect the risk lenders take when offering unsecured credit and the operational costs of providing these products. Imposing a 10 percent APR cap ignores these market realities. Historical examples show that price controls in credit markets reduce availability, leading to fewer card options, lower limits, and the elimination of promotions and rewards programs that many Americans depend on. Vulnerable households, particularly those with higher risk profiles, would be disproportionately affected.

Consumers May Turn to Riskier Alternatives: Limiting legal borrowing through rate caps would push consumers toward payday lenders, pawn shops, rent-to-own schemes, and other unregulated sources where interest rates can be extremely high and repayment terms rigid. Evidence from Illinois and Chile illustrates the danger. In Illinois, subprime borrowers saw a 38 percent reduction in loan access under interest rate caps, while in Chile, lower-income households experienced a nearly 20 percent decline in credit availability. Such policies, though intended to protect consumers, often worsen financial outcomes by restricting access to safe, regulated credit options.

Hidden Costs and Fewer Benefits for Consumers

Credit cards today offer zero percent promotional periods, cash back and travel rewards, and fee-free options. These benefits exist because lenders can price risk and recover costs through interest. Capping rates would reduce profitability and force credit providers to scale back rewards programs, eliminate 0 percent offers, or introduce new fees, ultimately raising costs for consumers.

Restrictive policies fail to address the underlying reasons households carry balances. Polls show many Americans are concerned about credit card payments, yet a significant portion takes no meaningful action to manage debt. Capping rates does not teach financial responsibility or alleviate debt pressure; it merely removes access.

A Better Path Forward

Instead of imposing sweeping federal caps, policymakers should focus on solutions that support consumers while preserving credit access. Banks can offer personalized repayment plans to help borrowers manage balances. Transparency can improve so consumers understand costs and can compare products effectively. Financial literacy initiatives should be expanded at all educational levels to equip Americans with the skills to make informed decisions and avoid debt spirals.

These approaches address the root causes of credit challenges without cutting off access to the very tools that allow families to manage finances responsibly. They protect vulnerable households, maintain product choice, and preserve rewards programs while encouraging long-term financial stability.

Why Interest Rate Caps Would Backfire

The Sanders-Hawley credit card interest rate cap, though well-intentioned, would restrict credit for millions of Americans, increase costs through lost rewards and fees, and push consumers toward inferior and riskier lending alternatives. Policies should promote choice, affordability, and inclusion rather than impose artificial limits that threaten access to essential financial tools.

Restricting the legal pricing of credit cards undercuts the flexibility that has made America’s credit markets among the most advanced in the world. A thoughtful approach that empowers consumers through education, transparency, and tailored repayment options offers a far more effective path to financial security than broad, arbitrary interest rate caps.