An analysis conducted by Unleash Prosperity Now warns that capping credit card interest rates could significantly reduce credit access for a substantial portion of American cardholders, potentially impacting over 100 million individuals.

Potential Impact on Credit Access

The analysis suggests that interest rate caps would function as price controls, impacting consumer access and potentially harming lower-income individuals and those with lower credit scores. Financial institutions may find it unfeasible to cover lending costs under the proposed rate limitations, leading to a decline in available credit.

Bipartisan Support and Economic Concerns

The proposal has garnered support from lawmakers across the political spectrum, including both Republicans and Democrats, as well as the Trump administration. However, some economists view it as a form of price control that could destabilize the current competitive credit market. Alternative proposals suggest higher caps, but concerns about negative consequences remain.

Who Would Be Affected?

Steve Moore, co-founder of Unleash Prosperity Now and a former Trump administration economist, stated that such caps would primarily affect lower-income individuals and those with lower credit scores, potentially worsening their financial situations. The report highlights that those with lower credit ratings would be most likely to see their access to credit cards reduced.

Supporting Research

Research from the American Bankers Association supports the projection of widespread impact, with a large percentage of existing credit card accounts potentially facing closure or reduced credit limits. This could force consumers to seek alternatives like high-interest payday loans.

Beyond Credit Availability

The repercussions of credit card interest rate caps could extend beyond credit availability. The analysis indicates potential changes to rewards programs, potentially leading to less generous incentives or their complete elimination.

Economic Activity and Alternatives

Moore argued that credit cards are integral to economic activity, and policies disrupting their usage could be detrimental. The analysis emphasizes the ubiquity of credit cards in the U.S. and cautions against policies that might negatively impact their usage.