Legislative Efforts to Cap Credit Card Interest Rates

In a notable display of bipartisan collaboration, Senators Bernie Sanders (I-VT) and Josh Hawley (R-MO) have introduced legislation aimed at capping credit card interest rates at 10% for five years.

This proposal seeks to provide financial relief to Americans burdened by escalating credit card debt and high interest rates.

The Legislative Proposal: A 10% Cap on Credit Card Interest Rates

The bill, introduced on Feb. 4, 2025, as S.381, aims to amend the Truth in Lending Act to enforce a 10% ceiling on credit card interest rates.

Sanders has criticized current interest rates, which averaged 22.6% in February of 2025. He described them as “extortion and loan sharking” that disproportionately affect working-class families.

Hawley shares this sentiment, labeling the current rates as “exploitative” and emphasizing the necessity for legislative action to safeguard consumers.

This legislative effort aligns with a campaign promise made by President Donald Trump. In September 2024, during a rally, Trump advocated for a temporary cap on credit card interest rates at approximately 10%, arguing that such a measure was essential to prevent financial institutions from imposing exorbitant rates of 25%-30% on consumers.

Unsurprisingly, public opinion favors the concept of capping credit card interest rates. A 2024 LendingTree survey revealed that 77% of respondents supported implementing a rate cap, even if it meant sacrificing certain credit card rewards. This indicates a widespread concern among consumers about the burden of high-interest debt.

Opposition from the Banking Industry

Despite public support, the proposed cap has encountered opposition from industry groups. The Consumer Bankers Association argues that imposing a 10% cap could inadvertently restrict access to credit for many consumers. They contend that such price controls might compel financial institutions to tighten lending criteria or reduce credit offerings, potentially pushing consumers toward less regulated and more costly financial products.

Financial analysts also express skepticism regarding the bill’s potential impact. Some suggest that capping interest rates could lead to unintended consequences, such as decreased access to credit and fewer rewards for cardholders. Banks might argue they need higher rates to offset the risks associated with unsecured lending and to maintain profitability.

Potential Impact on Consumers

The proposed 10% cap on credit card interest rates could have several implications for consumers:

• Reduced Interest Payments: A lower interest rate would decrease the amount paid for consumers carrying significant credit card balances. For instance, on a $5,000 balance at a 28% interest rate, a consumer might pay nearly $11,000 in interest if making minimum payments. Capping the rate at 10% could save over $7,000 in interest payments.
• Increased Access to Affordable Credit: Lower interest rates could make credit more accessible and affordable for consumers, particularly those with low credit scores who often face higher rates.
• Potential Reduction in Credit Availability: Critics argue that capping interest rates might lead financial institutions to tighten lending criteria, potentially reducing access to credit for higher-risk consumers. This could push some individuals toward alternative, potentially more expensive, financial products.
• Changes in Credit Card Rewards Programs: To offset potential losses from interest caps, credit card issuers might reduce or alter rewards programs, affecting consumers who benefit from cash-back offers, travel points, and other incentives.

Historical Context and Future Implications

The debate over capping credit card interest rates is not new. In 2019, Sanders and Rep. Alexandria Ocasio-Cortez (D-NY) introduced legislation to cap rates at 15%. Similarly, in 2023, Hawley proposed an 18% cap. Both initiatives failed to advance, highlighting the challenges such proposals face in the legislative process.

The current proposal by Sanders and Hawley seeks to build upon these past efforts, aiming to address the financial challenges many Americans face. The bill has now been referred to the Senate Committee on Banking, Housing, and Urban Affairs for further deliberation. Its future remains uncertain, but the proposal has undoubtedly reignited a critical conversation about consumer debt and the role of legislative measures in regulating financial practices.

The next step in the legislative process involves the committee’s evaluation of the bill. The committee may choose to hold hearings to discuss the bill’s implications, propose amendments, and ultimately vote on whether to report the bill favorably to the full Senate.

If the committee advances the bill, it will proceed to the Senate floor for debate and voting. Should the Senate pass the bill, it would then move to the House of Representatives for consideration. If both chambers approve the legislation, it would be sent to the President for signature into law.

What Happens Next?

Given the early stage of S.381, specific dates for subsequent actions have not been established. The bill’s progression will depend on various factors, including committee scheduling, legislative priorities, and political dynamics within Congress.

While the proposed cap on credit card interest rates aims to provide relief to consumers, it has sparked a complex debate involving public support, industry opposition, and historical legislative challenges. The outcome of this proposal could have significant implications for both consumers and the financial industry, making it a pivotal issue to monitor in the coming months.

Fortunately, there are steps you can take today to lower your rates without waiting on the government to deliberate. One effective approach is to directly negotiate with your credit card issuer. By contacting your credit card company and requesting a lower interest rate, you may be able to secure more favorable terms.

Before initiating a conversation, it’s beneficial to have a solid payment history and, if possible, gather competing offers from other issuers to strengthen your position. A polite and well-prepared discussion can often lead to a reduced rate.

Another strategy involves transferring your existing balance to a new credit card that offers a lower interest rate or an introductory 0% Annual Percentage Rate (APR). This can provide temporary relief from high-interest charges, allowing you to pay down your debt more efficiently. However, it’s important to be mindful of balance transfer fees (typically 2%-3% of the balance owed) and ensure you understand the terms before proceeding.

Additionally, improving your credit score can make you eligible for cards with better rates. Focus on paying bills on time, reducing existing debt, and avoiding new credit applications to boost your creditworthiness. As your score improves, you can leverage it to negotiate better terms or qualify for cards with lower interest rates.