Bill would cap credit card interest rates at 10%. What it means for you

Despite the Federal Reserve’s recent cuts, credit card interest rates have been hovering near record highs. A new bipartisan bill would cap them at a dramatically lower figure, but experts say it may not be a win for consumers.

Senators Bernie Sanders, I-Vt., and Josh Hawley, R-Mo., introduced a bill this week that would cap credit card interest rates at a 10% annual percentage rate (APR) for five years. It’s an idea President Donald Trump floated at campaign rally in New York in September. 

“Capping credit card interest rates at 10%, just like President Trump campaigned on, is a simple way to provide meaningful relief to working people,” Hawley said in a statement. 

The average APR on credit cards for January 2025 was 24.26%, according to LendingTree.

Almost half of credit card holders carry debt from month to month, according to a recent survey by Bankrate. In 2022, credit card companies charged consumers more than $105 billion in interest and more than $25 billion in fees, according to a 2023 study by the Consumer Financial Protection Bureau. 

“We cannot continue to allow big banks to make huge profits ripping off the American people. This legislation will provide working families struggling to pay their bills with desperately needed financial relief,” Sanders said in a statement.

This isn’t the first time these senators have proposed the idea of a rate cap. In 2023, Hawley proposed an 18% rate cap, while Sanders proposed a 15% rate cap in 2019. Neither had adequate support to advance the proposals.  

Around three-quarters, or 77%, of Americans surveyed said they support a cap on the interest rates financial institutions can charge on a credit card, according to a recent survey by LendingTree. But that support is down from 80% in 2022, and 84% in 2019. 

The legislation has a long way to go before it could become law, and experts say its fate may depend in part on what happens with inflation, and whether Trump continues to support the measure. 

“If pricing stays stable, I think it’s going to be much tougher to advance this kind of legislation,” said Jaret Seiberg, a policy analyst for TD Cowen.

While a 10% rate cap may sound appealing, experts say the intricacies of how it is structured are important, with consideration for periodic interest rates, fees and the repayment structure.

“You could have zero interest and still have an incredibly expensive product,” said Chi Chi Wu, a senior attorney at the National Consumer Law Center.

The proposal also seems at odds with the Trump administration’s interest in eliminating the Consumer Financial Protection Bureau, she said.

“If policy makers want to show that they actually care about protecting consumers’ wallets and keeping them from being abused by high-cost credit, they would make sure we have a strong Consumer Financial Protection Bureau,” Wu said.

The banking industry opposes the idea of a rate cap. Seven financial groups representing banks and credit unions of all sizes have joined forces to oppose the measure. They say it will limit consumers’ access to credit and push them into higher-priced, less-regulated products like payday loans, which can have an average APR of 400%. 

“There’s no evidence that APR caps make consumers better off or save them money,” said Lindsey Johnson, president and CEO of the Consumer Bankers Association. 

There are already a few federal caps on interest rates. In 2006, Congress passed the Military Lending Act, which put a 36% interest cap on revolving loans for active duty service members and their families.

Federal credit unions are typically restricted to a 15% APR maximum, but the rate can be increased to protect the safety and soundness of the credit union. The maximum is currently 18% through March 10, 2026.

Bankers say a rate cap inhibits lenders and reduces access to credit for higher-risk consumers. 

“Providing an all-in APR is a flawed tool for measuring the true cost of the loan, because to maintain the safety and soundness of the lender and ensure that credit availability is offered to a broad range of consumers, banks have to price their loan products commensurate with a risk for each borrower,” Johnson said. 

For consumers who are already carrying debt, this proposal may not be the lifeline it appears. 

“If you already have a lot of debt, this legislation probably doesn’t help you,” said Seiberg.

That’s because the interest rate cap wouldn’t be applied retroactively, he said: “It’s likely to only be on new purchases.”