In January, President Trump proposed capping credit card interest rates at 10 percent—a dramatic intervention in one of the largest consumer credit markets in the US. Trump framed the proposal as a response to the rising cost of living and ongoing affordability crisis. In recent years, federal policymakers across the political spectrum have championed similar proposals.
The appeal of a cap is straightforward. Credit cards are one of the most widely used—and most expensive—forms of mainstream consumer credit. With average credit card interest rates now above 20 percent, many families are paying thousands of dollars each year in interest alone.
An interest rate cap could reduce borrowing costs for the millions of people who carry a balance on their cards month to month. But it would also fundamentally reshape who can access credit and on what terms, potentially pushing many Americans into high-cost alternatives.
More than three-quarters of credit card holders have cards with interest rates above 10 percent
Using the Urban Institute’s credit bureau panel, we estimate that 76 percent of US credit card holders, about 164 million adults, had at least one credit card with an annual percentage rate (APR) above 10 percent in August 2025.
Consumers with low credit scores are most likely to have these cards: 90 percent of credit card holders with a subprime score (less than or equal to 600) and 87 percent of credit card holders with a near prime score (601–660) had a credit card with an interest rate above 10 percent.
But the proposed policy would also affect about 71 percent of consumers with a prime credit score (greater than 660 points) who hold cards with APRs above 10 percent. In other words, even many households with strong credit histories rely on products that would become noncompliant under a 10 percent cap.
If the proposed rate cap went into effect, the credit products available to these borrowers would necessarily change. Credit card companies would either offer them at a lower price or limit borrowers’ access.
An interest rate cap could lower families’ credit costs, but it could also reduce access to credit
The proposed rate cap could provide potential relief to families struggling with high prices and economic uncertainty. A recent study suggests a 10 percent cap on credit card interest rates could save people in the US roughly $100 billion per year (PDF) in lower interest payments. The people who would benefit the most would be the 46 percent of US households who carry a balance from month to month—to manage cash flow, cover medical bills, or bridge gaps between paychecks—provided they can still access credit.
But interest rate caps can shrink the supply of credit (PDF), especially for borrowers with low credit scores. Interest rates reflect borrowers’ risk of nonpayment, and credit issuers typically charge higher APRs to those more likely to default.
The proposed APR cap could therefore prompt lenders to reduce credit limits or stop issuing new cards to borrowers they view as too risky or too expensive to serve under the cap. In prior research, we found that consumers with deep subprime credit scores living near military installations lost access to credit after the Military Lending Act expanded its 36 percent APR cap.
Consumers, especially those with low credit scores, could turn to less regulated, high-cost alternatives, including some buy-now-pay-later products or payday-style loan products that fall outside traditional consumer protections. If that happens, a policy intended to shield consumers from high interest costs could unintentionally push them toward products with fewer safeguards, less transparency, and higher costs.
A broader affordability strategy is needed
The bipartisan interest in a credit card rate cap reflects a real and pressing problem: Millions of households are struggling to make ends meet, and credit cards have increasingly become a financial lifeline rather than a convenience.
But rate caps alone cannot solve the affordability crisis. A broader set of strategies is needed, including:
- expanding income supports and tax credits for working families
- reducing housing, child care, and health care costs
- strengthening consumer protections and financial transparency
Financial regulation can play a role in addressing the ongoing affordability crisis, but it must be paired with strategies that address the underlying cost pressures families face. Otherwise, we risk replacing one form of financial strain with another.
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