Unsurprisingly, credit card debt is surging among Americans of all ages. For 26-year-old Selena Cooper, the money is making her miss. On each of her three credit cards, interest rates have skyrocketed and Cooper has racked up $6,000 in debt. Her Capital One card’s interest rate doubled from 8% to 16%, but her American Express card went up from 10% to 18%. This predicament mirrors a broader trend: as of November, credit card interest rates averaged about 22%, a significant increase from 13% just a decade ago, according to Federal Reserve data.
In the United States, approximately 37% of adults carry a credit card balance, contributing to an overall credit card debt exceeding $1 trillion. Interest charges are emerging as a new golden egg for banks and lenders, hitting an estimated $160 billion in 2024. This dramatic increase in interest charges alone has brought consumer debt to the national political spotlight.
In response to this growing crisis, U.S. President Donald Trump has proposed capping credit card interest rates at 10% for one year. This isn’t the only proposal that’s received surprising bipartisan support. We agree, which is why Senators Josh Hawley (R) and Bernie Sanders (D) have teamed up to introduce an ambitious bipartisan bill to do just that. As with other states’ caps, experts warn the temporary relief may cause more harm than good.
Morgan, a 31-year-old struggling to pay off lots of credit card debt, said she felt positive and negative about the idea. She wrote in, detailing her sleepless nights as a result of her $6,700 debt. Still, she’s hopeful as she anticipates getting her new job and paying her debt down.
“I think the Trump administration is trying to find a way out of it,” – Susan Schmidt
Schmidt, a financial analyst, said that rising debt burden is an indicator that consumers are being financially squeezed. She cautions that a cap can provide only short-term relief. It does not address the underlying causes of credit card debt.
Opponents maintain that placing an interest rate cap would hurt banks and their ability to lend money. Financial expert Brian Shearer pointed out that banks might respond by limiting lending to borrowers with lower credit scores or compensating for lost interest revenue by increasing annual fees or late fees.
“No policy is without some pros and cons,” – Brian Shearer
Shearer went on to express that consumers—especially low-income consumers—would appreciate seeing the impact of saved interest payments in their accounts. This could simultaneously lead to reduced rewards for credit card customers.
Benedict Guttman-Kenney, T4A’s other new financial analyst, raised doubts about the cap’s ability to do real harm. He underscored the limitations, reminding folks that people are unlikely to see life-changing increases in their wealth or income.
“It’s not clear that people are going to be better off,” – Benedict Guttman-Kenney
Guttman-Kenney also drove home an incredibly crucial point. Even when interest rates go up or down, consumers end up paying about the same amount due to associated fees and other expenses.
The current debate over interest rate cap shows just how out of touch America’s leaders are on consumer debt and personal responsibility. Others consider it a pretty timely step to relieve borrowers’ short term stresses. Proponents express concern about the long-term impact on consumers and banks.
“It would help a little bit, but it’s still not going to get me out of debt.” – Selena Cooper
As financial analysts such as Susan Schmidt point out the deep waters we wade through.
Legislators are still engaged in intense discussions over what’s being proposed as an unconstitutional credit card interest rate cap. At the same time, consumers will experience a mix of excitement and skepticism about what those changes could achieve. Morgan pointed out how this proposal prioritizes individuals over corporate interests:
“A 10% cap may not be the right solution because the people that are already in trouble, that’s not necessarily going to help them,” – Susan Schmidt
The fight over capping credit card interest rates continues today. Millions of Americans are struggling under the weight of escalating debt burdens as rates keep going up. The financial ecosystem has shifted dramatically in recent months. Cooper and Morgan’s stories illustrate the importance and timeliness of solutions to address the growing complexity and difficulty of consumer debt.
“It’s one of the few things he’s done that prioritizes people over businesses.” – Morgan
While the debate over capping credit card interest rates remains ongoing, many Americans continue to confront escalating debt burdens amid rising rates. The financial landscape is shifting, and the experiences of individuals like Cooper and Morgan highlight the urgent need for effective solutions that address the complexities of consumer debt.