(The Center Square) – A proposed federal cap on credit card interest rates could drastically reduce Americans' access to credit and hurt the U.S. economy, a new report warns.
Unleash Prosperity, a nonprofit that promotes pro-business policies, released the report analyzing a plan to cap credit card interest rates at 10% for five years. The group argues the policy would act as a price control and lead to a major reduction in lending.
The report estimates that at least 64 million Americans could lose access to credit cards or face higher costs under the cap. It also projects up to $714 billion in lost economic output tied to reduced consumer spending.
“Credit cards are a central pillar of the American economy, helping families manage expenses and businesses grow,” Steve Moore, co-founder of Unleash Prosperity, told The Center Square. “Imposing a 10% cap would pull tens of millions of Americans out of the credit system, reduce spending, and put the economy at real risk of recession.”
The proposal, known as the “10 Percent Credit Card Interest Rate Cap Act,” has drawn attention from lawmakers across the political spectrum. The report says the measure would penalize lenders who exceed the cap and limit their ability to price risk.
Credit cards account for roughly one-third of consumer spending and about one-quarter of the American gross domestic product. The report says restricting interest rates would force lenders to restrict access for higher-risk borrowers, especially those with lower credit scores.
Some borrowers would likely turn to payday loans and other high-cost options if credit card access shrinks.
The report also warns of broader economic impacts. It estimates that about 30% of credit card accounts could be closed or have reduced limits under a 10% cap. That drop in available credit would lead to lower spending, weaker retail sales, and reduced production, it contends.
Key industries could also suffer. The analysis highlights airlines and hotels, which rely heavily on co-branded credit cards and loyalty programs tied to consumer spending. A reduction in credit availability could reduce those revenue streams and travel demand, it says.
The report says limiting credit would make it harder for consumers to build credit histories used for mortgages, auto loans and job applications.
Interest rate cap supporters argue that the policy would protect consumers from high borrowing costs. They also argue that reducing access to credit would force consumers to spend more responsibly, meaning they would amass less debt.
The authors contend the policy could squeeze both borrowers and businesses, increasing the risk of a broader economic downturn.
Keep reading
Bangladesh on Thursday signed a deal with US aircraft manufacturer Boeing to buy 14 planes for its national carrier Biman Bangladesh Airlines, the two sides announced -- the airline's biggest-ever order, in a deal valued at $3.7 billion.
US President Donald Trump said Thursday he wasn't keen on wearing a bulletproof vest despite multiple alleged assassination attempts -- as he is worried it may make him look fat.
Elon Musk sparred with lawyers for a third day Thursday at his California trial against OpenAI, struggling to explain why his own for-profit AI empire differs from the one he is trying to take down.
(0) comments
Welcome to the discussion.
Log In
Post a comment as Guest
Keep it Clean. Please avoid obscene, vulgar, lewd, racist or sexually-oriented language.
PLEASE TURN OFF YOUR CAPS LOCK.
Don't Threaten. Threats of harming another person will not be tolerated.
Be Truthful. Don't knowingly lie about anyone or anything.
Be Nice. No racism, sexism or any sort of -ism that is degrading to another person.
Be Proactive. Use the 'Report' link on each comment to let us know of abusive posts.
Share with Us. We'd love to hear eyewitness accounts, the history behind an article.