Republican presidential candidate Donald Trump has suggested implementing a temporary 10% limit on credit card interest rates. This proposal, he argues, would provide “working Americans a chance to catch up” financially.
Trump revealed this idea during a campaign event in Uniondale, New York, on Wednesday night. Currently, the Federal Reserve reports that the average credit card interest rate reached 21.5% earlier this year, one of the highest rates seen in the past decade.
“While working Americans catch up, we’re going to put a temporary cap on credit-card interest rates,” Trump announced to the crowd. “We can’t let them make 25 and 30 percent,” he emphasized, drawing applause from attendees.
However, financial industry experts were less enthusiastic about the proposal. Some cautioned that capping interest rates could lead to banks cutting off lending to many middle- and lower-income borrowers.
“Wall Street banks would say, how much further risk do I want to bring on given the fact that my revenue is shrinking?” David Robertson, publisher of the Nilson Report, explained to The Wall Street Journal. “That’s where the rubber meets the road.”
Peter Schiff, chief economist at Euro Pacific Asset Management, also voiced concerns to the New York Post, stating, “That would destroy the industry and millions of Americans would lose their credit cards. There are heavy losses in credit cards from people who don’t pay. So they need the high interest rates to offset that.”
The concept of capping credit card interest rates has been proposed before. In 2019, Senator Bernie Sanders, I-Vt., pushed for a 15% cap, while Senator Josh Hawley, R-Mo., suggested an 18% cap. Neither proposal gained traction, as reported by the Journal.
According to Federal Reserve data, the average credit card interest rate hasn’t dipped below 10% since 1994.
A spokesperson from the Consumer Banking Association shared further concerns, telling the Post, “Government-imposed price controls on credit card interest rates would … result in credit cards only being given to consumers who have high income and credit scores who post little risk to card issuers.”
{Matzav.com}