Credit Card APRs: A Real Affordability Pressure
As Calderon emphasized, policymakers are not wrong to focus on credit card interest rates. Average credit card APRs now hover around 22%, up sharply from roughly 13% a decade ago. Approximately half of cardholders carry a balance, and many rely on credit cards not for discretionary spending, but as liquidity bridges, covering emergency medical bills, car repairs, groceries, and other essentials.
For lower and moderate-income households, credit cards are often the only readily available, regulated source of short-term liquidity. That makes rising APRs particularly painful.
Calderon’s formulation is apt: policymakers have identified the right problem. The harder question is whether they have identified the right solution.
The 10% Interest Rate Cap: Lessons from History
The proposal to impose a flat 10% nationwide cap on credit card interest rates for one year would represent an unprecedented federal intervention into unsecured revolving credit markets.
Credit cards are unsecured and priced for risk. Interest margins help issuers cover expected charge-offs, volatility, and operational costs. If pricing flexibility is removed, lenders cannot simply absorb the loss, they adjust.
Historically, those adjustments take predictable forms:
- Tighter underwriting standards
- Higher minimum credit scores
- Lower credit limits
- Reduced rewards programs
- Increased non-interest fees
- Exit from higher-risk market segments
The likely result, as Calderon noted, is credit contraction, particularly affecting marginal and lower-income borrowers.
The most relevant historical example may be the 1980 credit controls imposed during the Carter Administration, which were rescinded within months after causing severe market disruption. A more targeted example is the 36% APR cap under the Military Lending Act, which illustrates both the importance of bipartisan legislative design and the reality that even well-intentioned caps can reduce access at the margins.
Recent Federal Reserve research on state usury caps reinforces this concern: when interest rate ceilings are imposed, credit to higher-risk borrowers contracts, credit to lower-risk borrowers expands, and delinquency rates do not meaningfully improve. In other words, credit is reallocated, not necessarily improved.
Even a “temporary” cap may have durable consequences. Issuers that exit certain segments or reduce credit lines are not obligated, and may not be economically inclined, to restore them once the cap expires. Credit score impacts and reduced access can linger well beyond the formal life of the policy.
As Calderon put it, blunt price controls are a chainsaw when what is needed is a scalpel.
Affordability in Context: What Drives Household Budgets?
An additional consideration is scale. Research recently highlighted by the Consumer Bankers Association shows that the fastest-growing household expenses from 2013–2024 were healthcare, shelter, food, and vehicles. Credit card interest represents a relatively small share of average household expenditures.
This does not minimize the pain of high APRs, especially for households carrying persistent balances, but it does raise an important structural question: can credit card rate caps meaningfully solve broader affordability challenges rooted in housing, medical costs, food inflation, and transportation?
Credit cards are often the mechanism households use to cope with those rising costs. Constraining access to that liquidity may exacerbate, rather than relieve, financial stress.
The Credit Card Competition Act: Structural Reform or Indirect Price Control?
The second proposal we discussed, the Credit Card Competition Act (the “CCCA”), takes a different approach.
Rather than capping interest rates, the CCCA would require large issuers to offer merchants at least two unaffiliated network routing options (only one of which could be Visa or Mastercard). The theory is that routing competition would reduce interchange fees (“swipe fees”), lowering merchant costs and ultimately consumer prices.
Merchants have generally supported the proposal. Banks and card issuers have strongly opposed it.
The consumer-facing promise is straightforward: lower merchant fees should translate into lower retail prices, but history complicates that assumption.
The Durbin Amendment to the Dodd-Frank Act imposed caps on debit card interchange fees for large issuers and included routing requirements. While interchange revenue declined, Calderon pointed out that empirical evidence suggests that cost savings were not consistently passed through to consumers in the form of lower prices. At the same time, banks offset lost revenue through higher account fees and reduced benefits.
A similar dynamic could unfold in the credit card market. Interchange revenue helps fund:
- Rewards programs
- Fraud detection and prevention
- Customer service infrastructure
- Risk management
If that revenue is compressed, issuers may respond with tighter underwriting, reduced rewards, or new fee structures. As Calderon observed, although the CCCA operates through indirect price pressure rather than a direct APR ceiling, downstream effects could look similar.
Distinguishing Populist Framing From Durable Reform
Both the rate cap and the CCCA are framed as pro-consumer, populist reforms. The political appeal is clear, but distinguishing headline appeal from durable consumer benefit requires careful analysis.
Calderon suggested several guideposts policymakers should consider:
- Access – Does the reform preserve or expand access for low- and moderate-income borrowers?
- Incidence – Who actually captures the gains? Consumers, merchants, intermediaries, or some combination?
- Substitution effects – Does the policy push consumers toward higher-cost, less-regulated alternatives such as payday or fringe products?
- Durability – What happens after implementation? Do markets rebound, or do credit line reductions and underwriting changes persist?
These questions are not ideological. They are structural.
Affordability and access are not opposing values. The policy challenge is designing reforms that alleviate financial strain without narrowing the regulated credit tools families rely on when emergencies arise.
The Bottom Line
Affordability concerns are real. Rising APRs are real. Financial stress among many households is real. But blunt price caps may reduce rates on paper while reducing access in practice. Structural competition mandates may promise savings that do not materialize at the checkout counter.
Durable consumer protection requires careful calibration — the scalpel, not the chainsaw.
For industry participants, policymakers, and advocates alike, the takeaway is straightforward: evidence and market mechanics matter. Populist framing may win headlines, but long-term financial stability depends on policy design that accounts for how credit markets actually function.
As always, we will continue to monitor these proposals and their evolution in Congress and the Administration. It may be noteworthy that President Trump did not mention either proposal during his almost two-hour State of the Union Address on January 24th.
Consumer Finance Monitor is hosted by Alan Kaplinsky, Senior Counsel at Ballard Spahr, and the founder and former chair of the firm's Consumer Financial Services Group. We encourage listeners to subscribe to the podcast on their preferred platform for weekly insights into developments in the consumer finance industry.
View the recording transcript here.
