President Donald Trump recently announced a plan to limit credit card interest rates to a maximum of 10%, a measure intended to make borrowing cheaper for consumers. However, this proposal has met with resistance from several key economic experts as well as notable members of the Republican Party who caution that the policy could produce harmful secondary effects.
House Speaker Mike Johnson (R-La.) addressed the issue during a Thursday press event, emphasizing the necessity to proceed cautiously with such regulatory changes. Johnson remarked that the House needs to carefully consider and examine the ramifications of implementing a cap on interest rates. He expressed concern that the strong desire to reduce borrowing costs might inadvertently trigger adverse consequences.
Further, Johnson suggested that President Trump and proponents of this rate ceiling may not have fully anticipated outcomes such as credit card companies choosing to cease lending altogether if the cap is enacted. This sentiment was echoed by Representative Rich McCormick (R-Ga.), who voiced apprehensions around government interventions like price controls. McCormick pointed out that such measures historically tend to yield unintended negative effects, potentially disrupting investment incentives within lending businesses, as reported by credible news outlets.
Within the party’s more conservative ranks, Representative Eric Burlison (R-Mo.), a member of the far-right House Freedom Caucus, argued in favor of preserving competitive market dynamics without governmental restrictions. He noted that retail lenders naturally have the incentive to offer lower interest rates to attract creditors. Burlison underscored the importance of maintaining a "healthy, robust," and free-market environment where market forces regulate rate competition organically.
Economist Justin Wolfers publicly criticized the proposal during his Thursday CNN appearance on One World. Wolfers described the 10% cap as a populist measure that could ultimately undermine the interests of working Americans. He characterized the president as skilled at diverting attention from the proposal’s real consequences.
Wolfers elaborated that the cap could negatively impact borrowers with lower income and poor credit histories because lenders, unable to charge rates above 10%, might simply decline to offer credit to these higher-risk individuals. He framed the proposal as effectively a "subsidy" favoring wealthier people with good credit by shielding them from higher interest charges. This, according to Wolfers, shifts financial burdens onto poorer credit card holders who have historically subsidized better-credit customers through higher interest payments.
Adding to the critique, economist Peter Schiff recently labeled the proposed rate cap as both unconstitutional and a form of socialist-style price control, echoing criticisms the Trump administration themselves voiced against similar policies from political opponents during the 2024 campaign. Schiff warned that enforcing such a cap could prompt banks to reduce credit limits and close accounts for borrowers deemed higher risk, thereby cutting off crucial access to credit for those individuals.
The Competitive Enterprise Institute, a libertarian public policy organization, also weighed in by cautioning about the supply-side repercussions. They highlighted that as financial institutions retreat from serving higher-risk consumer segments because of capped interest rates, these borrowers may be driven toward more precarious credit alternatives, including payday lenders and shadow financial markets that lack regulatory oversight and consumer protections.
As debates continue, these insights highlight the complex balance between consumer protection and market stability. While the intent behind limiting credit card interest rates is to ease financial strain for consumers, economic experts and lawmakers emphasize the imperative to thoroughly evaluate the broader implications for credit availability and overall market health.