The recent proposition advocating a one-year nationwide cap on credit card interest rates at 10% has sparked considerable discussion among financial experts regarding its broader consequences. Although the initiative is promoted as beneficial for consumers, the true effects may extend well beyond simplistic consumer gains, potentially impacting credit availability, reward programs, and associated industries such as airlines.
Impact on Rewards Programs and Consumer Segmentation
Industry authorities emphasize that while a cap on the annual percentage rate (APR) might appear advantageous initially, the repercussions for credit card rewards could be profound. Dave Grossman, founder of Your Best Credit Cards, underscores that issuers could struggle to price risk appropriately if interchange fees remain fixed. This imbalance might result in premium consumers becoming disproportionately valuable, leading to a bifurcated rewards system whereby substantial benefits are reserved primarily for holders of premium cards with high annual fees, effectively excluding average consumers from lucrative reward offerings.
Potential Strains on the Airline Industry
The ramifications extend to the airline sector, which is significantly intertwined with credit card rewards economics. Airlines generate substantial revenue through partnerships with credit card issuers, predominantly via the sale of frequent flyer miles. Grossman warns that should banks face diminished capacity to finance consumer rewards due to the proposed cap, airlines may confront financial distress, potentially to the extent of requiring governmental bailouts.
To illustrate this reliance, recent data reveals that Delta Air Lines secured approximately $2 billion in Q3 2025 from its partnership with American Express, marking a 12% year-over-year growth. Nearly all this revenue stems from spending on Delta co-branded credit cards. American Airlines reported a loyalty program liability of about $3.7 billion as of September 30, highlighting the volume of miles issued and anticipating significant forthcoming revenue from such collaborations. Similarly, United Airlines attributed $3.49 billion to 'other revenue,' mainly from increased co-branded credit card spending and loyalty alliances, signaling a vital non-passenger revenue source.
Effects on Credit Access for Subprime Borrowers
Concerns are especially acute for subprime and near-prime borrowers. John Garner, CEO of Odynn, cautions that a 10% APR ceiling, while seemingly beneficial, may inadvertently contract credit availability for consumers with less-than-ideal credit histories. Jennifer Doss of CardRatings.com corroborates this, noting that limiting credit card access could hinder consumers' capacity to build credit, thereby increasing reliance on costlier, less-regulated lending options like payday loans, which often lack robust consumer protections. Mike Taiano from Moody's Ratings adds that a temporary one-year limitation on interest rates may lessen the retrenchment by issuers compared to a permanent mandate, though negative impacts on credit growth and issuer profitability remain likely.
Price Controls and Their Economic Consequences
The proposal also reflects characteristics of traditional price controls, typically associated with unintended economic distortions. Thomas Aiello, Senior Director of Government Affairs at the National Taxpayers Union, remarks that government-imposed price ceilings frequently result in shortages and shift costs elsewhere in the economy, creating inefficiencies detrimental to overall societal welfare.
Responses from Industry Leadership
Notably, several prominent banking executives have voiced opposition. Mark Mason, outgoing CFO of Citigroup Inc., and Jamie Dimon, CEO of JPMorgan Chase, have both expressed disapproval of the proposed measure, underscoring the challenges it poses for major credit card issuers. Moody’s Taiano categorizes the cap as a credit negative, foreseeing a reduction in net interest income and loan growth, alongside potential declines in fee-based revenue streams, with impacts varying across institutions depending on their business models and risk tolerances.
Overall, while the interest rate cap aims to alleviate consumer burden, the multifaceted ramifications signal significant shifts in credit market dynamics, rewards program viability, and airline industry partnerships. Close monitoring and further analysis will be essential to gauge the enduring effects should such regulation be enacted.