MW Bernie Sanders floats a bipartisan bill to fulfill a Trump campaign promise. Critics say it's 'pandering.'

Andrew Keshner

The legislation underscores the high interest rates consumers continue to pay on credit-card debt, even as the Fed has begun to lower its benchmark rate

Many Americans are paying credit-card interest rates over 20%, but a new bill from a bipartisan duo would slice their card costs in half with a temporary rate cap of 10%.

At a time when Americans have amassed over $1 trillion in credit-card debt and delinquency rates are high, a new bill from Sen. Bernie Sanders of Vermont and Sen. Josh Hawley of Missouri would curb credit-card annual percentage rates, or APRs, at 10% for five years.

The interest rates that card issuers charge customers amount to "extortion and loan sharking," according to Sanders, an independent who caucuses with Democrats. They're "exploitative," added Hawley, a Republican.

The solution, they said, is to turn one of President Donald Trump's campaign pledges into legislation. Trump campaigned emphatically on promises to reduce everyday costs after inflation reached a four-decade high during the Biden administration, and during a rally in September proposed capping credit-card rates.

"While working Americans catch up, we're going to put a temporary cap on credit-card interest rates. We're going to cap it at around 10%. We can't let them make 25% and 30%," Trump said to applause.

Such a proposal appears to have broad public support. In a LendingTree survey (TREE) conducted in November, 77% of people said credit cards should have a rate cap. Two-thirds of respondents who supported rate caps said they would give up card rewards in exchange for capped APRs.

The White House did not immediately respond to a request for comment on the bill.

Whatever its future, the legislation underscores the high interest rates consumers continue to pay - even as the Federal Reserve has begun to lower its benchmark rate.

Read more: Why Americans still can't get cheaper mortgages, car loans or card balances after three Fed rate cuts

Americans had an average 21.47% APR on their credit cards in November, according to preliminary numbers from the Federal Reserve, and cards carrying unpaid balances month to month had a 22.80% rate. Banks set their APRs using the prime rate, which adds three percentage points onto the Fed's short-term rate.

There's no federal law against usury on a wide scale, but military servicemembers have protections barring rates above 36% on consumer credit products.

Card issuers charged $105 billion in interest and over $25 billion in fees during 2022, according to a Consumer Financial Protection Bureau analysis published in 2023. The markups on APRs have been becoming wider in the last decade, the agency said.

The share of active credit-card accounts only paying the minimum monthly bill hit a 12-year high in the third quarter of 2024, according to a recent analysis from researchers at the Federal Reserve Bank of Philadelphia.

Meanwhile, one banking-industry trade group quickly slammed Sanders and Hawley's bill. A credit-card rate cap would backfire and close off credit access for many people, the Consumer Bankers Association said.

"Price-setting is political pandering that has, time and time again, proven to harm Americans," the trade group said. "These socialist-type pricing policies are the best way to drive up costs for consumers and push access to credit further out of reach for millions of consumers."

Sanders and Hawley have separately made legislative efforts in the past to reduce card rates, though those bills failed to advance. In 2023, Hawley introduced a bill to cap credit card APRs at 18%, on par with the rate cap currently offered by federal credit unions. In 2019, Sanders teamed up with Rep. Alexandria Ocasio-Cortez, the New York Democrat, on a bill that would have limited APRs to 15%.

The margins that card issuers tack onto their APRs have "definitely crept up in recent years," said Ted Rossman, senior industry analyst at Bankrate. The national average on a new-card offer is currently 20.12%, though some card APRs can go much higher, he noted.

A 10% rate cap would be "dramatic," Rossman said. He said he was concerned about "unintended consequences" like decreased access to credit and fewer rewards for cardholders.

Banks might argue they need high rates to be profitable, he said. That's particularly because credit-card debt is not backed by collateral for lenders to collect in the event of nonpayment. "But I know a lot of people think they are paying way too much on their cards," Rossman added.

-Andrew Keshner

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February 04, 2025 18:16 ET (23:16 GMT)

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