Imagine a world where your credit card interest rate drops overnight from the national average of 24% to just 10%.
For anyone carrying a balance, this sounds like a dream come true. It means lower monthly payments, faster debt payoff, and less money lining the pockets of big banks. But as the old saying goes, "There is no such thing as a free lunch."
If a federal law were passed capping credit card interest rates at 10%—a proposal that has recently gained traction among politicians ranging from Bernie Sanders to Donald Trump—the credit card industry wouldn't just shrug and accept lower profits. They would radically restructure how they lend money. The credit card market as we know it would fundamentally change, and not necessarily for the better for everyone.
As a financial writer with over a decade of experience tracking industry trends, I’m going to break down exactly which credit cards would be hit the hardest, why they would be affected, and what that means for your wallet.
The Economics: Why 10% Breaks the Model
To understand which cards are on the chopping block, we first have to look at the "math" of a credit card.
Banks lend money on credit cards without collateral (unlike a car loan or mortgage). If you don't pay, they can't come take your house. This makes credit card debt unsecured and highly risky.
To manage this risk, banks use a simple formula:
Prime borrowers (Credit Score 750+): Very unlikely to default. Banks can afford to lend to them at 10% because the risk of losing money is low.
Subprime borrowers (Credit Score <660): Statistically much more likely to default. Banks charge them 25%–35% APR so that the interest collected from those who do pay covers the losses from those who don't.
If the government caps the rate at 10%, that math stops working for millions of borrowers. The bank is no longer earning enough interest to cover the risk of default. The result? They stop issuing those cards entirely.
Here are the three specific categories of credit cards that would be affected the most.
1. The First Casualties: Subprime and Credit-Builder Cards
Examples: Credit One Platinum, First Premier Bank, subprime Capital One cards, Mission Lane.
The cards most immediately threatened by a 10% cap are ironically the ones designed for people who need credit the most: subprime and credit-building cards.
Why they are vulnerable
These issuers cater specifically to people with bad credit or no credit history. Their entire business model relies on high interest rates (often 30%+) and high fees to offset the fact that a significant percentage of their customers will default on their debt.
If you cap their revenue engine (interest) at 10%, these banks simply cannot afford to lend money. The risk of default would effectively be higher than the potential profit.
The Likely Outcome
Mass Cancellations: Issuers would likely close millions of existing accounts that are deemed "too risky" under the new rate cap.
Impossible Approval Standards: The minimum credit score required to get a card might jump from 580 to 700 overnight.
The Return of Annual Fees: To make up for lost interest revenue, "free" credit builder cards would vanish, replaced by cards with heavy monthly maintenance fees or steep annual fees ($100+).
The Expert Take: If you are currently working on rebuilding your credit score, a 10% cap might actually lock you out of the traditional banking system, forcing you toward even more predatory options like payday loans or pawn shops.
Must Read This:- Can Blockchain Really Fix the Broken Insurance System?
2. The "Rewards" Apocalypse: Premium Travel & Cash Back Cards
Examples: Chase Sapphire Reserve, Amex Gold/Platinum, Citi Double Cash.
You might think premium cards for wealthy people would be safe. After all, high-income earners rarely default, right?
Actually, these cards are heavily subsidized by interest income. In the credit card industry, there are two types of users:
1. Transactors: People who pay their bill in full every month (and earn free rewards).
2. Revolvers: People who carry a balance and pay interest.
The sad reality of the rewards game is that the revolvers pay for the transactors' vacations. The billions of dollars banks collect in interest help fund the 5% cash back, the airport lounge access, and the massive sign-up bonuses.
Why they are vulnerable
If interest revenue is slashed by 60% (dropping from ~25% to 10%), the "slush fund" that pays for your rewards points dries up. Banks cannot afford to give you 3 points per dollar on dining if they aren't making high-margin interest income on the back end.
The Likely Outcome
Devaluation of Points: We would likely see a massive "nerfing" of rewards programs. That 2% flat cash-back card might drop to 0.5% or disappear entirely.
End of Sign-Up Bonuses: The days of getting $750 worth of travel just for opening a card would likely end.
Higher Annual Fees: To keep lounge access and concierge services, banks would have to charge the user directly. Expect premium card fees to jump from $550 to $1,000+ per year.
3. The Retail Trap: Store Credit Cards
Examples: The Gap Visa, Macy’s Card, Lowe’s Advantage Card, Amazon Store Card (Synchrony).
Have you ever been at a checkout counter and the cashier offered you 20% off your purchase if you opened a store card right now? Those cards are almost always issued by banks like Synchrony or Comenity, and they almost always carry APRs of 29.99% or higher.
Why they are vulnerable
Store cards are an "instant gratification" product. They approve almost anyone instantly, which carries huge risk. The only reason they can approve you in 30 seconds without a deep background check is because the interest rate is astronomical.
The Likely Outcome
Disappearance of "Instant Approval": Retailers would stop offering these cards at the register because the banks backing them would tighten lending standards drastically.
Loss of Store Discounts: The 5% off at Target or Amazon is often funded by the credit card issuer, not the store. If the issuer's profits shrink, those automatic discounts vanish.
Shift to "Buy Now, Pay Later" (BNPL): We would likely see a massive pivot toward services like Affirm or Klarna, which are regulated differently than credit cards, filling the void left by store cards.
Who Actually Survives?
It’s not all doom and gloom. Some cards would survive, and perhaps even thrive, in a 10% capped environment.
Credit Unions: Institutions like Navy Federal or PenFed often already offer rates near or below 10-12%. Because they are non-profits, they don't need the massive margins that big banks do.
Secured Credit Cards: Since you put down a cash deposit as collateral, the bank has zero risk. These would likely become the only option for people with credit scores below 680.
Strictly "Prime" Low-Interest Cards: Cards designed for people with 800+ credit scores (like the Citi Simplicity or US Bank Visa Platinum) might survive, but they would become exclusive clubs that are very hard to join.
The Big Picture: Is a 10% Cap Good or Bad?
While the intention behind a 10% cap is noble—to stop predatory lending and help Americans get out of debt—the unintended consequences could be severe.
If you are a wealthy borrower with an 800 credit score, you will likely keep your credit access, but you'll lose your fancy rewards.
If you are a working-class borrower with a 600 credit score, you might lose your credit card entirely. When banks can't price for risk, they simply stop taking risks. This is known as "credit rationing."
A Historical Parallel
We can look at the Durbin Amendment (2010) as a case study. When Congress capped the fees banks could charge retailers for debit card swipes, banks didn't just eat the loss. They eliminated free checking accounts and debit card rewards programs to make up the difference. A 10% credit card cap would likely trigger a similar, but much larger, reaction.
Conclusion
A 10% interest rate cap would be the single biggest disruption to the consumer credit market in fifty years. While it would save money for those who keep their cards, the cards themselves would change unrecognizable.
The biggest losers would be:
1. Subprime borrowers (who would lose access to credit).
2. Churners/Travel hackers (who would lose lucrative rewards).
3. Retail shoppers (who would lose store discounts).
The credit card market would effectively shrink, becoming a boring, utility-like service reserved for the financial elite, rather than the accessible (albeit expensive) tool it is today.
What can you do right now?
Regardless of whether this law passes, the best defense against high interest rates is to act as if the cap already exists.
Frequently Asked Questions (FAQs) About a 10% Interest Rate Cap
You’ve read the deep dive, but you probably still have some burning questions about how this would play out in real life. Here are the answers to the most common questions regarding the proposed 10% credit card interest rate cap.
1. Is this law actually going to pass?
The honest truth: It faces an uphill battle. While the idea has bipartisan support from populist figures—ranging from progressives like Bernie Sanders to conservatives like Donald Trump—the banking lobby is incredibly powerful. However, stranger things have happened. Even if a strict 10% cap doesn't pass, the political pressure might force banks to lower rates slightly or eliminate certain "junk fees" to avoid regulation. It is a possibility you should prepare for, but not a guarantee.
2. If the law passes, what happens to the debt I already owe?
Generally, legislation like this is not retroactive. That means the 24% interest you agreed to three years ago usually stands. However, banks might offer you a choice: keep your account open under the new terms (which they might reject you for), or close the account and pay off the existing balance under the old terms. In short: Don’t expect your current mountain of debt to magically shrink overnight.
3. Will my credit score drop if this happens?
Indirectly, yes. If banks decide to mass-cancel subprime cards or lower credit limits to reduce their risk, your "Credit Utilization Ratio" (the amount of debt you have vs. your available credit) will spike. For example, if you have a $2,000 balance and a $10,000 limit, you are at 20% utilization (good). If the bank lowers your limit to $2,500 because of the new law, you are suddenly at 80% utilization (bad). This could tank your credit score even if you didn't spend a penny.
4. I have excellent credit (800+). Why should I worry?
You shouldn't worry about losing access to credit, but you should worry about the cost of using it. The "Golden Age" of credit card rewards is likely subsidized by high interest rates. If a 10% cap hits, expect your favorite travel card to slash its points earning rates, remove perks like travel insurance, or raise its annual fee significantly. The days of "free" luxury travel would likely end.
5. Are there any alternatives if I can’t get a credit card anymore?
Yes, the market will adapt. We would likely see a rise in:
Buy Now, Pay Later (BNPL): Services like Affirm and Klarna often charge fixed fees rather than "interest," allowing them to bypass APR caps while still lending to risky borrowers.
Credit Unions: Because they are member-owned non-profits, credit unions can often afford to lend at 12–15% (or lower) when big banks cannot.
Secured Cards: You might have to return to the basics—putting down cash to secure a credit line.
6. Why is 10% the magic number?
The 10% figure isn't based on a specific complex economic formula; it is largely historical and psychological. Historically, usury laws (laws against charging excessive interest) often hovered around single digits or low double digits. The argument is that if the Federal Reserve lends money to banks at ~5%, a 10% return should be sufficient profit. Banks, of course, argue that this ignores the cost of defaults and operations.
Disclaimer: The information provided in this article ("Which credit card will be affected the most...") is for educational and informational purposes only. I am not a certified financial planner, accountant, or legal advisor. The content reflects my personal opinions and research. You should consult with a qualified professional before making any significant financial decisions.
If you like this information, then share it with your friends, relatives and WhatsApp and Facebook, Twitter friends through the buttons given below. So that he can also know about it.
.jpg)
.jpg)
.jpg)
.jpg)
.jpg)
