Don’t Cap Credit Cards – Kevin D. Williamson

The struggling consumer masses of the world are united in two things: their hatred of credit card companies and their desire for more and better credit cards. I get it, I do—I often have observed that all Americans would be advocates of free-market capitalism if not for their experiences with indecipherable medical bills, trying to cancel a gym membership, dealing with cable companies, and credit card issuers. Nobody loves the bank—but, then, nobody has to. The bank is like the power company: It just has to work. If you’re thinking about it at all, then something is probably wrong. 

Donald Trump, who once crowned himself the “king of debt,” wants credit card interest rates capped at 10 percent. He has urged the industry to adopt that cap voluntarily—which is not going to happen—but also has suggested to Congress that it should impose such a cap through law. The effect of doing this would not be to save Americans money on interest payments. The effect would be to deprive many Americans of access to ordinary consumer credit, beginning with those who have lower incomes and lower credit scores. 

Trump, of all people, is well positioned to understand how this works in the real world. During his time as an incompetent real estate developer, Trump made almost as many appearances in bankruptcy proceedings as he did on Page Six. Trump is a known deadbeat and a bad credit risk. When you are a bad credit risk, you pay higher interest rates and get credit on generally worse terms. And then, at some point, you simply cannot get credit at all, at least through ordinary channels. Toward the end of his run in real estate, Trump found it practically impossible to get loans from any of the major lenders with which he had been associated—often to those banks’ regret—over the years. Trump is, at the moment, legally prohibited from taking out commercial loans from banks in the state of New York after having been found by a court to have engaged in financial fraud. 

But most borrowers are not as outlandish in their behavior—or as wealthy—as Donald Trump. Ordinary borrowers see their credit ratings dinged from time to time over things like unpaid bills or late payments, too much debt relative to their incomes or savings—all the familiar stuff. Interest rates charged to consumers take into account credit risk—the banks’ chances of not getting paid back or of having to spend money and time recovering money owed—but also things such as opportunity cost (Why lend anybody money at 3 percent when you could just park those assets in an index fund and expect to make more money?) and, of course, the ultimate arbiter of interest rates: the market. People with poor credit scores or low incomes pay higher interest rates in part for reasons having to do with risk but also because there is a lot more competition to lend money to multimillionaires with 840 credit scores. The old bankers’ proverb holds true: You don’t want to lend money to people who need it—it is far better to lend to people who don’t need the money. 

Capping interest rates at 10 percent would, to be clear, simply destroy the credit card business as we know it. High income people with very high credit scores typically pay more than 15 percent as it is, whereas lower income people with worse credit scores pay a lot more—and the average rate is around 20 percent. At 10 percent, there would be more profitable things for firms to do with their money rather than take on the risk and work of operating a credit card business. If you think a bank could make a good go of it by offering credit cards at 10 percent, then my advice for you is: Do it. If you succeed, then you probably will end up being one of the wealthiest entrepreneurs in the world. 

But back here on Earth, where Wells Fargo charged off $1 billion in bad consumer loans in 2025 (and that was a very good year for the bank on that front) banks demand more than 10 percent not because they are greedy (of course they are greedy, but that isn’t the reason) but because markets are really good at aggregating and conveying information about prices—and prices go both ways. Credit-card lenders experience financial losses and recovery costs, among other expenses. 

Banks often measure their business health by “net interest margin,” meaning the difference between interest income (what borrowers pay banks) and interest expenses (what banks pay depositors), which on average has run between 3 percent and 3.5 percent in the past few years. That isn’t the same thing as profit margin, but it is worth knowing about. In terms of actual profit, some banks have had a good run of it lately, with profit margins above 20 percent, and some have had less success, with Citigroup, for example, earning only 8.5 percent margins in 2025. Meta, for comparison, enjoyed a 41 percent profit margin for the year.

Thanks in part to Zohran Mamdani, there is a specter haunting Donald Trump—not communism but affordability. Because Trump is both an economic illiterate and a populist (the terms often are interchangeable), his instinct is to try to paper over rising prices with cheap money—which is itself a cause of higher prices. (That is where we get the term inflation—from inflating the money supply.) And so Trump has these daffy ideas that would make things more expensive in reality while trying to make them seem more affordable in the short term: His absolutely imbecilic idea to create 50-year mortgages to help would-be homeowners afford houses at today’s painful prices would put upward pressure on prices (for the same reason people buy more expensive cars with six-year financing than with two-year financing) and ensure that borrowers are paying more in interest while building less equity in the property. Credit card interest rates are not the problem: Credit card balances are the problem for many families, because post-COVID inflation—which Trump’s big-spending policies and tariffs have made worse—has eaten into household incomes. That is not a problem that is going to be fixed by monkeying around with interest rates. 

Representatives of several conservative and market-oriented advocacy groups signed a joint letter to the administration advising against this. (My Competitive Enterprise Institute colleague John Berlau is a signatory.) Among other concerns, they note that a “10 percent cap could eliminate credit card access for up to 190 million Americans, or close to 90 percent of American cardholders.” Which is to say, Trump would replace your high-interest credit card with no credit card. Given the way credit cards facilitate commerce even for people who never carry a balance, it is easy to see how this would cause chaos for businesses ranging from Amazon to American Airlines, both of which offer credit cards of their own but, more significantly, depend to a great degree on the credit-card network for payments. 

This isn’t going to be a problem if you have a Centurion card. Or—probably—even a platinum AmEx. But for middle-income and low-income people with ordinary credit needs, it is, like so much of what Trump offers, a catastrophe hidden inside a handout. 

Why is it foolish to mess with prices? Because market prices are real things, reflections of an underlying reality that does not change just because some politician wants it to. Raise prices beyond what the market determines and you will see a reduction (possibly a collapse) in demand, e.g., businesses investing in automation when minimum-wage increases raise labor costs beyond too far beyond the real market price; cut prices below what the market determines and you end up with scarcity and rationing, as in the “free” health care enjoyed by our British cousins. The economic problem facing struggling American families is that their incomes are insufficient to enable the level of consumption they desire and expect. All the price-fixing in the world will not improve that but will instead make it worse. The only question is whether the policymakers in this case propose to make it a little bit worse or a lot worse.