There has been a surge of new credit card legislation recently, impacting both entrepreneurs and consumers. In a previous post, I discussed the impacts of the Credit Card Competition Act on startup financing. Turning to another major proposal, this post focuses on the 10% Credit Card Interest Rate Cap Act, aimed at lowering interest rates for consumer credit cards but could lead to some significant unintended consequences.
This blog post breaks down the proposed bill’s goals, potential impacts, and practical strategies for entrepreneurs to manage credit card debt and rewards in this changing landscape.
Why Should Entrepreneurs Care About This Bill?
While this legislation does not apply to business credit cards under the Truth in Lending Act (TILA), it directly affects personal credit cards, which many sole proprietors and entrepreneurs use for business expenses. As explained in another blog post, using personal credit for business purposes comes with legal considerations, but it remains a common way for startups to quickly access working capital.
The proposed 10% cap would amend TILA by setting a strict limit on the annual percentage rate (APR), which includes all associated finance charges. Understanding how this cap could affect financing options for entrepreneurs is crucial for managing cash flow and credit wisely.
What Is the Goal of the 10% Credit Card Interest Rate Cap Act?
In February 2025, Senators Sanders and Hawley introduced a bipartisan bill to cap consumer credit card interest rates at 10% for five years, aiming to deliver immediate financial relief to working families and consumers struggling with record-high rates and mounting debt. Representatives Ocasio-Cortez and Luna later introduced a companion House bill, but both versions remain in committee. These efforts echo a campaign promise made by President Trump and reflect growing bipartisan concern over growing consumer debt.
The bill seeks to address soaring credit card interest rates (now averaging over 24%) and national credit card debt exceeding $1.2 trillion. Supporters argue that the 10% cap is necessary to protect consumers from predatory lending and prevent families from being trapped in debt cycles. However, previous attempts to cap interest rates at 15% and 18% failed to advance in Congress. Despite bipartisan support, the current bill faces strong industry opposition and an uncertain path forward.
What Are the Potential Benefits and Risks?
Proponents believe a 10% cap could significantly reduce the debt burden for millions of Americans. For example, paying off a $5,000 balance with a $150 monthly payment at 10% APR instead of 20% would save nearly $1,500 in interest and shorten the payoff period from 50 to 40 months. However, experts warn that this proposal may not be a true lifeline since the proposed cap would likely apply only to new purchases, not retroactively to existing balances.
Financial groups argue that using an all-in APR to measure loan costs is flawed, as banks must price loans according to each borrower’s risk to maintain financial stability and offer credit to a wide range of consumers. The bill may inadvertently tighten access to consumer credit, particularly for people with lower credit scores. This could disproportionately affect communities of color, who already face barriers to building credit and wealth, since median credit scores are 727 for white households compared to 627 for Black and 667 for Hispanic households. Critics also caution that millions of consumers could be “debanked” and forced to turn to riskier, higher-cost alternatives like payday loans with interest rates over 300%.
Can the Proposed Bill Impact Rewards Programs?
Financial experts warn that credit card issuers might offset lost interest revenue by raising fees or reducing rewards programs. Although issuers profit from multiple sources, including late fees, interest, and interchange fees, rewards could be scaled back. As evidenced by the 18% APR cap for the credit union sector, their cards typically offer less generous rewards and perks compared to major banks.
Rewards programs are highly valued by consumers, with almost 70% of Americans preferring to pay with credit cards to earn points. Any reduction in benefits would disappoint many cardholders, especially entrepreneurs who leverage rewards to reinvest in their businesses or offset large expenses. While it remains uncertain exactly how banks will respond, history suggests that tighter profit margins could mean fewer perks and diminished value for those who rely on their rewards.
How Can Entrepreneurs Implement Smart Swiping Strategies?
Regardless of the bill’s fate, entrepreneurs should focus on minimizing high-interest debt and maximizing rewards. Here are some practical strategies:
1. Use rewards to pay down existing balances with cashback or statement credits, but remember these options often provide less value than travel redemptions. For example, 10,000 points may be worth $100 in cashback but could cover a two-night staff retreat at the Hyatt Place in Los Cabos (worth over $260) or a one-way nonstop economy flight from Washington, D.C., to Honolulu (valued at $620+) if redeemed strategically.
2. Consider balance transfer offers with 0% interest for a set period to reduce interest costs. If you anticipate a large purchase, apply for a card with a 0% introductory APR, typically lasting 12-18 months. Paying off high-interest debt with a low-rate personal loan can also save money.
3. Prioritize eliminating expensive debt with a repayment plan that fits your needs. If payments become unmanageable, consider debt consolidation or seek guidance from a reputable nonprofit credit counselor.
Final Thoughts: Swipe Strategically and Stay Informed
The 10% Credit Card Interest Rate Cap Act could provide relief for many Americans but may also cause unintended consequences like reduced credit access, higher fees, and diminished rewards. Despite the bill’s uncertainty, it’s wise to pay down balances promptly and avoid carrying debt. Credit cards are valuable tools for entrepreneurs, but responsible use is key. When your balance is zero, your interest rate becomes far less important. Keep up with legislative changes and regularly review your credit card terms to ensure you’re maximizing the value of every swipe.
Sources:
https://www.congress.gov/bill/119th-congress/house-bill/1944/text
https://www.congress.gov/bill/119th-congress/senate-bill/381/text
https://www.congress.gov/crs-product/IF12861
https://www.aba.com/advocacy/policy-analysis/joint-trades-opposition-letter-to-hr-1944
https://www.bankrate.com/credit-cards/news/credit-card-interest-rate-cap/
https://www.investopedia.com/average-credit-scores-by-race-5214521
https://scholarship.law.missouri.edu/mlr/vol73/iss3/3
https://www.aecf.org/blog/report-describes-the-racial-wealth-gap-and-how-to-start-closing-it
Image Sources:
https://unsplash.com/photos/concept-of-financial-problems-with-credit-cards-2hfeXBKzpAA
https://unsplash.com/photos/a-man-sitting-at-a-table-looking-at-a-cell-phone-d0uZ4D7BnZ4
https://www.elevate.com/article/everything-you-know-about-credit-cards
https://unsplash.com/photos/woman-in-white-shirt-using-smartphone-FWVMhUa_wbY