In recent days, there has been renewed talk in Washington about expanding federal intervention in the credit card market. Two proposals in particular should concern anyone who cares about affordability, access to credit, and a healthy economy: a temporary 10 percent cap on credit card interest rates and the Credit Card Competition Act (CCCA).
At Palmetto Promise Impact, we oppose both.
The goal of helping Americans manage the rising cost of living is a worthy one. But government imposed price controls and payment mandates are not the answer. History and data show that these policies almost always produce the opposite of their intended effect.
Interest rate caps quickly become credit caps. When government artificially limits the price of credit, lenders respond by tightening standards, reducing credit limits, or pulling back entirely. The result is fewer choices and less access for consumers. That matters because credit cards play a major role in the U.S. economy. In 2024 alone, consumer credit cards supported $3.6 trillion in spending, roughly 12 percent of U.S. GDP. Injecting uncertainty into such a core engine of economic activity carries serious risks for growth and household stability.
There policies are especially harmful to low income and financially vulnerable families. Millions of Americans rely on credit cards to manage short term financial shocks because they do not have sufficient emergency savings. Federal Reserve data show that more than one third of adults cannot cover a $400 emergency expense with cash. For many households, credit cards serve as a bridge during unexpected expenses. Rate caps would cause lenders to cut back on higher risk borrowers first, leaving the families who most need access to credit with fewer and worse options.
The evidence is clear. State experiments with rate caps have consistently reduced access to credit and worsened outcomes for consumers. Illinois saw a sharp decline in lending to subprime borrowers after imposing a rate cap. A similar policy in Oregon harmed consumers on average, with young, low income, and less educated families bearing the greatest burden. More recently, a December 2025 study from the New York Federal Reserve reaffirmed that rate caps sharply reduce credit access for higher risk borrowers without improving delinquency outcomes.
Alongside these concerns, the Credit Card Competition Act presents a different but equally troubling form of government overreach. The CCCA would force changes to how card payments are routed, taking choice away from consumers and placing it in the hands of large corporate retailers. It is a solution in search of a problem. The U.S. payments system is widely regarded as the best in the world, enabling secure, efficient transactions that support trillions of dollars in commerce each year. Similar mandates in the past did not lead to lower prices for consumers. Instead, they increased margins for major retailers while delivering little to no benefit at the checkout counter.
Taken together, these proposals would almost certainly reduce or eliminate popular credit card rewards programs and lead to new fees for consumers who retain access to credit. Nearly nine in ten cardholders value rewards like cash back, points, and travel miles, and consumers overwhelmingly oppose losing these benefits due to government intervention.
Most concerning, neither proposal addresses the underlying challenges faced by households struggling with debt. In fact, they risk making those challenges worse. When traditional credit options are constrained, consumers are pushed toward less regulated and often more expensive alternatives. That does not make borrowing more affordable. It makes it harder and riskier.
There is a better path forward. Policymakers should focus on fostering competition, transparency, and consumer education, along with targeted support for those facing financial hardship. One size fits all federal mandates distort markets, undermine consumer choice, and ultimately harm the very people they are meant to help.
South Carolina families and working Americans deserve policies that expand opportunity, not restrict it. That is why Palmetto Promise Impact strongly opposes both a federal credit card rate cap and the Credit Card Competition Act, and why we are urging lawmakers to reject these proposals.
Wendy Damron, CPA is the President & CEO of the Palmetto Promise Institute. You can read more about her work here.
