Credit Card Interest Rate Caps Aren’t Pragmatic Reform

Conservatives have long stood for a simple but powerful idea: prosperity is achieved through freedom, competition, and growth. That principle has powered America’s economic dynamism and provided hard-working families with the opportunity to live out the American Dream. It’s no coincidence that our economy has been and continues to be the envy of the world, while other countries stifle their own growth with heavy-handed regulations and misguided policies like price controls.

Unfortunately, many left-wing politicians in the United States look to these failed economies abroad as models of success. While all the evidence points to the dangers of such an approach, progressives like Bernie Sanders, Elizabeth Warren, and Alexandria Ocasio-Cortez routinely put ideology over pragmatism – feeling over fact.

Recent proposals to place a 10 percent cap on credit card interest rates fall into this same trap. While well-intentioned in the face of an affordability crisis handed over from the previous administration, the idea should give every pro-growth advocate pause. In fact, Warren and Sanders, and AOC have championed this very policy.

For years, the loudest champions of interest rate caps have been figures on the economic left who believe markets are inherently exploitative and must be tightly controlled by bureaucrats in Washington. When leading progressive lawmakers praise a credit card rate cap as a long-sought victory, conservatives should recognize it for what it is: a warning sign.

It is a basic axiom of public policy that the most well-intentioned policies eventually bump up against very real realities. Or, more simply (and as my father used to say to me), there are many roads to utopia, however all must traverse the surface of the earth.

And as we have seen so many times before, the road here is well worn: price controls don’t reduce costs. They reduce access. That’s not ideology; it’s economic reality.

Credit cards are priced based on risk. Lenders extend unsecured credit to millions of Americans with varying financial profiles, absorbing losses when borrowers default. A government-imposed ceiling doesn’t erase that risk. When lenders can’t price in risk, they simply won’t expose themselves to it, refusing to lend to the very borrowers who need credit the most.

The result isn’t cheaper credit. It’s no credit—an outcome that would undermine President Trump’s pro-growth, pro-consumer agenda. Worse, it would upend a system that is already fully democratized and truly consumer friendly.

History bears this out. Countries that have experimented with interest rate caps have repeatedly seen fewer lending options and higher fees layered on to compensate. When these options dry up, consumers inevitably turn to worse alternatives. Unregulated lenders thrive in the shadows created by well-intentioned but misguided regulations.

A temporary 10 percent cap would only accelerate this pattern. Families already struggling to manage expenses wouldn’t suddenly see their balances disappear. Instead, they’d find their credit limits slashed or their cards closed altogether. That doesn’t solve an affordability problem — it compounds it.

Conservatives should also be clear-eyed about what this policy empowers. Rate caps hand more authority to federal regulators, invite new compliance regimes, and expand Washington’s role in deciding who gets access to financial tools. That may sound great to progressives, but it’s a major red flag for anyone who believes in limited government and individual choice—and it ultimately hastens what progressives truly want: the destruction of the consumer financial credit system entirely, to be replaced by a government-run system.

There is a better path to affordability. It doesn’t involve copying progressive economics and hoping for a different outcome.

We must promote competition and encourage innovation in financial services. We can increase transparency so that consumers can better understand the true cost of borrowing. We can support financial literacy and debt-management tools that help families make informed decisions and build long-term stability. And we can pursue economic growth policies that cut back on burdensome regulations, raise wages, and expand opportunity.

These solutions respect markets, empower consumers, and stay true to the principles that have long powered our economy.

Conservatism has always been about trusting people over bureaucracies and markets over mandates. If we abandon those principles now, we won’t make the economy fairer. We’ll make it smaller, more regulated, and less forgiving for the Americans who need flexibility the most.

Andrew Langer is Director of the Center for Regulatory Freedom at the CPAC Foundation.