Banks Respond to Proposed Cap on Credit Card Interest Rates

[hegemony]

Banks Respond to Proposed Cap on Credit Card Interest Rates

 

Quote

evidence shows that a 10% interest rate cap would reduce credit availability and be devastating for millions of American families and small business owners who rely on and value their credit cards

cry a tear for banks

[MP80]

Helping poor people who are burdened with massive, long-term debt is a good thing, as this assistance can temporarily alleviate the seemingly endless burden on these debtors.

 

However, the potential negative consequences will affect us who pay in full and lenders, such as reduced credit limits or rejected loan applications, which will hinder the efficient functioning of the credit market, and is a more significant concern.

 

This idea was initially proposed by Massachusetts Senator Elizabeth Warren, the founder of the Consumer Financial Protection Bureau (CFPB) and a member of the Senate Finance Committee, who has consistently throughout her career advocated for the rights of working-class and low-income individuals. The White House later adopted her suggested 10% cap as a policy guideline.

[Flyingifr]

Translation:

 

"Americans like paying 30% interest rates. That's why we moved our headquarters to South Dakota where there is no usury law."

 

The only thing a 30% interest rate does for a poor person is to keep that person poor. I guess the next thing our banksters will be saying is "The only thing a drowning person needs is a brick".

[supern8ural]

I don't like high interest rates, but I do think a likely consequence of enacting this would be banks simply withdrawing credit products from people with less than excellent credit.

[hdporter]

Interest rate caps seldom work to the broad consumer's benefit.  

 

A much more prudent effort would be to step up consumer credit education (AI has to offer some intriguing novel opportunities), and to foster a more robust marketplace that would assist consumers in seeking lower cost financing opportunities.

 

 

Edited January 16 by hdporter

[chicagorich]

On 1/15/2026 at 9:33 PM, hdporter said:

Interest rate caps seldom work to the broad consumer's benefit.  

 

A much more prudent effort would be to step up consumer credit education (AI has to offer some intriguing novel opportunities), and to foster a more robust marketplace that would assist consumers in seeking lower cost financing opportunities.

 

 

The most important education is understanding the difference between a need and a want.

[hegemony]

it won't relieve the debt "burden" of people who carry balances but it will undercut the marketplace of extending people like that credit. it's just a headline grabber to distract from releasing the ... 

[nemo]

For those interested, the Vanderbilt study is here:

https://cdn.vanderbilt.edu/vu-URL/wp-content/uploads/sites/412/2025/09/03183755/Capping-Credit-Card-Rates.pdf

 

One aspect that hasn't been discussed much is that they don't believe there will be an impact on rewards for people with FICO scores above 760.  This is discussed in the paper but there is also a reference to it in this table which was excerpted by Mint:

[MP80]

You rarely see large banks issuing new credit cards with an annual interest rate below 20%. The average annual interest rate for credit card applications from the five largest banks ranges from 18.99% to 22.99%, provided you have an excellent credit history. JPMorgan Chase, for example, won't even offer you an interest rate below 23%. In fact, the annual interest rate on Chase and Capital One's Visa Infinite credit cards can be as high as 29.99%.

 

Most people who have low-interest-rate credit cards applied for them 10 or 15 years ago, when interest rates ranged from 9.9% to 12.99%. Even with a 4% to 5% increase in interest rates, these rates are still very low compared to current market rates.

 

When I applied for the Capital One Venture credit card ten years ago, I was approved for a $30,000 credit limit with mediocre FICO 700 credit, with an annual interest rate of 13.99%. Now, my annual interest rate has increased to 18.25%. Even with an excellent credit history, according to current economic trends and credit market influences, Capital One won't offer you an interest rate as low as 18.25%.

[TheVig]

22 hours ago, hegemony said:

it won't relieve the debt "burden" of people who carry balances but it will undercut the marketplace of extending people like that credit. it's just a headline grabber to distract from releasing the ... 

 

I told someone the same thing the other day. Even at 10%, do you have the capacity to make large enough payments to take advantage of the 10% and get the debt paid off?

[hdporter]

I love my CU 8.9% fixed rate card.  When it's a convenient source of short-term liquidity, I don't balk at carrying a balance for 2 or 3 mo.  (no cash adv fee!  )

[supern8ural]

On 1/18/2026 at 1:06 AM, MP80 said:

You rarely see large banks issuing new credit cards with an annual interest rate below 20%. The average annual interest rate for credit card applications from the five largest banks ranges from 18.99% to 22.99%, provided you have an excellent credit history. JPMorgan Chase, for example, won't even offer you an interest rate below 23%. In fact, the annual interest rate on Chase and Capital One's Visa Infinite credit cards can be as high as 29.99%.

 

Most people who have low-interest-rate credit cards applied for them 10 or 15 years ago, when interest rates ranged from 9.9% to 12.99%. Even with a 4% to 5% increase in interest rates, these rates are still very low compared to current market rates.

 

When I applied for the Capital One Venture credit card ten years ago, I was approved for a $30,000 credit limit with mediocre FICO 700 credit, with an annual interest rate of 13.99%. Now, my annual interest rate has increased to 18.25%. Even with an excellent credit history, according to current economic trends and credit market influences, Capital One won't offer you an interest rate as low as 18.25%.

 

yup.  My FICO 8s are hovering around 800 (I'm waiting for my last card to hit to be full AZEO so I see what they really are) and I think my lowest regular interest card is 16.74% APR on a card that I've literally had for almost two decades and it's lower than their current lowest advertised APR for that card - although I do have a 0% promo and a 11.99% promo (I'm obviously only using the 0%)

[MP80]

4 hours ago, supern8ural said:

I do have a 0% promo and a 11.99% promo (I'm obviously only using the 0%)

Based on my current observations, banks are unlikely to revert to their previous practice of offering various incentives to consumers, especially now that Discover has been acquired by Capital One and the top-level decision-making power is relatively weak.

 

The reason you can obtain promotional interest rates of 0% to 2.99% or 3.99% is that lenders assess a risk of 1% to 2% based on your FICO credit score and a long history of good and stable credit.

 

Sometimes, attempting a balance transfer can lead to potential disaster (as exemplified by Capital One), ultimately resulting in the closure of all accounts. Furthermore, even with an excellent personal credit history, using balance transfers may reveal instances of overspending or maxed-out credit limits in your business credit to your creditors.

 

Another issue is that almost all travel-related credit cards have very high annual interest rates, ranging from 23.99% to 29.99%. If you maintain a high balance for an extended period, coupled with high annual fees, the bank will make you pay dearly.

[hegemony]

On 1/20/2026 at 10:38 PM, MP80 said:

Based on my current observations, banks are unlikely to revert to their previous practice of offering various incentives to consumers,

so there's a new toaster in my future?

[MP80]

Sure, you'll definitely have to pay more, as the annual fee will increase; it's designed to incentivize you to use coupons you have no interest in.

 

Large banks give you tons of travel points when you book hotels and flights, but not for everyday credit card spending. So paying $400 to $800 a year for one or two occasional trips is absurd and doesn't justify such a hefty annual fee. On the other hand, you can't earn those travel points by buying groceries and everyday expenses.

 

I think the American Express Platinum Card and the Chase Sapphire Reserve Card are the dumbest credit cards to pay annual fees for, but of course, this is just my personal opinion. 

[hdporter]

14 hours ago, MP80 said:

I think the American Express Platinum Card and the Chase Sapphire Reserve Card are the dumbest credit cards to pay annual fees for, but of course, this is just my personal opinion. 

 

I generally agree with the greater body of your post.  I'm split on the last paragraph (quoted).

 

I haven't been able to rationalize Amex Plat.  But until this year, Chase Saph Rsv has been a font of value.

 

As you suggest, it's not a Card for every day spend.  But with $20k+ annual spend on 3% cat exp, the card becomes very attractive for use.

 

There were a number of opportunities to redeem banked points at a 50% premium (4.5% cb).  Other opportunities to redeem for merch like Apple products at significant discounts.  Access to airport Priority Pass lounges/Minute Suites was a desirable perk when travelling. And on one occasion, we received free admission to a wine event sponsored by CSR while vacationing in Sonoma.

 

Generally speaking, we had a very satisfactory relationship with this card.

 

But in the last year or so they eliminated opportunities to redeem points at a premium.  Most recently, the added benefits that held no interest for us while boosting primary/authorized user annual fees to an amount that negated much of the benefit value I just outlined.

 

We passed on this year's renewal and downgraded to Saph Pref'd.

 

Again, I'm not invalidating the opinion you expressed.  I'm just reacting out of the fact that we've never experienced another Card that suited us as well as Saph Rsv (until the revisions this year).

[MP80]

Let me be clear, cut to the bone, and be blunt: those top-tier credit cards with high annual fees are indeed feasible and attractive in the first year, as they include enticing sign-up bonuses equivalent to $1,000 in cash. However, by the anniversary, you will anticipate receiving no compensation of any sort to offset your hefty annual fee, so the unambiguous outcome is clear, and the consequences are obvious.

 

The only way to offset the $800 annual fee is through travel and vacation spending, including accommodation and transportation—airfare, cruises, hotel resorts, and car rentals. With business credit cards, you'll receive more rebates on everyday inventory purchases, which will help offset the annual fee.

[MP80]

The already approved Chase Sapphire Reserve credit card has always been there, but I've never considered applying. If I had applied, my credit limit would be around $35,000, plus a 125,000 sign-up bonus (with a $5,000 mandatory spending ), which, of course, would be canceled next year.

 

 

[Flyingifr]

On 2/10/2026 at 10:35 AM, MP80 said:

Sure, you'll definitely have to pay more, as the annual fee will increase; it's designed to incentivize you to use coupons you have no interest in.

 

Large banks give you tons of travel points when you book hotels and flights, but not for everyday credit card spending. So paying $400 to $800 a year for one or two occasional trips is absurd and doesn't justify such a hefty annual fee. On the other hand, you can't earn those travel points by buying groceries and everyday expenses.

 

I think the American Express Platinum Card and the Chase Sapphire Reserve Card are the dumbest credit cards to pay annual fees for, but of course, this is just my personal opinion. 

The points are just one of the benefits of a card, although it is by far the most heavily touted one. In my case, however, it is far from the best value for the AF they charge.

 

I have an Amex Delta Platinum with a $250 AF. Yeah, I get double points on my groceries, but that is not why I have that card. Every year I fly my grandkids from TUS to PIT to stay with me for a couple of weeks. One of them flies free on the Companion Fare that Amex and Delta give me. The ticket ordinarily costs over $500, so I pay $250 to save $500.  I run just about ever dollar I can of my ordinary spending through that card. Utilities, Insurances, operating costs of two cars and a boat, groceries, restaurants, eating out, you name it. This is money I would be spending anyway and if I used a Debit card I would get nothing for. In another two years I will have enough points for me and Mrs Flyingifr to spend two weeks on vacation literally anywhere in the world. Hotel, airfare and dining free (if we choose an all inclusive) courtesy of Amex and Delta.

[hdporter]

13 hours ago, MP80 said:

However, by the anniversary, you will anticipate receiving no compensation of any sort to offset your hefty annual fee ...

 

The only way to offset the $800 annual fee is through travel and vacation spending, including accommodation and transportation—airfare, cruises, hotel resorts, and car rentals.

 

I disagree.  Statement credits covered about 40% of the annual fee.  Enhanced cashback (just the portion above 3% on dining/travel) considerably exceeded the residual annual fee.  Other benefits (Doordash, Lyft, Priority Pass, etc) were pure gravy.

 

In the 9+ years that we actively used this card, we reaped a bounty over and above the benefits that might have been available from competing products.

 

The benefit redesign and fee hike killed that net benefit for us.

[MP80]

16 hours ago, Flyingifr said:

In another two years I will have enough points for me and Mrs Flyingifr to spend two weeks on vacation literally anywhere in the world. Hotel, airfare and dining free (if we choose an all inclusive) courtesy of Amex and Delta.

I can tell you that you really enjoy flying Delta, especially with family. If you're considering applying for the American Express Delta Reserve credit card, the annual fee is $650, but you get a 125,000-point sign-up bonus if you don't mind, and you can cancel it next year. I'm mentioning it because I received this offer yesterday myself. 

 

 

[Flyingifr]

9 hours ago, MP80 said:

I can tell you that you really enjoy flying Delta, especially with family. If you're considering applying for the American Express Delta Reserve credit card, the annual fee is $650, but you get a 125,000-point sign-up bonus if you don't mind, and you can cancel it next year. I'm mentioning it because I received this offer yesterday myself. 

 

 

I thought of upgrading but in my case the math just didn't work out. The $9,000 spend in 6 months was the killer for me. With the Platinum card I presently have I have no minimum spend, so the points just accumulate on my normal spending habits. And yes, I prefer Delta. With my annual spend in points I qualify for seat upgrades and fly Premium Economy and sometimes Business Class while paying the cattle car prices, and Delta's on time record is one of the best in the USA, not to mention their service has always been top notch. As a licensed pilot I pay attention to these things. Every time I fly commercially I always notify the #1 Cabin Crew before push back that should anything happen on the flight deck there is another pilot on the plane. They are always glad to know that.

Edited Thursday at 05:49 PM by Flyingifr
add additional info.

[MP80]

I just received my offer today for the American Express/Delta Skymiles Platinum Card ($350 annual fee). It's a bit strange that American Express is pushing its high-fee credit cards so aggressively every week. Last week, they were promoting the Gold and Platinum cards, and also added checking accounts, savings accounts, personal loans, and business credit lines.

 

I received a $100,000 business credit line from Wells Fargo and a $40,000 personal loan from Discover Bank. I think deregulation will loosen up allow large banks to lend as much as they used to, further fueling the credit bubble.

 

[Flyingifr]

I must be grandfathered. Mine renewed last month and it was only $250. Even at $350 I am still $150+ ahead just on the Companion Fare.

[MP80]

13 hours ago, Flyingifr said:

I must be grandfathered.

AmEx did not grandfather the old annual fee for the Delta SkyMiles Platinum card; instead, they implemented a fee increase to $350 (up $100) for existing cardholders upon their first renewal on or after May 1, 2024.

Here are key details regarding the annual fee change:

 

- Effective Date: Renewal on or after May 1, 2024, saw the increase to $350.

 

- No Long-Term Grandfathering: The old rate was not maintained for existing users.

 

- New Benefits: The annual fee increases coincided certificate and enhanced statement credit.