Credit card debt is weighing more heavily on millions of Americans as interest rates rise and policymakers debate whether capping rates would ease the strain. Recent data and personal accounts point to growing financial pressure, while banks and economists warn that a cap could reshape access to credit.
Selena Cooper, 26, said the burden escalated after she lost stable income following a US government shutdown. A former paralegal at the Social Security Administration, she said her pay stopped in October and her job ended permanently after Christmas. Since then, balances across three credit cards climbed to $6,000. Capital One and American Express notified her last month that late payments would trigger higher rates. Her Capital One rate rose to 16% from half that level, while her American Express rate increased from 10% to 18%, she said.
Cooper now relies on income from a photography business in Columbia, South Carolina, which she said covers small bills but not her credit card balances.
Rising Rates And Household Exposure
Average US credit card interest rates reached about 22% as of November, up from roughly 13% a decade earlier, according to Federal Reserve data. About 37% of adults carry a credit card balance, and total credit card debt exceeds $1 trillion.
Susan Schmidt, a portfolio manager at Exchange Capital Resources in Chicago, said the figures indicate households are under sustained pressure. She said consumers are likely to continue feeling constrained.
White House Proposal And Political Response
Last week, US President Donald Trump proposed capping credit card interest rates at 10% for one year beginning January 20. The idea was part of his campaign platform. Cooper said the proposal would help modestly but would not eliminate her debt.
The proposal drew swift opposition from bank executives, who said a cap could reduce access to credit by prompting lenders to lower limits or close accounts for higher-risk borrowers. Interest charges generated about $160 billion in revenue in 2024, according to the Consumer Financial Protection Bureau, an agency Trump largely dismantled last year.
At JPMorgan, chief financial officer Jeremy Barnum said on an earnings call that a cap could lead to widespread loss of credit access, particularly for borrowers who need it most. Citigroup chief executive Jane Fraser also warned of a severe impact on lending and consumer spending.
Analysts Weigh Potential Effects
Some economists said a cap alone may not deliver the benefits supporters claim. Schmidt said a 10% cap may not help borrowers already in distress. Benedict Guttman-Kenney, an assistant professor of finance at Rice University, said banks could respond by tightening lending to lower credit score borrowers or by increasing fees elsewhere, such as annual or late fees.
Guttman-Kenney added that some bank expenses could be reduced to preserve margins, including marketing costs.
A study from Vanderbilt University estimated Americans could save about $100 billion a year in interest if a 10% cap were implemented. Brian Shearer, a researcher at Vanderbilt’s Policy Accelerator and the study’s author, said the savings would be noticeable for households. He questioned claims that lower rates would necessarily reduce lending, noting strong margins in credit cards and that interest is not the primary revenue source for banks.
Shearer said banks might reduce rewards, especially for borrowers with lower credit scores, but said the interest savings would exceed the value of lost rewards.
Personal Accounts And Credit Access
Morgan, 31, who asked to use only her first name, said she accrued $6,700 in credit card debt using a Discover card to pay for childcare while unemployed. Her husband, who serves in the military, covers other expenses. Through a service member benefit, she secured an interest rate of about 3%. She said paying typical rates near 27% would have made childcare unaffordable.
Morgan said the proposed cap appears to be a step toward prioritizing households, and she hopes it moves forward.
Legislative Outlook And Bank Pushback
Efforts to cap credit card rates have circulated for years. Senators Josh Hawley, a Republican, and Bernie Sanders, a Democrat, introduced legislation last year to set a 10% cap. Senator Elizabeth Warren said she discussed the issue with Trump this week and urged him to support congressional action.
Challenges remain. House Speaker Mike Johnson cited concerns about secondary effects and reduced lending, calling for deliberation. Analysts said banks are likely to continue opposing the measure through lobbying, given the importance of interest income to their business.
Featured image credits: Pix4free
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