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The Price of Plastic

Credit cards have become a focal point in Washington’s renewed push on affordability. President Trump’s call for a one-year, 10% cap on credit card interest rates targets an industry where average APRs hover around 23%, despite open questions about whether such a cap could be enacted without congressional action.

The underlying economics are less simple. Credit card rewards are supported by interchange fees, annual fees, and interest income, each carrying different weight across customer segments. Research from Vanderbilt University estimates a 10% cap would shift roughly $100 billion a year from issuers to borrowers in the form of lower interest payments, forcing changes elsewhere. Lenders are expected to protect their most profitable relationships by trimming rewards, raising annual fees, or tightening access to credit. For borrowers on the margin, the risk isn’t just fewer rewards, but fewer cards – and a push toward alternatives like buy-now-pay-later loans, where annualized rates can approach 36%.

Some early moves hint at how the system may adapt. Bilt recently overhauled its card lineup to include a 10% introductory rate, positioning itself ahead of potential legislative mandates even as large banks warn that tighter pricing would constrict access to credit. For incumbents, the likely outcome isn’t a blanket cap, but narrower products and selective concessions designed to limit disruption. The fight isn’t over interest rates alone, but over who still gets invited into the credit system, and on what terms.