Price controls never work, despite political opinions

Credit card interest rates can feel punishing. When cash gets tight, many American families turn to credit cards to float expenses, often at interest rates that can be eye popping, especially for low-income families with less-than-stellar credit scores.

As a result, it's no surprise politicians are taking notice, and the idea of capping those rates at 10% may sound appealing. For years, folks like Bernie Sanders, Elizabeth Warren, and AOC have called for similar policies, which, unfortunately, have also been mentioned recently by President Donald Trump and U.S. Sen. Josh Hawley.

But here's the hard truth: price controls don't work. They never have, and they never will. And when it comes to credit cards, capping interest rates would actually hurt the very people it's designed to help.

When You Cap Prices,

You Block Access

We've been down this road before. In 2010, Congress passed what's called the "Durbin Amendment," which capped interchange fees on debit cards with the promise that savings would flow to consumers. Instead, something very different happened.

According to the Federal Reserve Bank of Richmond, more retailers raised prices than lowered them after the cap took effect.

Meanwhile, banks responded by eliminating free checking accounts and debit card rewards programs. The Government Accountability Office found that without the Durbin Amendment, 65% of checking accounts at covered banks would have been free. Instead, ordinary Americans, particularly those with lower incomes, paid more for basic banking services. Further, half of debit card issuers regulated by the Durbin Amendment ended their rewards programs entirely.

Now, some in Congress want to double down on this failed policy with the Credit Card Competition Act, which would extend Durbin-style price controls to credit cards. Adding fuel to the fire, President Trump has proposed capping credit card interest rates at 10% for one year.

Both ideas share the same fundamental flaw: they ignore how markets actually work.

Interest rates aren't arbitrary numbers pulled from thin air. They reflect the real cost and risk of extending credit to different borrowers. According to a coalition letter signed by a number of free-market organizations (including the Pelican Institute), a 10% interest rate cap would make it mathematically impossible for most Americans to qualify.

In fact, the Electronic Payments Coalition estimates that up to 190 million Americans (more than 80% of current cardholders!) could lose access to credit cards under such a cap.

These individuals are not wealthy Americans with perfect credit scores. House Speaker Mike Johnson captured the issue perfectly when he warned that price controls would mean "credit card companies would just stop lending money, and maybe they cap what people are able to borrow at a very low amount." Senate Majority Leader John Thune added that such caps would "probably deprive an awful lot of people of access to credit around the country. Credit cards would probably become debit cards."

The Credit Card

Competition Act: Same Idea, Different Package

The Credit Card Competition Act takes a different approach but leads to the same place.

Instead of directly capping interest rates, it would force banks to include multiple payment networks on every credit card and allow merchants to choose which network processes each transaction. Proponents claim this will increase competition and lower costs. History tells a different story.

The Taxpayers Protection Alliance warns that this legislation would give the Federal Reserve complete control over American payment networks: "reminiscent of the Ma Bell phone network monopoly or the Civil Aeronautics Board price fixing." More importantly, it would decimate the rewards programs that 86% of credit cardholders – including 77% of those earning less than $50,000 – actively use.

These proposals fit into a disturbing pattern of Washington politicians believing they can outsmart market forces, especially in the financial sector. Whether it's capping interchange fees, mandating payment network routing, or setting maximum interest rates, the impulse is the same: use government power to override private contractual agreements between banks and consumers.

What Actually Works:

Markets, Not Mandates

The best solution to high credit card rates isn't government intervention, it's competition and transparency. Lawmakers should support:

Greater competition in credit markets by reducing regulatory barriers that make it harder for new entrants to compete with established players

Financial literacy initiatives that help Americans manage debt more effectively and improve their creditworthiness over time

Regulatory reforms that reduce compliance costs banks can pass on as savings to consumers

Everyone wants to see Louisiana families (and all American families) thrive. That means fair treatment in the marketplace and the freedom to make one's own financial decisions. Price controls, whether imposed through interest rate caps or back-door interventions like the Credit Card Competition Act, would undermine these principles.

When government picks winners and losers in the marketplace, we all lose. When politicians override market signals with artificial constraints, unintended consequences follow. And when Washington substitutes its judgment for that of millions of consumers and lenders making individual decisions, the result is always fewer choices, higher costs, and reduced access for those who need it most.

The path to genuine affordability runs through economic growth, robust competition, and limited government intervention in voluntary exchanges. That's liberty. Everything else is just the Leviathan in disguise.