The pressures of rising prices, inflation, and consumer costs are weighing heavily on American families, especially those already living paycheck to paycheck. Affordability has emerged as a top issue and is supposedly the reason behind President Trump’s demand for a one-year, 10% cap on credit card interest rates.

That might sound appealing at first, but government forcing a cap on interest rates will produce unintended consequences that will limit financial flexibility and disproportionately harm low- and moderate-income communities.

Millions of Americans rely on credit cards as a financial lifeline. According to Federal Reserve data, 37 percent of adults are unable to cover a $400 emergency expense with cash or its equivalent. Among those who can manage the expense, the most common solution is to use a credit card. Only 55 percent of adults have enough emergency savings to cover three months of expenses. For low- and moderate-income households, credit access often fills the gap when unexpected costs arise.

Interest rate caps disrupt that access. When lenders are unable to price for risk, they respond by reducing credit limits or eliminating access altogether for higher-risk borrowers. Lower income consumers and underserved communities are the first and most affected. Lower credit limits increase utilization rates, which can quickly damage credit scores and make future borrowing more expensive or impossible.

History bears this out. After Illinois imposed an interest rate cap in 2021, loans to subprime borrowers fell by 38 percent. A similar rate cap in Oregon harmed consumers on average and led to a deterioration in household financial conditions. More recently, a December 2025 study from the New York Federal Reserve found that credit to the riskiest borrowers contracted sharply in states with rate caps, while delinquencies did not improve.

The broader economic implications are also significant. Consumer spending accounts for roughly 70 percent of U.S. GDP, and credit cards facilitated $3.6 trillion in spending in 2024, about 12 percent of the economy. As Republicans on the Joint Economic Committee warned in a 2022 report, price controls too easily lead to shortages rather than relief. In credit markets, that shortage manifests as reduced access.

Addressing affordability must be a priority. But policy that cuts off credit for financially vulnerable families risks deepening inequality, not easing it. Viable solutions would include expanding access, promoting competition, and increasing consumer financial literacy—including responsible credit card use.

Price controls do not work. Applying them to interest rates will ensure consumers are not left with fewer options when they need help most.