Credit Expert Warns Trump’s Credit Card Rate Cap Will Create Bigger Problems

Credit card debt has become a growing problem for many Americans. Prices are still high, interest rates remain painful, and more families are relying on credit cards just to cover everyday costs. That’s why a proposal to cap credit card interest rates at 10% has gained so much attention lately.

At first glance, the idea sounds simple. Lower rates would seem to mean lower payments and less pressure on consumers.

But not everyone believes it would work that way.

Business credit expert, Ari Page, warned that the proposal could create serious problems across the lending industry and possibly make it harder for many Americans to borrow money at all.

Rather than helping struggling consumers, Page argues that the policy could end up cutting millions of people off from credit entirely.

How lenders decide interest rates

According to Page, who runs the business credit consulting firm, Fund&Grow, credit card companies don’t just assign rates randomly or purely on market rates. Instead, they study a borrower’s risk profile carefully before approving credit and setting interest rates.

He explained that banks often review factors such as payment history, income, and amount of outstanding debt” before making lending decisions.

People with stronger credit scores usually receive lower rates because data shows they’re more likely to repay what they borrow. Borrowers with weaker scores are considered riskier, based on data, so lenders charge more to offset the possibility of losses.

As Page explained, “your credit score is a proxy for risk to the lender.”

That system, he argues, is what allows lenders to continue offering credit to a wide range of borrowers instead of limiting loans only to people with near-perfect credit.

If lenders lose the ability to price loans based on risk, Page believes many companies will simply stop approving higher-risk borrowers altogether.

The financial side lenders worry about

Consumers often don’t understand the actual cost of running a credit card business.

Page says that many consumers assume banks reap huge profits from interest rates alone without considering the expenses attached to lending money.

Here’s how it works: Lenders first have to borrow money themselves. Many of those borrowing costs are tied to the Federal Reserve’s Prime Rate, which Page noted currently sits at 6.75%.

From there, banks still have to cover fraud protection systems, customer service operations, employee salaries, payment processing, and technology expenses.

Page also pointed to research from the Federal Reserve Bank of New York showing that operating expenses can average between 4% and 5% per year.

Then comes another major problem: defaults.

Some borrowers stop making payments altogether. When that happens, lenders absorb the loss, and according to the New York Fed, subprime borrowers carry charge-off rates above 9%.

After adding those numbers together, Page argued that a 10% cap leaves little room for lenders to remain profitable.

“The math simply doesn’t work,” Page explained.

He says that even borrowers with strong credit scores could become difficult for lenders to profit from under a strict cap.

Fewer people may qualify for credit

Supporters of rate caps often focus on making borrowing cheaper. Critics, however, believe the larger issue is access.

Page argues that lenders would likely respond to a nationwide cap by tightening approval standards almost immediately.

“This means only borrowers with the absolute highest credit scores would be able to get credit,” Page explained.

That possibility worries many financial experts because millions of Americans already struggle to qualify for affordable financing.

And this isn’t hypothetical. The New York Fed reports that states that imposed similar caps showed major declines in available credit for subprime borrowers.

If a federal cap were implemented, Page believes the impact could become a national epidemic.

He pointed to estimates from the American Bankers Association claiming that as many as 85% of current credit card accounts could be closed or heavily reduced if lenders could no longer make the numbers work financially.

For many families, losing access to emergency credit could create even more financial stress during difficult times.

Small businesses may also suffer

While much of the public conversation centers on consumers, Page argues that small businesses could face serious problems as well.

Many small business owners depend on business credit cards to help manage uneven cash flow. Some use credit to purchase inventory, handle payroll during slower months, or cover unexpected costs.

Because many business credit cards require a personal guarantee, business owners are often approved based on their personal credit history.

That connection between consumer credit and business financing could create ripple effects throughout the economy.

“Without access to this credit, many will be forced to make layoffs,” Page warned.

If business owners suddenly lose access to flexible borrowing, hiring could slow down quickly. Some businesses could even shut their doors altogether if they cannot cover short-term expenses.

Page argued that the proposal could unintentionally damage the same economy lawmakers are trying to protect.

Credit card rewards could shrink

Those popular rewards programs that we all love may not survive the inevitable revenue cuts that would need to be made once an interest rate cap is implemented.

Cash-back offers, travel rewards, airline miles, and other perks are often supported by interest income and transaction fees. If profits fall sharply, lenders may decide those programs no longer make financial sense.

That could leave consumers with fewer card options and fewer benefits tied to everyday spending.

While rewards may not matter as much as access to credit, many consumers have grown used to using those programs to help offset travel costs and monthly expenses.

A debate that goes beyond credit cards

The larger disagreement surrounding the proposal comes down to the role that government should play in the financial system.

Supporters of a rate cap believe consumers need stronger protection from high-interest debt. Opponents believe government price controls often create unintended problems that make the situation worse over time.

Page made his position clear.

“Our economy today is shaky,” he says. “But the solution isn’t more government intervention.”

Whether lawmakers move forward with a rate cap remains uncertain. Still, the debate has already sparked strong reactions from economists, banks, consumer advocates, and business owners across the country.

For now, one thing is clear: Americans are searching for relief from rising debt, but some experts, like Ari Page, disagree on the best way to provide it.