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Before the Supreme Court’s 1978 decision in Marquette National Bank of Minneapolis v. First of Omaha Service Corp., credit cards were typically available only to people with near-perfect credit, limiting many families’ and small businesses’ ability to manage everyday expenses or invest in new opportunities. The ruling allowed banks to apply their home-state interest rates nationwide, making it possible to responsibly extend credit to higher-risk and subprime borrowers and significantly expand access. Since the 1990s, subprime loans and starter credit cards have helped individuals and small businesses build credit and pursue goals like homeownership and entrepreneurship. While access to credit has come a long way, it remains a vital financial tool that is still at risk, including proposals to cap credit card interest rates that could restrict access for borrowers who rely on credit the most.
Lenders extend credit by balancing risk and cost. Borrowers with stronger credit typically receive lower rates, while those with limited or weaker credit pay higher rates that reflect greater lending risk. This approach allows banks to serve a broad range of consumers while remaining financially sustainable.
Imposing caps on credit card interest rates would undermine this model. If lenders are unable to price for risk, they will reduce or eliminate credit offerings for higher-risk borrowers, including entry-level and secured credit products. One study found that imposing an interest rate cap would restrict access to credit for more than 14 million people. It also demonstrated that a 15% interest rate cap would risk access to credit for about 95% of people with credit scores lower than 700.
Left without access to traditional banking options, many of these consumers would be forced to seek financing from unregulated sources that charge extreme rates, with some predatory lenders charging up to 400% in interest rates, and provide little consumer protection, which would harm the very people it intends to help.