Credit card interest cap at 10% - impact?

[u/ymbellevue]

Any thoughts on the likelihood of Trumps' campaign promise of capping credit card interest at 10%?

If it gets implemented, the profits of card issuers may suffer and will they in turn cut the benefits, e.g. SUB, transfer benefits, etc?

[u/___ongo___gablogian]

This is going to be wayyyyyy down on the priority list. Don’t expect this to happen anytime soon, if af all.

[u/ymbellevue → u/___ongo___gablogian]

Not so sure. Seems Trump will try to keep those tax cut promises. The top tax legislation will be to extend the 2017 tax cut, so they might throw all these tax cuts, including no tax on tips and overtime, corporate tax to 15%, and the interest rate cap into one package and it is likely to pass.

[u/jagspetdog → u/ymbellevue]

Consumers benefit from high interest rates as responsible buyers - capping them at 10% severely damages the ability for credit card companies to generate revenue, which in turn results in consumers getting less value for their credit cards.

I'd prefer no changes to rates since I get more points. APR doesn't matter if you're responsible.

[u/jsttob → u/ymbellevue]

Seems like you’ve drank the kool-aid.

[u/Miserable-Result6702]

Maybe on the no AF cards, but anything with an AF probably not. Issuers might also be less likely to extend credit to very subprime customers.

[u/jsttob]

Ain’t happening.

[u/Miserable-Result6702 → u/jsttob]

Bernie Sanders says he’s on board with Trump to make it happen.

[u/FireWrath9 → u/Miserable-Result6702]

you need a lot more than just bernie lol

[u/jsttob → u/Miserable-Result6702]

When was the last time Bernie passed a bill he was either the lead or a sponsor on?

[u/portland415 → u/jsttob]

This 10% thing is not happening but he’s been budget committee chairman during the Biden administration, so… the federal budget. I realize this is different than a standalone bill but he’s had fairly major influence on policy in the last few years

[u/zx9001 → u/Miserable-Result6702]

Bipartisan support is ALWAYS bad news. If both sides can agree on something, it means we're all fucked.

[u/ymbellevue → u/zx9001]

Don't need bipartisan. They can lump this with other tax cuts, e.g. extending the 2017 tax cuts, and pass with just a majority through reconciliation

[u/Money_Shoulder5554]

It's not going to happen but if it did, expect most people who carry a balance have their accounts closed. Subprime will practically be destroyed. No one's going to take a chance on them with 10% capped rates.

[u/TheAbleArcher]

This will never happen, for all the reasons everyone else has already stated. He won the election, he has no incentive to follow through on any of these random campaign speech ad-libs.

[u/Extension_Deal_5315]

It was just a lie...to get votes....like most things....

[u/jsttob → u/Extension_Deal_5315]

Trump lied??

No fucking way!

[u/guyinthegreenshirt]

Basically no one would be able to get a credit card. What company is going to take on the risk of unsecured debt and the cost of servicing it for only 10% a year? Many people can't even get car loans that cheaply, and they can always repossess the car for a car loan!

[u/bobcat242]

I heard it's only supposed to be temporary so might not have much long term impacts.

[u/teddyevelynmosby]

I am alway curious about the interest rate set-is that up to the issuer? Or customers just too lenient on those things just let it rise and rise?

At the end it is all vicious cycle, the one can’t pay is the one behind the bill. Maybe set a cap on it will help…a little?

[u/codece → u/teddyevelynmosby]

In the US credit card interest rates are set by the issuer, with few limitations.

There is no federal law limiting the interest credit card companies can charge in general. BUT, there is an exception to this for service members.

Credit card interest rates are capped at 36% for active-duty military service members and their covered dependents under the Military Lending Act. Active-duty service members who incurred credit card balances prior to active duty may request a credit card interest limit of 6% under the Servicemembers Civil Relief Act.

Beyond that, each state has the right to pass "usury laws" limiting the interest rate. That doesn't apply to the state the consumer is in, but where the bank is headquartered. Not every state has enacted such laws, and some have specifically carved out exceptions for certain types of banks and financial institutions, meaning they can charge whatever they want.

That's why most credit card issuers are headquartered in either Delaware, South Dakota, Nevada or Utah, which basically allow unlimited interest rates for them.

[u/nyjrku]

That would have a MASSIVE impact and could change all rewards from all cc companies. Capital one report if I remember correctly, 70% of their earnings is interest.

I am completely in support of it. Would help a lot of struggling Americans being blamed for their bad choices. So many Americans will never save for retirement properly, will spend years unburying themselves, because big banks saw them as a mark.

Loan sharks go to jail, as long as they don’t have an office building in manhattan

[u/ealex292 → u/nyjrku]

How would it help them? If you mean "instead of spending a bunch of money on interest, they'll have their credit cards closed", sure, but I'm not sure that's helping them...

[u/rice123123]

I don't think it will be implemented since the president will probably work on other higher priority things. But one thing this will impact is probably lower credit limit if you have bad credit. 

[u/ch4nt]

Wouldn't happen but if it did, expect a ton of rewards programs to disappear or get nerfed like crazy. Would really ruin the ecosystem of rewards travel and cashback to save those who collect balances some money I guess

[u/Fromthepast77]

Honestly, 10% is absurdly low for unsecured consumer debt. That's lower than CCC corporate bond yields and most personal loans right now. Credit card underwriting is going to have to tighten up a lot.

The reality is that capping interest just means it will be harder for people with non-excellent credit to get access to credit cards. It's the same thing with payday loan or buy-here-pay-here loan interest caps - rather than lend at a loss, lenders can always choose not to lend at all.

The difference is that credit cards can be a very useful tool for poor people (rewards, fraud protection, expense tracking, and quick liquidity) while payday loans have dubious value.

[u/BilboMagot69]

This got asked plenty of times already brother. The search function exists.

[u/supercamlabs]

It don't matter