Experts warn proposed credit card rate cap could hurt low-income borrowers

EL PASO, Texas (KVIA)-- According to LendingTree, the average interest rate on credit cards is now nearly 24%.

Last week, President Trump said on social media he wants a one-year cap on credit card interest rates at 10%, something he campaigned on.

“Lenders use higher interest rates to help offset higher risk,” said Brian Mirau, an investment adviser with more than 40 years of experience in financial services.

Mirau said banks and credit unions could tighten approval standards, eliminate certain credit products altogether or reduce credit limits.

“Many of them may stop offering credit to lower-income consumers and those with weaker credit histories,” he said.

Mirau said that could push some people toward more expensive or unregulated alternatives. He also said credit card benefits such as reward programs, grace periods and fraud protection could be reduced.

“The reason they’re able to give us benefits like cash back, airline rewards and things like that is because they have a pretty good margin on those higher interest rates,” Mirau said.

Raiz Federal Credit Union said the strict cap could harm El Pasoans living below the poverty line.

In a statement, a spokesperson said in part, “The very individuals who rely on credit to get by could lose access to future credit, while still being responsible for paying down their existing credit card debt.”

Some residents said while the idea may sound appealing, they are skeptical.

“It sounds like he says a lot of things, and they don’t actually come to fruition.”

I feel like if there isn’t legitimate evidence showing how this would be beneficial, especially with so many economic issues already — I don’t see how there could be support for it.”

Financial experts said the proposal could ultimately harm lower-income communities.