When costs rise and families feel squeezed, Washington’s reflex is always the same: cap prices, mandate terms, declare victory. It’s an understandable political impulse, but a reliably poor substitute for sound economics. Price controls promise quick relief, yet history shows they distort markets, reduce access, and ultimately leave consumers worse off than before.
That reflex is resurfacing in the debate over credit cards. Congress is now considering a temporary 10 percent cap on credit card interest rates and the Credit Card Competition Act, which would manipulate interchange fees—presenting these proposals as relief for households facing rising costs. While the motivation to make everyday financial life more affordable is understandable, the proposed solutions won’t lead to the desired outcome.
Affordability imposed by mandates often pales in comparison to affordability created by unleashed free enterprise and competition. Interest-rate caps, for example, will not reduce the true cost of credit. Instead, they will restrict its supply and cripple a central lifeblood of the American consumer economy. Those with strong credit histories will continue borrowing, while working-class households and small businesses—often dependent on short-term, flexible credit to manage bills and cash flow—will be pushed to the margins or shut out entirely. Those trying to build credit will see a crucial pathway to financial independence closed off.
Price controls on interest will not eliminate costs. They will relocate them. When government sets interest rates below market levels, lenders have little choice but to tighten standards and reduce exposure. Risk will shift to those least able to absorb it. Rewards programs will shrink even for borrowers with good credit. Fraud protections will weaken and become more restrictive for consumers.
If the objective is affordability and prosperity, the answer is not federal micromanagement, but policies that expand competition, innovation, and economic growth. The most reliable way to help Americans pay down credit card debt is to put more money in their pockets.
That’s what happened when lawmakers have pursued freedom-based strategies to expand economic opportunity. Across the country, states that remove artificial barriers—occupational licensing restrictions, certificate-of-need laws, zoning constraints, and regulatory bottlenecks—have reduced costs by increasing supply, not rationing it.
These reforms share a simple principle: affordability comes from abundance, not bureaucratic calculations.
Price controls move in the opposite direction. They treat symptoms while ignoring causes—policy-driven scarcity, regulatory complexity, and restricted competition. Worse, they crowd out the experimentation needed to solve long-term affordability challenges.
If policymakers are serious about helping families, workers, and small businesses, the focus should be on expanding access, reducing artificial constraints, and letting competition do what it does best: drive prices down through innovation and efficiency.
History and economics leave little doubt which path leads to prosperity. Affordability cannot be legislated by decree. It must be built through broad-based growth spurred on by free enterprise. Washington should reject the temptation to take the easy and shortsighted way out.
Carl Paulus is a Senior Writer for the Goldwater Institute.
