You know a financial proposal isn’t a great idea when both MSNBC and The Wall Street Journal take issue with it.
Last week in New York, Donald Trump told a rally, “We’re going to put a temporary cap on credit-card interest rates. We’re going to cap it at around 10%. We can’t let them make 25 and 30%.”
On the facts, no one can accuse Trump of hyperbole or not telling the truth. Credit card interest rates are hovering around 24% for new offers and 27% for those with only fair credit. However, his plan to cap those interest rates at 10% – no matter how temporary – won’t solve anything for anyone.
MSNBC called it “nonsensical” and stressed, “Trump’s pitch on credit card rates should not be taken seriously.” Meanwhile, The Wall Street Journal provided the analysis…
- Banks would stop issuing credit cards to those with low incomes and credit scores – meaning only the well-off would have the opportunity to earn rewards.
- In fact, kiss most rewards programs goodbye.
- Banks would also impose other fees to make up for lost revenue.
I’ll add another reason why Trump’s cap would never happen: The powerful banking lobbyists in Washington, DC. Such a plan would have to go through Congress, and that’s where lobbyists reign supreme. Of course, while everyone was tearing down Trump’s plan, no one – Republican or Democrat – was coming up with anything better. Trump isn’t the first politician to curry favor by suggesting an interest rate cap.
In 2019, Sen. Bernie Sanders and Rep. Alexandria Ocasio-Cortez proposed a federal cap on interest rates at 15%. That went nowhere for the same reasons. The solution to a financial problem is seldom dictating terms, whether it’s capping interest rates or forgiving student loans. Eventually, treating the symptoms no longer works. You need to address the underlying disease.
Like most solutions to complex and pervasive problems, solving credit card debt may be considered boring and time-consuming. Only 26 states mandate students pass a personal finance course to graduate. Only 28% of employers offer financial wellness programs, according to the Harvard Business Review.
For three decades, I’ve founded debt-solutions companies that have helped more than 10 million Americans. Even so, the most common reply I hear when I tell people what I do has been, “That sounds too good to be true.”
We spend a lot of time in this country promoting how to spend money. Isn’t it time we talked about how to save money?
