Credit card caps could recreate old barriers

For much of our nation’s history, access to credit was a privilege reserved for the wealthy and well-connected. Entrepreneurs without inherited capital and established banking relationships, particularly small business owners and entrepreneurs from diverse communities, were routinely shut out of the financial system. For African American entrepreneurs in particular, discriminatory lending practices and redlining didn’t just limit access to capital; they delayed the chance to build generational wealth and fully participate in the American dream.
Over time, this country has made meaningful progress with credit. Modern credit markets, while far from perfect, have expanded access to capital for small businesses and entrepreneurs who would have been excluded just a generation ago. This progress has opened doors for countless African American business owners who are building companies, creating jobs, and anchoring economic growth in their communities.
That is why proposals to cap credit card interest rates deserve scrutiny. While credit card caps can be framed as consumer-friendly policies, and their ultimate goal is to help consumers and small businesses, they could reverse the progress made. For communities that have historically faced barriers to traditional financing, these policies can have unintended consequences if they restrict access to mainstream credit.
Hard credit caps hurt small business owners
Credit card interest rates reflect real costs and real risks. Credit cards are typically unsecured, meaning lenders have no collateral if a borrower defaults. Rates account for borrower risk, fraud losses, operating costs, and economic conditions. This risk-based pricing is what allows lenders to extend credit to a wide range of borrowers, including startups, sole proprietors, and small businesses with limited credit histories.
For many small business owners, especially those just starting, personal credit cards are often the first and most accessible form of financing. They are used to cover inventory, manage cash-flow gaps, or handle unexpected expenses. Some even use them to start their business. Restricting access to this credit doesn’t eliminate risk. It simply shifts it onto entrepreneurs who already operate with narrow margins.
When policymakers impose hard caps on interest rates, lenders lose the ability to price for higher risk. The result is not cheaper credit for everyone, but less credit for those who need it most. A study by the American Bankers Association found that between 74% and 85% of credit card accounts would be closed if the 10% cap is implemented. In Ohio alone, rate caps would restrict credit for at least 4 million people.
Good policy preserves and expands access to capital
History offers a clear lesson. When access to credit is constrained, capital flows toward those who already have wealth, assets, and established banking relationships. That is how we ended up with a system that once excluded so many aspiring entrepreneurs. Rolling back access today risks recreating those same barriers.
Strong consumer and small business protections are essential. Transparency, clear disclosures, and fair lending standards all play a vital role in a healthy credit market. But blunt policy tools like interest rate caps can undermine those goals by shrinking access to regulated credit and pushing borrowers toward less transparent, higher-risk alternatives.
We should be focused on policies that expand opportunity, preserve access to capital, and support responsible borrowing. The progress made in broadening access to credit should not be taken for granted. The goal should be a credit system that works for everyone. A system that recognizes the power of access to credit not just as a financial tool, but as a pathway to prosperity and shared growth.