No Card, No Sale. What a Credit Card Cap Would Mean for Small Firms

If you follow financial news, you’ll know about the proposed 10% cap on credit card interest rates. This is a dramatic cut from the current average interest rate of around 22–24%, and has drawn considerable pushback. 

This proposal isn't new. In 1991, a Senate amendment capping rates at 14% passed but was stripped from the bill following banking industry opposition. In 2019, Senator Bernie Sanders advocated for a 15% cap alongside Representative Alexandria Ocasio-Cortez, but the bill never reached committee vote because it lacked Republican support. Four years later, in 2023, Senator Josh Hawley introduced the Capping Credit Card Interest Rates Act seeking a limit of 18% but stalled without Democratic backing.  

Supporters argue it will make borrowing more affordable for households burdened by high debt. A coalition of over 55 organizations — including the National Association for the Advancement of Colored People, the American Federation for Teachers, and the United Food and Commercial Workers — estimates the cap would save the average American $899 per year, amounting to roughly $100 billion in annual savings nationwide. A 2025 Vanderbilt University analysis provides further support, finding that even after accounting for the lost income banks will incur as a result of the cap, they still stand to make hefty profits. 

But the effect of the cap is unknown because not all credit card users are created equal. Lower income households (<$79,000) are more likely to carry a balance on their credit card. from month to month, compared to higher income households (>$80,000) (see chart below).

Source: Bankrate 2026 Credit Card Debt Report (released January 12, 2026)

The fact is, in the absence of any accompanying regulation that addresses the potential harm for low-income consumers, a rate cap will likely have a disproportionate effect on the economics of lending to higher-risk, lower-income borrowers — the group the cap is intended to help. Lenders who can no longer price for that risk may stop serving low income households, shrinking access to credit for up to 85% of credit card holders, according to the American Bankers Association.

Since we at FAI are in the midst of surveying 80 small firms for SFD USA, this news caught our eye because credit cards are not just a consumer product — they are a core operating tool for many small businesses. According to the Federal Reserve's 2025 Small Business Credit Survey, credit cards are the most widely used form of external financing among employer firms, with 58% using them regularly. A February 2026 survey by the Hispanic Business Council of over 1,200 small business owners puts the figure even higher: about 80% of small businesses surveyed use credit cards for day-to-day operations. 

In that survey, nearly 70% of owners said they oppose rate cap proposals that would limit credit access and more than 78% said they would experience “operational harm” if their credit were reduced by 50%. This is likely due to the fact that many small firms operate with thin margins and do not often have the financial cushion to weather a sharp reduction in consumer spending. We see this among the firms in the SFD USA sample; over 40% have less than 4 weeks of cash on hand.

Our data also shows how reduced access to credit could be damaging for small businesses across the country. Among our sample, 45% of firms report difficulty accessing credit when they need it and almost half (48%) had been denied credit in the last 12 months. Further, more than half said they rely on personal or business credit cards to plug gaps when cash flow is low.

For many firms, credit cards serve as an important bridge during periods of low revenue and a buffer against financial volatility. As the debate around interest rate caps continues, policymakers face a dual challenge: making credit more affordable for those burdened by high interest costs, while preserving access for the households and businesses that depend on it most. How that balance is struck — and who bears the cost if it isn't — is a source of continuing debate with implications that extend well beyond the credit market.