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ROCHESTER, N.Y. — In an unexpected move, two senators from opposite ends of the political spectrum are joining forces to tackle high credit card interest rates.
Senator Bernie Sanders, a far-left politician, and Senator Josh Hawley, a far-right figure, have introduced a bill aiming to cap credit card interest rates at 10%.
Currently, the average credit card interest rate exceeds 20%, according to Bankrate. This rate refers to the fee banks charge if you don’t pay off your credit card balance in full. The proposed bill would set a cap for five years.
Senator Sanders likened the current high rates to “extortion and loan sharking,” while Senator Hawley called them “exploitative.”
Personal finance expert Jarrett Felton, owner of Invessent, explained the impact of high interest rates using the “rule of 72.”
He said, “Take the interest rate you’re getting on your money, divide it into 72, and that equals the number of years it takes for your money or credit card balance to double if you’re not paying it off in time.”
Felton illustrated this with an example: “Let’s say Betty has $5,000 of credit card debt. Her interest rate is 20%. Seventy-two divided by 20 is 3.6, meaning if Betty is paying the minimum, her $5,000 debt will double to $10,000 in roughly three and a half years.”
With a 10% interest rate, the calculation changes.
“Seventy-two divided by 10 is 7.2, making tackling that debt much easier,” Felton noted.
However, the National Trade Association for Banks argues that the bill could harm consumers by limiting the types of credit available.
Deanna plans to continue to monitor this closely.
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