Personal Finance
Bill would cap credit card interest rates at 10%. What it means for you
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Despite the Federal Reserve‘s recent cuts, credit card interest rates have been hovering near record highs. A new bipartisan bill would cap them at a dramatically lower figure, but experts say it may not be a win for consumers.
Senators Bernie Sanders, I-Vt., and Josh Hawley, R-Mo., introduced a bill this week that would cap credit card interest rates at a 10% annual percentage rate (APR) for five years. It’s an idea President Donald Trump floated at campaign rally in New York in September.
“Capping credit card interest rates at 10%, just like President Trump campaigned on, is a simple way to provide meaningful relief to working people,” Hawley said in a statement.
The average APR on credit cards for January 2025 was 24.26%, according to LendingTree.
Almost half of credit card holders carry debt from month to month, according to a recent survey by Bankrate. In 2022, credit card companies charged consumers more than $105 billion in interest and more than $25 billion in fees, according to a 2023 study by the Consumer Financial Protection Bureau.
“We cannot continue to allow big banks to make huge profits ripping off the American people. This legislation will provide working families struggling to pay their bills with desperately needed financial relief,” Sanders said in a statement.
Limiting credit card interest rates is not a new idea
This isn’t the first time these senators have proposed the idea of a rate cap. In 2023, Hawley proposed an 18% rate cap, while Sanders proposed a 15% rate cap in 2019. Neither had adequate support to advance the proposals.
Around three-quarters, or 77%, of Americans surveyed said they support a cap on the interest rates financial institutions can charge on a credit card, according to a recent survey by LendingTree. But that support is down from 80% in 2022, and 84% in 2019.
The legislation has a long way to go before it could become law, and experts say its fate may depend in part on what happens with inflation, and whether Trump continues to support the measure.
“If pricing stays stable, I think it’s going to be much tougher to advance this kind of legislation,” said Jaret Seiberg, a policy analyst for TD Cowen.
Fees, rate structure may still make credit expensive
While a 10% rate cap may sound appealing, experts say the intricacies of how it is structured are important, with consideration for periodic interest rates, fees and the repayment structure.
“You could have zero interest and still have an incredibly expensive product,” said Chi Chi Wu, a senior attorney at the National Consumer Law Center.
The proposal also seems at odds with the Trump administration’s interest in eliminating the Consumer Financial Protection Bureau, she said.
“If policy makers want to show that they actually care about protecting consumers’ wallets and keeping them from being abused by high-cost credit, they would make sure we have a strong Consumer Financial Protection Bureau,” Wu said.
Rate caps could limit access to credit
The banking industry opposes the idea of a rate cap. Seven financial groups representing banks and credit unions of all sizes have joined forces to oppose the measure. They say it will limit consumers’ access to credit and push them into higher-priced, less-regulated products like payday loans, which can have an average APR of 400%.
“There’s no evidence that APR caps make consumers better off or save them money,” said Lindsey Johnson, president and CEO of the Consumer Bankers Association.
There are already a few federal caps on interest rates. In 2006, Congress passed the Military Lending Act, which put a 36% interest cap on revolving loans for active duty service members and their families.
Federal credit unions are typically restricted to a 15% APR maximum, but the rate can be increased to protect the safety and soundness of the credit union. The maximum is currently 18% through March 10, 2026.
Bankers say a rate cap inhibits lenders and reduces access to credit for higher-risk consumers.
“Providing an all-in APR is a flawed tool for measuring the true cost of the loan, because to maintain the safety and soundness of the lender and ensure that credit availability is offered to a broad range of consumers, banks have to price their loan products commensurate with a risk for each borrower,” Johnson said.
New bill may not apply to existing debt
For consumers who are already carrying debt, this proposal may not be the lifeline it appears.
“If you already have a lot of debt, this legislation probably doesn’t help you,” said Seiberg.
That’s because the interest rate cap wouldn’t be applied retroactively, he said: “It’s likely to only be on new purchases.”
Martin Barraud | Ojo Images | Getty Images
As U.S. home equity climbs, owners are more likely to face capital gains taxes from selling property. But a lesser-known tax strategy could help shrink your bill, experts say.
When selling your main home, there’s a special tax break that shields up to $250,000 of profits for single filers and $500,000 for married couples filing jointly. However, you need to meet certain rules.
An increasing number of home sellers are exceeding those thresholds, according to a 2024 report from real estate data firm CoreLogic. Nearly 8% of U.S. homes sold in 2023 exceeded the capital gains tax limit of $500,000 for married couples, up from about 3% in 2019, the report found.
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Those percentages were even higher in high-cost states like Colorado, Massachusetts, New Jersey, New York and and Washington, according to the CoreLogic report.
Exceeding the $250,000 and $500,000 exclusions is “becoming more common,” said Tommy Lucas, a certified financial planner and enrolled agent at Moisand Fitzgerald Tamayo in Orlando, Florida.
Home sale profits above the $250,000 or $500,000 thresholds are subject to capital gains taxes of 0%, 15% or 20%, depending on your taxable income.
Increase your ‘basis’ to reduce profits
Many home sellers don’t realize they can reduce capital gains by increasing their “basis,” or the home’s original purchase price, according to Mark Baran, managing director at financial services firm CBIZ’s national tax office.
You can increase your basis by adding “capital improvements,” such as renovations, adding a new roof, exterior upgrades or replaced systems.
Your “adjusted basis” is generally the cost of buying your home plus any capital improvements made while you own the property.
“That adds up over time and can bring them fully within the [$250,000 or $500,000 capital gains] exclusion,” Baran said.
However, you cannot add home repairs and maintenance, such as fixing leaks, holes, cracks or replacing broken hardware, according to the IRS.
You also can reduce your home sale profit by adding fees and closing costs from the purchase and sale of the home, according to Lucas.
The IRS says some of these expenses could include:
- Title fees
- Charges for utility installation
- Legal and recording fees
- Surveys
- Transfer taxes
- Title insurance
- Balances owed by the seller
“Maybe that gets you an extra few thousand” to reduce the profit, Lucas added.
Traders on the floor of the New York Stock Exchange at the opening bell in New York City on Feb. 12, 2025.
Angela Weiss | Afp | Getty Images
Stock market investors enjoyed lofty annual returns over the past two years. However, 2025 may not offer a “three-peat,” investment analysts say.
The S&P 500 stock market index yielded a 23% return for investors in 2024 and 24% in 2023. (Those returns were 25% and 26%, respectively, with dividends.)
Three consecutive years of total returns of more than 20% for U.S. stocks is a historical rarity. It has only happened once — in the late 1990s — dating back to 1928, according to Scott Wren, senior global market strategist at the Wells Fargo Investment Institute.
“Do we expect an S&P 500 Index three-peat in 2025? In short, no,” Wren wrote in a market commentary Wednesday.
The U.S. stock market has delivered average annual returns of roughly 10% since 1926, according to Dimensional, an asset manager. After accounting for inflation, stocks have consistently returned an average 6.5% to 7% per year dating to about 1800, according to a McKinsey analysis.
“We have been spoiled as investors” the past two years, said Callie Cox, chief market strategist at Ritholtz Wealth Management.
“Twenty-percent gains haven’t been the norm,” Cox said. “Twenty percent gains are the exception.”
What might ruin the party?
While history “isn’t gospel,” there are reasons to think the stock market may not perform as well in 2025, Cox said.
For one, there are many uncertainties that could negatively impact the stock market, including tariffs and a potential rebound in inflation, Wren said. A surge in bond yields might also pose a headwind, Wren wrote in a market commentary. (Higher yields could dampen demand for U.S. stocks.)
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Additionally, technology companies have been a major driver of S&P 500 returns in recent years but may not be poised for the same outperformance this year, Cox said.
Tech stocks suffered a rout in late January, for example, amid fears of a Chinese artificial intelligence startup called DeepSeek undercutting major U.S. players. Those stocks have largely recovered since then, however.
In all, a rosy backdrop of solid economic growth and consumer spending, coupled with relatively low unemployment, may push the S&P 500 up by about 12% in 2025, Wren wrote. That would be slightly better than the long-term historical average, he said.
“So do not be disappointed,” Wren wrote. “We think investors should be optimistic.”
However, investors shouldn’t let high expectations cloud judgment about market risks, Cox said.
The current environment is one in which investors should “prioritize portfolio balance” and long-term investors should ensure their portfolio is in line with their targets, she said.
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