OPINION: Credit Card Interest Rate Caps Pose Threats to Growing the Rural Texas Economy

I spent years working to grow Spearman’s economy, first as City Manager and then as the Chamber of Commerce President. In that time, I learned that economic development in a rural community doesn't come from a single investment or policy. It comes from building the conditions where businesses can start and thrive. Credit is one of those foundational conditions. Without it, the rest of the work is harder than it needs to be. 

So, when I learned about proposed federal legislation to cap credit card interest rates, I started to worry about what it would mean for communities like Spearman and for every small town across rural Texas trying to keep its economy intact.

Interest rates are a key part of how the system works. Credit cards are typically an unsecured line of credit, meaning there’s no collateral required to apply for and receive one. And lenders having a wide range of interest rates means that borrowers across the risk spectrum can access a card. 

 Borrowers with a limited credit history, lower incomes, or low credit scores due to previous missed payments will have higher interest rates, but they’ll still have access and be able to use cards to help rebuild their credit scores. A cap on interest rates would fundamentally change this system.

 Without risk-based pricing, lenders would look to avoid taking on risk in the first place. They may deny higher-risk borrowers outright. 

 Evidence backs this up. The Federal Reserve Bank of New York analyzed the effects of a 36% interest rate cap and found that it reduced credit access for higher-risk borrowers without improving their financial outcomes. 

Some in Washington have proposed going even lower and capping rates at 10%. A level that could see more than 13.5 million Texas cardholders lose access, bringing on severe harm to small businesses and rural economies. 

 Nearly 80% of small businesses use credit cards for day-to-day operations, whether it’s purchasing new inventory or equipment or managing cash flow. Capping interest rates removes this financial mechanism that helps entrepreneurs successfully run their businesses. It risks the jobs and economic opportunities that these small businesses create. And it risks pushing some business owners, particularly those in rural towns, toward more unregulated lending sources just in hopes of staying afloat. 

 Local economies run on small businesses. And many of these small businesses run on credit cards. They’re not a nice-to-have for these businesses; they’re a necessity, and they could be the difference between growth and stagnation, success and failure. 

 If a 10% cap were implemented, the loss of access among over 13.5 million Texans equates to countless businesses without the resources to operate, countless consumers without money to spend locally, and economic loss that rural towns like ours cannot afford.

 Rural Texas has been building back for a long time. The people and businesses here are resilient. But when the federal government pushes for policies that directly undermine our ability to grow, we can only weather so many storms. And a cap on credit card interest rates is a big storm. 

 Credit cards help rural economies invest in themselves. An interest rate cap won’t protect that; it will close the door on what we've spent years building.