The Case Against Credit Card Interest Rate Regulation

Abstract

This article analyzes recent proposals to regulate credit card interest rates on a national scale. The proposals are a modern chapter in a very old story. Usury laws-laws forbidding or limiting payment for money loans-are among the most ancient forms of price control. Like previous economic studies of usury controls, this one concludes that they are unjustified because the supply of credit is highly competitive, and would be harmful because they would cause an artificial contraction in the supply of credit and other economic inefficiencies.