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Trump wants to cap credit card interest rates at 10%. But such limits could harm consumers

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Credit cards are the sharpest double-edged sword in Americans’ personal finance arsenal.

They can be an indispensable tool for coping with financial hardship, a great way to finance your family vacation, or a free pass granting access to luxury lounges at the airport. But for many consumers, they can also be a debt trap with no escape.

Like Robin Hood in reverse, credit card companies take the interest payments from those who carry a balance and redistribute them as rewards that benefit people who don’t.

Sky-high annual percentage rates (APRs) on U.S. credit cards are worsening the debt trap for those who carry a balance. Four years ago, the average APR was less than 15%. By 2024, it was over 21%, and a growing number of Americans are finding themselves with interest rates over 30%.

On Friday, President Donald Trump called for a one-year cap on credit card interest rates at 10%, effective Jan. 20.

That comes after Sens. Bernie Sanders (I-VT) and Josh Hawley (R-MO) introduced a bill last year that would cap credit card interest rates at 10% for five years. On the campaign trail, Trump supported the idea—despite stark opposition from the banks and credit unions that issue credit cards.

“When large financial institutions charge over 25 percent interest on credit cards, they are not engaged in the business of making credit available. They are engaged in extortion and loan sharking,” stated Sanders in a press release. 

The bill aims to curb the profits that flow from credit card lending and provide financial relief for working families. However, if passed the measure would likely reduce easy access to credit and also undercut the credit card rewards that power the industry.

The unintended consequences of a credit card interest rate cap

Whenever the Congress imposes new regulations on the economy, second- and third-order effects often create unintended consequences, experts and industry groups told Fortune last year. By solving the problem of high credit card APRs, a rate cap could very well end up hurting those it was intended to help.

Credit card interest rates vary widely depending on the unique risk profile of each cardholder. Limiting banks’ ability to charge rates commensurate with historic default levels would likely send shock-waves through the industry. 

Jennifer Doss, executive editor at Cardratings.com, explains that cards with high APRs give banks the option to offer credit to people who might not otherwise qualify. “Credit card companies typically charge higher interest rates to mitigate higher perceived risk,” she said. “Consequently, individuals with lower credit scores generally face higher interest rates.“

John Cabell, managing director of payments intelligence at J.D. Power, adds that rate caps could make it economically unviable for issuers to provide credit to people who struggle with delinquency.

“If you are forced to cap [APRs for] those with the highest interest rates, it would no longer make sense for the issuer to even offer them a product because it might not even be net positive from a revenue perspective,” he said.

Consumers denied access to credit cards by interest rate caps would still need access to credit. They could end up opting for payday loans or similar options that carry even more expensive rates than high-interest credit cards. 

“Research clearly shows that when politicians, rather than the free market, dictate prices, consumers ultimately pay the price through limited choices outside the well-regulated banking system,” said Consumer Bankers Association President and CEO Lindsey Johnson.

A cap on interest rates could diminish credit card rewards

Capping card rates would also likely dampen credit card rewards. If you’ve ever redeemed points or miles for a flight or hotel stay, you’ve benefited from high credit card interest rates. That’s because the revenue generated by interest payments on card balances helps to power the ecosystem of points, miles, and cashback rewards. 

According to Cabell, cardholders who never carry a balance need to understand that their expectations of getting “something for nothing” carries a steep cost for other consumers. “Higher net worth individuals are consuming all of those perks, at the cost of the lower-end consumers who don’t benefit,” he said.

Customers who reap the most rewards from credit cards don’t pay interest. Federal Reserve research has found that every year a whopping $15 billion is transferred from those who carry a balance and redistributed to those who earn rewards.

Credit card payment fees on retail transactions—some of which are as high as 4%—are another source of support for card rewards, and some experts believe swipe fees could have a more direct financial connection to the rewards system. However, a separate bill in Congress is taking aim at high swipe fees.

The proposed Credit Card Competition Act, a bipartisan bill introduced in 2024 by Sens. Dick Durbin (D-IL) and Roger Marshall (R-KS), targets the dominance of payments processors Visa and Mastercard—which together took in $93 billion in credit card swipe fees in 2022. 

The bill would require large financial institutions to allow at least two credit card payment processing networks to be used on their card cards—and one of them cannot be Visa or Mastercard. This would give merchants greater flexibility to choose payment networks and, it’s hoped, reduce the swipe fees. 

If both bills were to pass, the reduction in revenue from interest payments and swipe fees would likely be the final straw for credit card rewards programs.

A version of this story was originally published on Feb. 6, 2025.



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I run one of America’s most successful remote work programs and the critics are right. Their solutions are all wrong, though

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Justin Harlan is the managing director of Tulsa Remote, the largest relocation incentive program in the U.S., with over 3,500 members. Publications such as the Harvard Business Review and the Brookings Institute have looked to Tulsa Remote as a prominent example of how remote work attraction programs are reversing the brain drain in smaller U.S. cities and have confirmed the economic impact of the program.


Justin previously served as the Senior Executive Director for Reading Partners Tulsa. He launched his career with Teach For America-Oklahoma when it opened in Tulsa in 2009 and quickly rose through the organization as it expanded across the state. In various roles, Justin raised over $7.5 million for Teach For America and secured funding from the State of Oklahoma. He was a founding board member for Collegiate Hall College Prep Charter School in Tulsa.



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Greenland’s harsh environment, lack of key infrastructure and difficult geology have so far prevented anyone from building a mine to extract the sought-after rare earth elements that many high-tech products require. Even if President Donald Trump prevails in his effort to take control of the Arctic island, those challenges won’t go away.

Trump has prioritized breaking China’s stranglehold on the global supply of rare earths ever since the world’s number two economy sharply restricted who could buy them after the United States imposed widespread tariffs last spring. The Trump administration has invested hundreds of millions of dollars and even taken stakes in several companies. Now the president is again pitching the idea that wresting control of Greenland away from Denmark could solve the problem.

“We are going to do something on Greenland whether they like it or not,” Trump said Friday.

But Greenland may not be able to produce rare earths for years — if ever. Some companies are trying anyway, but their efforts to unearth some of the 1.5 million tons of rare earths encased in rock in Greenland generally haven’t advanced beyond the exploratory stage. Trump’s fascination with the island nation may be more about countering Russian and Chinese influence in the Arctic than securing any of the hard-to-pronounce elements like neodymium and terbium that are used to produce the high-powered magnets needed in electric vehicles, wind turbines, robots and fighter jets among other products.

“The fixation on Greenland has always been more about geopolitical posturing — a military-strategic interest and stock-promotion narrative — than a realistic supply solution for the tech sector,” said Tracy Hughes, founder and executive director of the Critical Minerals Institute. “The hype far outstrips the hard science and economics behind these critical minerals.”

Trump confirmed those geopolitical concerns at the White House Friday.

“We don’t want Russia or China going to Greenland, which if we don’t take Greenland, you can have Russia or China as your next door neighbor. That’s not going to happen,” Trump said

A difficult place to build a mine

The main challenge to mine in Greenland is, “of course, the remoteness. Even in the south where it’s populated, there are few roads and no railways, so any mining venture would have to create these accessibilities,” said Diogo Rosa, an economic geology researcher at the Geological Survey of Denmark and Greenland. Power would also have to be generated locally, and expert manpower would have to be brought in.

Another concern is the prospect of mining rare earths in the fragile Arctic environment just as Greenland tries to build a thriving tourism industry, said Patrick Schröder, a senior fellow in the Environment and Society program at the Chatham House think-tank in London.

“Toxic chemicals needed to separate the minerals out from the rock, so that can be highly polluting and further downstream as well, the processing,” Shröder said. Plus, rare earths are often found alongside radioactive uranium.

Besides the unforgiving climate that encases much of Greenland under layers of ice and freezes the northern fjords for much of the year, the rare earths found there tend to be encased in a complex type of rock called eudialyte, and no one has ever developed a profitable process to extract rare earths from that type of rock. Elsewhere, these elements are normally found in different rock formation called carbonatites, and there are proven methods to work with that.

“If we’re in a race for resources — for critical minerals — then we should be focusing on the resources that are most easily able to get to market,” said David Abraham, a rare earths expert who has followed the industry for decades and wrote the book “The Elements of Power.”

This week, Critical Metals’ stock price more than doubled after it said it plans to build a pilot plant in Greenland this year. But that company and more than a dozen others exploring deposits on the island remain far away from actually building a mine and would still need to raise at least hundreds of millions of dollars.

Producing rare earths is a tough business

Even the most promising projects can struggle to turn a profit, particularly when China resorts to dumping extra materials onto the market to depress prices and drive competitors out of business as it has done many times in the past. And currently most critical minerals have to be processed in China.

The U.S. is scrambling to expand the supply of rare earths outside of China during the one-year reprieve from even tougher restrictions that Trump said Xi Jinping agreed to in October. A number of companies around the world are already producing rare earths or magnets and can deliver more quickly than anything in Greenland, which Trump has threatened to seize with military power if Denmark doesn’t agree to sell it.

“Everybody’s just been running to get to this endpoint. And if you go to Greenland, it’s like you’re going back to the beginning,” said Ian Lange, an economics professor who focuses on rare earths at the Colorado School of Mines.

Focusing on more promising projects elsewhere

Many in the industry, too, think America should focus on helping proven companies instead of trying to build new rare earth mines in Greenland, UkraineAfrica or elsewhere. A number of other mining projects in the U.S. and friendly nations like Australia are farther along and in much more accessible locations.

The U.S. government has invested directly in the company that runs the only rare earths mine in the U.S., MP Materials, and a lithium miner and a company that recycles batteries and other products with rare earths.

Scott Dunn, CEO of Noveon Magnetics, said those investments should do more to reduce China’s leverage, but it’s hard to change the math quickly when more than 90% of the world’s rare earths come from China.

“There are very few folks that can rely on a track record for delivering anything in each of these instances, and that obviously should be where we start, and especially in my view if you’re the U.S. government,” said Dunn, whose company is already producing more than 2,000 metric tons of magnets each year at a plant in Texas from elements it gets outside of China.

___

Funk reported from Omaha, Nebraska, and Naishadham reported from Madrid.



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A major factor in Gen Z and millennial divorce is ‘financial future faking’

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Many of us have experienced that gut-wrenching feeling when we realize the relationship we’re in and thought was “the one” turns out to be a total wash.

Sometimes the eventual severance comes down to a difference of morals or plain-old lost feelings. And sometimes it happens when dishonestly, like catfishing, is revealed.

But many people in the younger generations are navigating a new kind of deception: financial future faking. It’s when people make big promises to each other about sharing a home, lifestyle, or long-term financial security early in a relationship without any real intention or follow-through. This phenomenon is an offshoot of “future faking,” a psychological manipulation tactic recognized by major health care and psychological organizations. 

Financial future faking is becoming a major factor in Gen Z and millennial divorces—and perhaps a reason why these younger generations marry less often or much later in life.

“I often see a lack of financial intimacy, transparency, and alignment as central factors in divorce,” celebrity divorce attorney Jackie Combs told Fortune. “When money becomes a source of leverage, or when expectations are never clearly articulated, it fractures communication, creates misalignment, and erodes trust.”

Combs, who is a family and matrimonial law attorney and partner at Los Angeles-based firm BlankRome, has represented many Gen Z and millennial celebrities including Emily Ratajkowski, Chris Appleton, and Ines de Ramon. She also represents other high net-worth clients and has been recognized both as a top family lawyer as well as an “Entertainment Business Visionary” by the Los Angeles Times

The financial future faking trend is especially disheartening for Gen Z and millennials because they’re facing an inflationary period, soft job market, and a housing affordability crisis. So when those in relationships aren’t honest about money and shared goals, the entire lifestyle they’ve dreamed of could all come crashing down. 

“Gen Z and millennials are particularly vulnerable to future financial faking for several reasons,” Combs warned. “They are dating in an era of unprecedented financial instability, defined by student debt, housing unaffordability, and delayed economic security.”

Beware of the dream wedding

Combs says another reason younger generations are so susceptible to this is because they were raised in households where money was rarely openly discussed, leaving them ill-equipped to ask direct financial questions or understand whether they’re financially aligned with their partner early on. 

“This vulnerability is compounded by consumer culture and social media, which glamorizes aspirational lifestyles such as luxury weddings, ‘soft life’ aesthetics, and trad-wife narratives, without addressing the financial infrastructure required to support them,” she added. 

The illusion of a dream wedding can also be a culprit. The wedding services market alone was valued at about $218 billion in 2024, according to BRC Wedding Service Global Market Report 2025, and is expected to grow to a whopping $362 billion by 2029. This underscores “how fantasy often outpaces financial reality,” Combs said. 

To put it in perspective, the average cost of a wedding is an eye-popping $33,000, according to The Knot, or roughly half the average American salary. And that’s a relatively conservative average, considering weddings in certain markets—and for certain demographics and aesthetics—can cost hundreds of thousands of dollars. 

Still, it’s comforting and exciting to daydream about a luxurious wedding and lifestyle with your partner—although it can often lead to a trap.

“When someone offers hope through vague financial promises about the future, it can feel reassuring rather than deceptive, making financial future faking particularly effective,” Combs said.

How to spot financial future faking—and when to talk about money

Some of the common signs of financial future faking include making grand, but nonspecific financial promises, a lack of transparency about income, debt, or spending, and repeated delays in financial accountability or tangible process toward a financial goal, Combs said. 

“Future promises sound like commitment, but are never structured in reality or a future partnership” is what financial future faking sounds like, she added. 

But it’s difficult, and can sometimes feel confrontational, to question a partner—especially in a new relationship—about finances. 

“Sincerity is reflected in alignment between words and behavior,” Combs said. “Vague optimism without structure, or a willingness to learn, is a red flag.”

Combs said it’s important to have financial discussions early on before significant emotional or financial commitments are made. That entails having discussions about money before moving in together, signing a lease, or sharing expenses. 

Still, “that doesn’t mean sharing your 401k balance on the first date,” she explained. “It means asking thoughtful, value-based questions like, ‘if you won the [lottery] today, what would you do with the winnings?’ ‘What does financial security mean to you?’ or “What’s your biggest financial fear?’”

To get the most out of your conversation, Combs recommended “leading with curiosity and not judgment” because it can help show emotional vulnerability and build trust. And it’s also critical to have these conversations before any discussions about marriage or long-term commitment, because the former can often mean relinquishing financial autonomy.

Basically, if one person in a relationship doesn’t fully understand the financial or legal implications of marriage, they “give up control over their financial future,” Combs said.

“These conversations aren’t about forcing commitment,” she emphasized. “They’re about risk assessment and determining long-term compatibility.”



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