Local opinion: Protect credit access for Arizona's Hispanic entrepreneurs and working families

As a small business advocate, realtor and leader within the Hispanic business community, I spend my days helping families pursue the American Dream. Whether that dream is buying a first home, starting a business or building financial security, one thing is consistently essential: access to credit. That is why I am concerned about proposals in Washington to cap credit card interest rates, including those that would cap rates at 10%.

With many families struggling with rising costs, it is understandable that policymakers want to help. But good intentions don’t always lead to good outcomes. An interest rate cap would make it harder to access credit for the very people proponents were looking to help. Credit is more than a way to borrow money. It is often the foundation for building a financial future. A strong credit history helps individuals qualify for mortgages, purchase vehicles, invest in education, and start businesses. For most individuals, building that credit history starts with credit cards.

Today, lenders can offer credit cards to borrowers across a wide range of financial backgrounds through risk-based pricing. Borrowers with little to no credit history can access credit cards because lenders can account for a borrower’s risk of default by charging higher interest rates. But that would go away if a rate cap were to be implemented. The same higher-risk borrowers that once had access to credit cards would see that access disappear. That risk falls hardest on communities that are still building a financial footing. This is particularly important in Hispanic communities.

Many Latino families come from cultures that traditionally emphasize cash transactions and avoiding debt. While those values have strengths, they can also result in limited credit histories. Language barriers, limited access to financial education, and historical challenges in the financial system have also made it more difficult for some Hispanic families to establish credit.

For families that have historically operated outside the traditional credit system, a credit card is often the first step. It lets them demonstrate financial responsibility, build their scores and eventually qualify for home loans and other lines of credit that build long-term wealth.

A federal interest rate cap restricts that pathway. The Progressive Policy Institute found that a 10% cap would reduce or eliminate access to anyone with a credit score below 720. Rather than offering lower-priced credit and absorbing significant losses, many lenders may simply stop extending credit to higher-risk applicants altogether. This would hurt working families that use a credit card to pay an emergency medical bill, young adults building credit, first-time entrepreneurs that use a credit card to finance a new small business, and communities that have historically faced barriers to financial services.

For Hispanic entrepreneurs, the consequences could be especially significant. Small businesses are a driving force in Arizona’s economy, and Hispanic-owned businesses continue to be among the fastest-growing segments of the business community. Arizona’s Hispanic-owned small businesses have grown by more than 40% even as small business ownership declined among other groups. Many of the entrepreneurs driving this growth rely on personal credit cards not only to get started but also to purchase equipment and manage day-to-day cash flow once open. Instead of creating opportunity, a rate cap could limit it. The conversation about affordability is an important one. But reducing access to credit is not the answer.

As Congress debates proposals to cap credit card interest rates, lawmakers should carefully consider the unintended consequences. Policies that reduce access to credit will not expand economic opportunity. They may instead place it further out of reach for the families and entrepreneurs who need it most. Economic mobility begins with opportunity. Access to credit remains one of the most important tools for creating that opportunity, and it starts with credit cards. It deserves to be protected.