Earlier this year, U.S. Senator Bernie Sanders (I-VT) introduced legislation to cap credit card interest rates at 10%. Since then, other U.S. Senators have put forward additional proposals to cap rates. As a longtime elected official in Columbiana County in Appalachian Ohio, I can say with certainty that any cap on interest rates misses the mark on what members of our community need.

Over the last several years, Columbiana County has been a hotbed of new investment and economic development. Main Street storefronts that once sat empty are being filled. Small businesses are the backbone of that growth.

Across Appalachia, small businesses make up 99% of all businesses. These not only contribute to our local economy, but they support jobs that go to our local residents. Protecting and further fostering our small business sector should be the priority of Congress.

An interest rate cap would work against all of that.

Credit card lenders use risk-based pricing, meaning lenders charge higher rates to borrowers who are more likely to default. Higher rates allow lenders to absorb the risk and still extend credit.

Capping interest rates eliminates that balance. By removing the ability for lenders to absorb the risk of extending credit lines to higher-risk borrowers, they will pull back from extending them at all.

This already occurred in several states where interest rates were capped at 36%. Credit access for higher-risk borrowers was reduced or eliminated, but their underlying financial situations did not improve.

A cap won’t reduce costs for consumers or help higher-risk borrowers. It’ll just make credit inaccessible for these individuals.

Right now, a variety of borrowers, regardless of risk, have an opportunity to access credit cards. A 10% cap is estimated to limit that opportunity to as few as 15% of Ohio cardholders. Even a credit score of 600-plus wouldn’t be enough for most Ohioans.

Despite ongoing challenges for Appalachian towns, our communities have shown resilience. But one of Appalachia’s most pressing challenges remains a persistent capital supply gap for small businesses.

Credit cards help to fill that gap.

They’re a primary financial tool for the small business owners in our community. They use them to purchase inventory, manage cash flow, purchase new equipment, and ultimately build a strong credit score that allows them to access larger lines of credit to expand or bring on new staff. In a region where small businesses are often the primary source of local employment, cutting off access to the credit they rely on to stay operational undermines these businesses and the local economies that depend on them.

But credit cards matter for more than just rural small businesses. Our rural residents rely on them for paying for emergencies, everyday spending, or as a tool to help manage their own household cash flow. And many of these residents do not have a long history of credit prior to getting their first card, meaning that they’ll be among the millions of residents to lose access. That hurts them and the local small businesses they support.

Helping residents and small businesses in places like ours requires supporting policies that help people access and build credit and rejecting the policies that lock them out of it. A blanket cap on credit card interest rates does the latter. Ohio’s federal lawmakers must reject it.

John Morrow

Wellsville