Visa, Mastercard, and the Coming Credit Crunch: Why Rate Caps Could Backfire | Between The Lies 022

I heard a rumor that Trump wants to cap credit card rates at 10%. Personally, I was just thinking it's already too easy to move up economically in America. Not like we have an unaffordability crisis constantly making headlines or anything.

 

Welcome to another episode where Rob Brayton from Perfect Spiral Capital and I break down another government solution that's likely to create more problems than it solves. Spoiler alert: When you cap what lenders can charge for risk, they just stop lending to risky people.

 

What We Cover:

• Why credit card rate caps mean fewer people get credit, not cheaper credit
• The Big Short connection: How Wall Street just invents new financial products when you regulate the old ones
• Rob's breakdown of what happens when a 400 credit score and 850 credit score get treated the same
• Why this is probably negotiating theater rather than actual policy
• The return of secured credit cards and why that's worse than high rates
• Wall Street's morning panic versus end-of-day reality check
• How Bitcoin and policy loans could fill the gap if traditional credit disappears

Key Insights: Rob nails the fundamental problem: if it was YOUR $10,000 on the line, would you lend it to someone and cap your return at 4%? Of course not. These companies aren't going to willingly lose money. They'll either stop lending to anyone below stellar credit or invent some new financial product that technically isn't a "credit card" but functions the same way with different rules.

 

We've seen this playbook before. Remember The Big Short when Michael Burry walks in wanting a financial product that doesn't exist? Wall Street just invents credit default swaps on the spot. Same thing will happen here. You decree this thing called a "credit card" can't charge more than 10%? Fine. Here's a new thing called a "flexible spending arrangement" that does exactly what credit cards used to do.

 

The Real Talk: Yes, credit card rates are insanely high. Rob has over an 800 credit score and still gets quoted 15-16% on his card. But the solution isn't price controls that eliminate options for people who need them most. The payday loan crowd everyone loves to hate? Those people need money and don't have it. Sometimes you find yourself in a situation where you just need a hand up, and you may not look good enough on paper to qualify under strict risk caps.

 

The Silver Lining: This kind of credit crunch could actually push more people toward Bitcoin and private banking solutions. If you have assets, why wouldn't you lend against those instead of begging traditional banks for permission?

 

Websites Referenced:

• PerfectSpiralCapital.com/podcast