Maggie Haass is the owner/broker of Burns & Ellis Realtors in Dover. She is also the owner of Evergreen Farms in Dover.
My family and I have spent decades investing in Dover’s business community. My husband and I, between us, own and operate multiple small businesses: Burns & Ellis Realtors (open since 1966), Haass’ Family Butcher Shop (open since 1955) and Evergreen Farms (open since 2020).
Between the two of us, we know the power of small businesses to create jobs and new opportunities for Delawareans. And, as a Realtor, I understand the importance of homeownership to create wealth. Importantly, we know what it actually takes to keep these doors open for members of our community.
But now, there are proposals in Congress to cap credit card interest rates, measures that would reshape our financial landscape and lending system. The impact would uniquely affect small businesses and working families.
Credit cards are necessary for small businesses to thrive. We use them day in and day out, whether it be to manage cash flow, purchase supplies or pay for emergencies. They’re also an important tool for consumers, whether for making purchases at the butcher shop or as a longer-term tool to build a credit profile to qualify for a larger loan for a home purchase.
But proposals that would cap rates at 10% would hurt the very families they’re meant to help, by limiting their access to credit.
Lenders rely on interest rates to manage the risk of extending credit, especially to higher-risk borrowers. Statistically, borrowers with low credit scores or little credit history are more likely to default, so lenders use higher interest rates to price that risk.
Currently, the only borrowers who qualify for rates at or below 10% are those in the superprime category, or those with scores above 720. With a rate cap of 10%, everyone else would effectively see their access to credit cards either cut off entirely or sharply reduced.
The total count could be as many as 517,000 Delaware cardholders losing access. In a state with an adult population of less than 1 million, that’s a substantial number.
And, for small-business owners, it would be a serious problem.
Right now, 79% of small businesses rely on credit cards for day-to-day operations. That means the health of a small business is directly tied to the ability to access a card. When borrowers are cut off, the effects would be felt up and down Main Street.
Small businesses don’t have the same access to institutional capital markets as large companies. We rely on credit cards to keep operations running. A policy that restricts access to those products deeply affects us and our future.
It also negatively impacts the people we serve and our communities. It limits our ability to expand in the future or survive a slower season. That means fewer jobs for community members and slower economic growth. Consumers also lose the ability to purchase our products and products from other small businesses in the community. And they lose the ability to build a credit score that ultimately qualifies them for a home loan.
In 1980, lending was restricted in an effort to curb inflation. Ultimately, the opposite occurred. Consumer spending collapsed, small businesses lost access to capital, and the economy crashed. That outcome should be enough of a warning to know not to try this again.
Small businesses in Dover and throughout Delaware rely on credit cards to keep our doors open and create new opportunities in our communities. A 10% interest rate cap would restrict the financial tools available to build businesses, create jobs and contribute to our local economies.
Reader reactions, pro or con, are welcomed at civiltalk@iniusa.org.
