updated 10/26/2009 5:59:02 PM ET 2009-10-26T21:59:02

Senate Banking Committee Chairman Chris Dodd, who is fighting for his political survival, proposed Monday an immediate interest rate freeze on existing balances for the estimated 700 million credit cards in circulation.

The legislation is unlikely to go anywhere in the Senate, where business-minded Democrats would join Republicans in casting the measure as draconian and unnecessary.

Banks say that capping interest rates would cut their profits and force them to lend less money, which would reduce spending and worsen the economy.

Dodd's proposal seemed aimed at reconnecting the Connecticut Democrat with voters, many of whom have questioned his close ties to big banks after he was tied to a sweetheart loan scandal. The Senate Ethics Committee cleared him of violating any rules, although his poll numbers remain shaky.

Spokeswoman Kirstin Brost said the bill was not a political maneuver and only reinforced Dodd's views that more consumer protections were needed.

"At a time when families are struggling to make ends meet, jacked-up rates can quickly create crushing debt," Dodd said in a statement. "People need to be responsible with their money, but they shouldn't be taken to the cleaners by outrageous rates."

Congress has already passed legislation that puts new rules for credit card lenders into effect come mid-February. The law, signed by President Barack Obama in May, limits when and how banks hike rates. It does not set a cap on the amount of interest lenders can charge.

But many progressive Democrats, including Dodd, say that banks have been hiking rates ahead of the new rules. The House was expected to vote soon on legislation that would move up the enactment date to Dec. 1.

While that measure was expected to pass the House, its prospects in the Senate are dim. Banks are telling lawmakers that they need more time to implement the changes.

Copyright 2009 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

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Data: Latest rates in the US

Home equity rates View rates in your area
Home equity type Today +/- Chart
$30K HELOC FICO 4.36%
$30K home equity loan FICO 5.08%
$75K home equity loan FICO 4.51%
Credit card rates View more rates
Card type Today +/- Last Week
Low Interest Cards 10.86%
10.86%
Cash Back Cards 16.41%
16.40%
Rewards Cards 15.95%
15.94%
Source: Bankrate.com