Jack McCarthy opened his Citigroup credit card statement recently and read something that made him call the company with a pressing question.

“Are you guys nuts?’’ he recalls asking a phone representative. McCarthy, who lives in Marstons Mills, says he’s owned a Citi credit card for about seven years and never missed a payment. But he says his interest rate was suddenly jacked up to 29.99 percent.

“It just completely blew my mind. I called and asked what did we do wrong. Why are we getting this?’’ McCarthy says.

He didn’t do anything wrong, as far as I know. McCarthy and lots of other people with cards from various banks - not just Citi - are watching their rates jump sky high. Big banks are facing severe credit card delinquencies and so they’re trying to squeeze the business. More important, they are acting ahead of a new law that by February will force banks to give customers 45 days notice before raising credit card rates.

Dramatic rate hikes have caused a furor and sparked talk about interest caps on credit cards. Senator Bernard Sanders, the Vermont Independent, proposed just such a cap in May and the measure got smoked in the Senate by a 60-33 vote. Sanders hopes to pitch the idea again as an amendment to the Senate’s eventual financial regulation reform bill.

Credit card rate caps are probably dead on arrival as legislation, but that doesn’t mean they’re a bad idea. In fact, reasonable caps would do a lot more good than harm for banks and the entire economy.

Rate caps aren’t theoretical ideas with no real-world track record. Caps on credit card interest were common in many states, including Massachusetts, until the 1980s, typically ranging from 18 to 20 percent. Banks usually charged an annual service fee and applied an interest rate that fell within the cap. That system worked pretty well.

Cards, as a form of consumer credit, don’t work very well today. Big banks are struggling with double-digit delinquency rates, largely because of their own hyper-aggressive market expansion.

Bankers got into trouble with credit cards because they saw a hugely profitable business and wanted to expand. They built computer models that told them what they wanted to hear about risk. Best of all, they knew they could jack the interest rate way up on borrowers who turned out to be problems. High rates could help banks still make money on problem borrowers or, more likely, drive the problem out the door to some other credit card issuer.

Caps on credit card interest rates would change that. Card issuers would think harder and make more prudent decisions about credit if they lacked the ability to blast problem customers out the door with extremely high rates.

“Rate caps - and we’re talking about caps that are up there - are a reasonable solution that could induce banks to act more rationally or consider the risks in a more measured way instead of passing the hot potato to someone else,’’ says Boston College economist Bob Murphy.

Citigroup chief executive Vikram Pandit answered lots of questions about credit cards when he visited the Globe the other day. He said Citi had to raise rates when competitors jacked up theirs, prompting customers to pay those bills and neglect their Citi debt. He who inflicts the most pain gets paid first, a kind of race to the bottom.

Pandit said he wanted a level playing field for the credit card business. Rate caps would give it to him.

The credit card industry wants nothing to do with interest rate caps. They say it will squeeze the availability of consumer credit, a real problem in the short run but an important goal in the long haul. America was awash in excess consumer credit and has suffered the consequences.

Some warn of unintended consequences. “You try to dam one part of the river and water will flow somewhere else; they’ll try to capture fees,’’ says economist Brian Bethune of IHS Global Insight. But those consequences wouldn’t be so serious if regulators did their jobs.

Industry officials say government should leave the free market alone. That would be the same government that saved the banking industry with unprecedented market intervention.

Credit card debt wasn’t the economy’s only problem, or even its biggest. But it inflicted real harm and interest rate caps would push banks to do better.