Falling prices and wages make it even harder for people to pay back the loans they borrowed when prices and wages were higher. This makes their debt payments even more expensive. The economy skids to a stop, and as in the Great Depression, people become afraid to borrow and invest because of the ballooning cost of the money down the road. The problem is that credit card companies do everything they can to ensure customers don't know the price they are paying. Congress must also stop credit card companies from offering ridiculously high lines of credit that delude us into thinking we can carry heavy amounts of debt.
Credit limits tap into our deep sense of power as consumers and distort our sense of our wealth.
If they give you a credit line, it increases your sense of importance. Credit card companies should enforce reasonable credit limits instead of using them as yet another opportunity to profit from those who exceed them. If they actually do this, the credit card companies need not cover their risk by charging high interest rates and hidden penalties. Congress might also cap the interest rates the companies can charge, a move Rep. Joseph Kennedy pondered a few years back. A cap need not force the companies to dump their new, high-risk, customers, as they direly warned when faced with the prospect.