During a recession, which behavior is most likely to occur regarding credit use?

During a recession, the behavior of deleveraging becomes prevalent among consumers and businesses. Deleveraging refers to the process of reducing debt levels by paying off existing loans or avoiding taking on additional debt. This behavior typically arises from a heightened sense of financial caution and the desire to improve one's financial stability in uncertain economic times.

During a recession, people may experience job losses, reduced income, or economic instability, which can make them wary of accumulating more debt. As a result, individuals and families are more likely to focus on paying down existing debts, such as credit card balances, mortgages, and other loans. This focus on reducing debt load helps to strengthen their financial position and provides a buffer against further economic downturns.

In contrast, behaviors such as leveraging, which involves increasing debt to finance investments or purchases, or increasing credit limits, would typically be less common during a recession, as consumers are more cautious and likely to avoid further debt accumulation. While consolidating debt can be a strategy used during economic hardship to manage payments more effectively, the overarching trend during a recession leans towards deleveraging as people prioritize reducing their overall debt burden.