Koreans are going back to cash after their credit binge

The fall, registered by the central bank in the three months to June, is the first in four years, after a credit glut which has seen personal debt soar to record levels.

Credit by financial instutitions dropped 252.5bn won ($215m; �137m) in the second quarter after a rise of 279.5bn won between the end of December and the end of March, according to the Bank of Korea.

"Growth in household loans slowed notably from the previous quarter, while sales on credit saw a big fall amid sluggish consumption," the bank said in a statement.

That still leaves most families carrying heavy debts, with the average per household standing at 29.15m won ($25,000; �16,000) and one in ten borrowers having trouble meeting repayments.

And the turnaround comes at a cost, in the shape of a contraction in the size of the economy during the April-June quarter - the second in a row - thanks to the shrinking consumer spending.

But the news nonetheless comes as a relief for the central bank.

Household debt has doubled in the past five years, partly as a result of an explicit policy of encouraging the use of credit cards to cut down on cash-based transactions and fight tax evasion.