US shoppers shun plastic

Shoppers preferred cash to plastic

US shoppers kept their credit cards tucked away in June, prompting an unexpected fall in consumer debt figures.

The Federal Reserve said outstanding consumer credit fell by $400m in June to $1.76 trillion - the first time figures have dropped since November 2002.

Wall Street had been expecting figures to climb by about $6.9bn.

The fall, led by a $1.3bn drop in charge and credit card debt, prompted further fears that the US economy is far from rebounding.

With unemployment above 6% and weak consumer confidence, there are fears that consumer spending - the US economy's main ballast in recent months - will be next to suffer.

However, some analysts said consumers were simply spending cash released from remortgaging homes and using it to pay off high interest loans.

In contrast to charge and credit card debt, so-called 'nonrevolving' debt - which includes lending for cars, boats and other items - grew by $900m in June.