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By EILEEN AJ CONNELLY, AP Personal Finance Writer

NEW YORK (AP) — Fewer credit card accounts slipped into default in December than in any other month of 2010, and signs point to further improvement ahead.

All six of the biggest card issuers Tuesday posted their lowest rates for charge-offs, or accounts written off as uncollectible. Citibank, which has had some of the highest charge-off rates over the past two years, posted the biggest decline. It wrote off 8.34% of its card balances in December, down from 9.4% in November and well below the high of 11.55% posted in March.

Discover, Chase and Capital One also reported substantial declines.

While the rates of balances companies wrote off declined consistently throughout the year, they remain high by historical standards.

"There are some good improvements," said Mike Dean, a managing director with Fitch Ratings. Fitch's charge-off index, which tracks the industry, remains near record levels, he said. "We've seen some better numbers there, but nothing to say, 'Wow!'"

Dean said he expects charge-off rates to continue improving, but noted that the defaults are "highly correlated" to the unemployment rate.

With the jobless rate forecast to remain high throughout the year, it is difficult to predict when charge-offs will return to normal levels, said Jeff Hibbs, an analyst with Moody's Investors Service.

Industry wide, the charge-off rate peaked in the second quarter of last year at 10.37% of balances, according to the latest data from the Federal Reserve. In the two years prior to the recession, it averaged 3.82%, Fed records show.

Credit card debt has been dropping the last two years, reflecting a combination of factors, including individuals paying down balances and credit card companies cutting the amount of available credit and writing off what they can't collect.

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The elimination of many card users who could not pay their bills from the pool of borrowers through charge-offs is one reason for the lower charge-off rates. Hibbs said that the customers who have been able to keep paying their bills despite the downturn and the spike in unemployment have proven they are trustworthy borrowers.

"Those left have exhibited a great deal of resilience to this stress," Hibbs said. "They withstood the depths of the last three years."

Card companies have tightened lending standards, so people who lost access to credit during the recession have not been able to get new cards. Fed data shows that in November, total revolving debt held by U.S. consumers — which is mostly credit cards — fell to $796.5 billion. That's about 18.5% below the record high reached in the third quarter of 2008, and the lowest point since September 2004.

Credit reporting agency TransUnion has estimated as many as 8 million former credit card users no longer have cards, either by choice or because their banks cut their credit lines.

Reflecting the strong positions that remaining credit card borrowers are in, December rates for payments late by 30 days or more also reached annual lows for all six top card issuers.

That figure, also known as the delinquency rate, is considered a precursor of future defaults.

"The numbers this month are as low as we have ever seen them," Hibbs said. "That's a strong indicator that charge-offs will continue to move steadily lower."

All issuers are participating in the industry-wide improvement, he added, noting that the first part of the year is typically the best for credit card payments, because consumers frequently use tax returns to catch up on overdue bills.

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