The consumer credit card charge-off rate declined for the second consecutive month in May, increasing the likelihood that they soon will dip below their year-ago levels, Moody's Investors Service Inc. said Tuesday.

The average chargeoff rate in May fell 20 basis points, to 10.71% from 10.91% in April. The May chargeoff rate is just nine basis points above the average rate from a year earlier.

Moody's analysts expect that within "the next couple of months," the average chargeoff rate will fall below levels from a year earlier. The last time the credit card chargeoff rates had been better than year-earlier levels was December 2006, Moody's said.

The delinquency rate on all card accounts more than 30 days past due in May fell for the seventh consecutive month, to 5.26%, down 28 basis points from April, the lowest delinquency rate since November 2008.

Assuming unemployment rates stabilize at 10.1% during the second half of 2010, Moody's expects to see more improvement in both credit card chargeoffs and delinquencies.

The unemployment forecast "reinforces our view that credit card chargeoffs have passed their peak levels for this credit cycle," Moody's said, referring to the economic downturn that began in late 2008.

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