Credit card charge-offs decreased in January to 4.98%, which is the lowest level since November 2007, as reported by Moody's Investors Service Credit Card Indices.

The early-stage delinquencies also dipped to new record lows, indicating more dips in charge-offs in the upcoming months, the agency noted.

The rating agency expects the charge-off rate to trend lower well into this year, finally moving to  less than 4% by the end of 2012, according to Moody's.

"We expect the improvement in credit card performance to continue throughout 2012, although the rate of improvement will slow as the year  goes on," said Jeffrey Hibbs, a Moody's assistant vice president and analyst.

The charge-offs at each of the six biggest credit card programs are at least 30% lower versus a year ago as a result of the attrition of weaker quality credits from collateral pools.

The charge-off rate, the rating agency explained, measures the credit card account balances written off as uncollectible as an annualized percentage of total outstanding principal balance.

According to Moody's, the delinquency rate rose slightly by two basis points in January to 2.93%, after dipping to the lowest level in the 23-plus year history of the agency's credit card indices last month.

But, early-stage delinquencies at the six largest trusts were flat or even lower with the index down by three basis points from December 2011, which is an all-time low, Moody's stated.

The delinquency rate measures the proportion of account balances for which a monthly payment is over 30 days late as a percentage of total outstanding principal balance.

The early-stage delinquency rate measures the proportion of account balances for which a monthly payment is 30 to 59 days late as a percentage of total outstanding principal balance, Moody's said.

The payment rate index increased for the second consecutive month, more than reversing the four prior months of decline, according to analysts at the agency. After this month's 50 basis point increase to 22.08%, the payment rate index is now at an all-time high, and is another positive credit indicator, especially in light of the increase in both consumer spending and card balances over the holiday months.

The payment rate, Moody's explained, measures the average amount of principal that cardholders repay each month, as a percentage of total outstanding principal balance.

The yield index declined to 17.90%, which is its lowest mark since April 2009, mainly because of the expiration of Discover's discounting mechanism in January. This exacerbated normal seasonal weakness and resulted in a sharp, 123-basis point dip. None of the six largest trusts are discounting principal collections on newly generated receivables any longer, even though some trusts are still discounting principal collections on existing receivables, Moody's indicated.

Yield is the annualized percentage of income, mainly finance charges and fees, collected over the month, as a percentage of total loans, Moody's stated.

After being at a close to all-time high of over 11% for eight months, the excess spread index also dropped to 10.08%, the lowest level since the seasonal low of April 2011, the rating agency reported.

But, even at its current level, the excess spread index is still relatively healthy and well over historical norms. Moody's expects the excess spread index to rise with charge-offs still decreasing as the year progresses. Excess spread is a measure of the overall performance of securitized pools of credit card receivables.

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