Credit card users are paying back less of their outstanding balances each month, data from February show, setting the stage for deeper pain for issuers of plastic.

A sustained decline in the amount borrowers repay each month, compared with a year earlier, is a leading indicator of credit losses. Analysts are concerned that more customers won't be able to pay at all, forcing issuers to write off loans. This would mean heavier losses on credit card debt already battered by rising unemployment.

"Payment rates are a forecasting tool for delinquencies and charge-offs," says Scott Valentin, an analyst at FBR Capital Markets. "Lower payment rates signal consumer distress."

Card users paid back 17.15% of their balance on average in February, down from 20.46% a year earlier, according to a Fitch Ratings index, which tracks about $285 billion of credit card loans.

Lower payments are actually desirable in a strong economy; when customers pay a minimum balance each month, issuers collect more interest on the unpaid balances. But this pattern is worrisome in an economic downturn because lower payment rates are a sign that borrowers will fall behind on payments.

Higher delinquencies force issuers to squirrel away capital to reserve for potential losses; ultimately, companies must write off loans if customers can't pay up. That could mean trouble for card issuers such as Citigroup Inc. (C), Bank of America Corp. (BAC), American Express Co. (AXP), Capital One Financial Corp. (COF), Discover Financial Services (DFS) and JPMorgan Chase & Co. (JPM).

The annualized charge-off rate, measuring defaults as a percentage of loans outstanding, rose to 7.74% in January from 5.48% a year earlier, according to Moody's Investors Service. That rate is already historically high; it peaked at just over 7% during the 1991 and 2001 recessions, according to Moody's.

Individually, American Express's card users paid down 22.23% of their balances in February, down from 22.44% a month earlier, according to data on credit card loans released Monday. Similarly, Capital One borrowers paid down 13.7% of their balances last month, down from 15.33% in January. The data, released monthly by issuers of plastic, track the performance of credit card loans that are packaged and sold to investors, and are considered an accurate gauge of payment trends.

"As consumers are more cash strapped, they pay less and keep higher balances" on their credit cards, says Chris Wolfe, an analyst at Fitch Ratings.

Data also indicate borrowers are struggling to catch up on missed credit card payments. American Express's monthly data on credit card debt performance note that the percentage of cardholders who went from skipping two-to-three payments to more than three payments rose to 71.6% last month, from 62.1% a year earlier, according to FBR's Valentin. Typically, once borrowers are three payments behind, fewer of them ever catch up.

Sanjay Sakhrani, an analyst at Keefe, Bruyette & Woods, notes that the average life of a credit card loan was longer at about 6.7 months in January, compared with 5.8 months a year ago.

-By Aparajita Saha-Bubna, Dow Jones Newswires; 617-654-6729; aparajita.saha-bubna@dowjones.com