American Express Co. (AXP) said Monday that U.S. borrowers at least a month behind their card payments decreased modestly to 4.2% in July from 4.4% in June.

This continued decline in delinquencies, a key gauge of future losses, is important because 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. The slowing pace of delinquencies is also noteworthy because it comes at a time when seasonal factors - such as good behavior on the part of borrowers fueled by tax refund checks - are behind the card industry.

This monthly report card on the performance of credit-card loans, including those packaged into bonds, comes amid heightened scrutiny around credit as losses stemming from souring card loans pile up.

Issuers of plastic, including Capital One Financial Corp. (COF), JPMorgan Chase & Co. (JPM), Bank of America Corp. (BAC), Citigroup Inc. (C), Discover Financial Services Inc. (DFS) and American Express are also coping with sweeping legislation that will bite into income. To fight the losses, card issuers are scaling back on credit and getting tougher on whom they lend to.

AmEx wrote off 9.2% of its card loans, including those packaged into bonds. For the quarter ended June 30, the company wrote off 10% of its U.S. card loans, up from 8.5% in the first quarter and 5.3% a year ago.

The company said earlier this month that better than expected bankruptcy trends contributed to the decline in write-offs.

Like other card issuers, AmEx is being hurt by cutbacks in spending and customers who are falling behind on their bills in the current economic slump. Unlike other card companies, AmEx both issues cards and processes transactions. It issues both charge cards requiring a monthly payoff and credit cards on which customers can carry a balance.

An AmEx spokesman declined to comment on the company's July credit card loans performance.

Another card issuer, Discover Financial, wrote off 8.43% of credit card loans that have been packaged into bonds in July, down from 8.75% in June; the 30-day delinquency rate was nearly flat at 1.38%.

Bank of America, at 13.81%, had the highest write-off rate in July among the card issuers who released their credit-card data Monday. This compares with a write-off rate of 13.86% in June. Officials at these companies declined to comment on the monthly reports.

Capital One said earlier Monday it wrote off 9.83% of its card loans last month, compared with 9.73% in June, beating analysts' estimates of higher losses. Its 30-day delinquencies increased to 4.83% in July from 4.77% in June, according to a regulatory filing Monday.

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