Consumers are dramatically scaling back how much of their credit card balances they pay each month.
Data released this month show that the credit card payment rate — the percentage of outstanding card debt paid — fell by 2.5 percentage points to 16.1%. The drop in November, the latest month available, is among the largest on record, according to CardTrak.com, a credit card research firm.

"It's kind of shocking," says Robert McKinley, founder of CardTrak.com. "It indicates that there are fundamental changes in the way that consumers view and use credit."

The credit card payment rate is a widely watched indicator of consumers' financial health. Its plunge comes as consumers have become more reluctant — and less able — to take on debt. Revolving debt, much of it on credit cards, dipped at a 3.4% annual rate in November to $973.5 billion, after flattening in October, preliminary numbers from the Federal Reserve show.

Even with less debt, consumers are struggling to pay their card bills. The average household with at least one credit card owed $10,728 in 2008, nearly the same amount as in 2007, according to CardTrak.com.

"People have limited amounts of income," says James Chessen, chief economist at the American Bankers Association.

Consumers also have less access to balance-transfer offers and home-equity loans these days, other factors behind the lower payment rate, said David Nelms, the chief executive of Discover Financial, in a recent conference call with analysts. November was a "low point" for Discover with card payment rates, Nelms noted.

As the economy slumps, even consumers who can pay their bills may feel it's prudent to reduce their monthly payments to conserve cash instead, says Cynthia Ullrich, a senior director at Fitch Ratings, which rates corporate debt.

Historically, consumers pay an average of about 18% of balances each month, McKinley says. "The payment rate can drift down in recessionary times, but the (recent) near-collapse is mind boggling."

As credit card payments fall, and loan delinquencies and defaults rise, issuers increasingly will see profits eroded.

Already, to shore up balance sheets, card issuers have raised interest rates for some borrowers even as the Federal Reserve cuts rates.

They've also introduced new or higher credit card fees.

The danger for the companies — and the economy — though, is that these measures won't be enough.

"If what we have now continues through 2009, it could be the first year in 30 years that the industry loses money," says McKinley.