NEW YORK, Jan 7 (Reuters) - U.S. consumer credit deteriorated in December as credit card defaults rose and cardholder payment rates suffered the largest one month drop on records hurt by a deepening recession, Fitch Ratings said in a report on Wednesday.

Fitch said the charge-off index, a measure of default, of prime credit cards rose 31 percent last month against a year ago to a four-year high of 6.84 percent. The agency expects it to reach 8 percent in 2009.

In addition, monthly payment rates, the rate at which cardholders repay outstanding balances, fell 246 basis points month-over-month to 15.96 percent, the lowest level since 2004.

"Consumers continue to struggle amid a rapidly deteriorating employment situation and from declining property values and other measures of wealth," said Mike Dean, managing director at the rating agency.

The outlook is gloomy, as consumers struggle with a deepening recession and the highest unemployment rates in 15 years.

And conditions in the United States are expected to get much worse, with forecasts that the economy could have shrunk by as much as 6 percent in the fourth quarter and is expected to keep declining for the next six months. Unemployment is seen climbing to the highest level since the early 1980s.

Major credit losses are big trouble for banks J.P. Morgan Chase & Co (JPM.N: Quote, Profile, Research), Citigroup Inc, (C.N: Quote, Profile, Research), and Bank of America (BAC.N: Quote, Profile, Research), as well as for other card issuers such as American Express Co (AXP.N: Quote, Profile, Research) and Discover Financial Services (DFS.N: Quote, Profile, Research).

But retailers share the pain, too. The store cards default rate jumped almost 50 percent to a three-year high of 10.51 percent. Fitch forecast the rate will surpass 12 percent by mid-2009.

Fitch estimated credit card asset-backed securities ratings outlook would remain stable in 2009 as ample levels of credit and structural protections remain available to support the existing ratings. (Reporting by Juan Lagorio, editing by Gunna Dickson)