Last updated 05:16, Friday, 21 November 2008

The cost of credit card borrowing has increased “significantly” during the past three months with more than 10 per cent of providers hiking their rates.

Heading for a big bill: Sixteen credit card providers have increased the interest rates they charge on purchases since August, despite falls in the Bank of England base rate

Sixteen credit card providers have increased the interest rates they charge on purchases since August, despite falls in the Bank of England base rate, according to financial information group Moneyfacts.co.uk.

At the same time 12 cards have raised the interest they charge on cash advances, hiking them by up to five per cent in some cases, and seven have increased their cash advance fees.

Other charge increases include 11 cards raising their balance transfer fees, while seven have reduced the number of interest-free days holders benefit from and four have increased foreign usage fees.

On top of this a number of providers have also reduced the amount of time that 0 per cent balance transfer deals last for.

The group found that in the past three months, the average interest rate charged across the 163 credit cards available has risen from 16.8 per cent to 17.2 per cent.

Michelle Slade, analyst at Moneyfacts.co.uk, said: “During the past year, card companies have continued to increase the charges on their cards and consumers will find they will be stung more severely than ever before.

“Just like on mortgages, card companies are factoring in a much bigger margin for the risk of consumers defaulting, so rates are going up rather than down.”

The figures come the day after research showed that the average annual percentage rate (APR) on cards had risen by 0.4 per cent since May, despite the fact that interest rates have fallen from five per cent to three per cent during the period.

The study, carried out by market analyst Defaqto for The Independent, showed the average rate climbed from 17.2 per cent to 17.6 per cent.

Prime Minister Gordon Brown has hit out at the interest rate hikes made by credit card firms, telling them to behave “responsibly”.

He said it was unacceptable to saddle British customers with big increases as the recessions bites.