The Government has announced new proposals to ensure that credit and store card companies give people a fairer deal.

As part of a series of reforms designed to make financial services work for consumers, the government has made a number of proposals to protect credit card users.

Under the proposed laws, increases to credit limits without cardholders’ prior consent will be banned, interest-rate increases will be restricted, minimum monthly repayments will be raised and the most expensive borrowing on a card – usually cash withdrawals – will have to be paid off first.

At present, it is common practice for credit card issuers to raise customers’ borrowing limits without asking them first.

Consumer groups have welcomed the proposed new laws.

"For too long, card companies have been allowed to apply the tricks of their trade to the detriment of millions of consumers," said Phil Jones, a Which? campaigner.

"We think it’s simply wrong to entice people into spending more than they can afford and then to squeeze as much money out of them as possible. The sooner these practices are stamped out, the better," he added.

However, the UK Cards Association, which represents the issuers, expressed concern that the new laws would mean 30m credit cardholders face less choice and higher costs.

"These proposals risk disadvantaging more customers than they protect," claimed Melanie Johnson, the association’s chair.