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Credit card companies have agreed with Government a new set of 'fair principles' that will put an end to overnight hikes in credit card charges.

The Government says this will give much-needed breathing space to borrowers struggling to repay their debts.

Consumer Affairs Minister Gareth Thomas says: "I am pleased by the commitments card companies have made.

"I recognise that these changes will not be without financial pain for credit card companies, but it was vital that we nipped in the bud the bad practices that were causing real hardship for borrowers. These commitments will help families manage their finances and cope with repaying their debts"

The Government’s investigation found that some borrowers were having their interest rate significantly increased – sometimes by 10% or more, and at short notice. Now, customers will be given the option of closing their account and paying off their debts at the existing rate of interest.

Also, credit card companies have agreed to give people at least 30 days notice of an increase in their rate and to limit how often they will they increase it. This will make sure people have time to shop around for a better deal and plan ahead for changes to their family budgets.

The Government has also made sure that the industry agree that they will not increase rates for customers who've failed to make their minimum payments for two months or more, or if the borrower has sought help from a debt advice agency.

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