Nearly half of all shoppers seeking new credit cards are being refused, as a money squeeze begins to hit ordinary borrowers.

The number of applications refused by card providers has risen by 17 per cent to an estimated 3.27 million in the past six months, figures released yesterday showed, while those who are granted a card are being forced to pay higher interest rates and charges. There have been 125 separate fee and rate increases over the past two months.

Young people aged between 25 and 34 are most likely to be refused a card, according to Moneyexpert.com, the price comparison website. But financial experts said that people already struggling with debt would be hardest hit by the clampdown.

Esther James, credit card analyst at Moneyfacts.co.uk, another financial website, said: “It seems as if the credit crunch is beginning to cause credit card chaos. The 125 fee and rate increases over the last two months is quite staggering . . . with Christmas coming up, incomes will be stretched to the max with more people perhaps turning to their plastic for access to additional cash, only to get stung by higher rates and fees.”

Peter Brooker, a director at Experian, the credit reference agency, said: “Quite rightly, lenders are being more discerning about who they lend to and whether they can afford it. It was happening even before the credit crunch, as interest rate rises meant that people’s finances were tightening. We have noticed lenders keeping a closer eye on borrowers before it gets too late.”

UK homeowners are already reeling from five interest rate rises since the summer of 2006, with many facing the threat of repossession in 2008. Borrowers coming off low fixed-rate mortgages now face an immediate increase costing hundreds of pounds a month.

Reposessions are set to rise by 50 per cent next year, according to the Council of Mortgage Lenders. Thousands of borrowers have already been forced to resort to paying their mortgages on their credit cards to avoid arrears, according to a recent report by Shelter, the housing charity.

Shona Dobbie, head of Alliance Trust Research Centre, the investment group, said, “UK households have been too short-sighted and have lost track of financial reality . . . consumers remain reluctant, in the face of growing evidence, to pull back from their elongated spending binge.

“Low real earnings growth, higher mortgage repayments and hefty council taxes, to name just a handful of issues, all suggest that households should take a much needed reality check.”

Many debtors are turning to their families for loans. The amount owed by Britons to their families now stands at £25 billion – 82 per cent more than they owed in 1997, according to Skipton Building Society.

Chris Tapp, director of Credit Action, the debt charity, said: “This could hit a lot of people very hard. Some will have to make some very difficult decisions about their spending. We might need to see a move away from people bouncing between 0 per cent credit card deals and starting to try to live within their means without relying on cheap credit. It is understandable that credit card companies are doing this, in light of the credit crunch and bad debt figures, but it couldn’t happen at a worse time of year. This time of year, and January, are our busiest times.”

A spokesman from Barclaycard said: “We are declining more than 50 per cent of applications. We are constantly reviewing our criteria and have seen a slight increase in the number we are declining.”

The stricter borrowing rules and higher costs come as UK lenders, wary of the fate of their US counterparts, try to reduce their exposure to risk. The recent financial crises in America, which caused the chief executive of Citigroup to resign this week, was caused initially by homeowners defaulting on loan repayments.

Consumers owed a total of £5.4 billion on credit cards in September, the highest figure in six months, new figures from Apacs, the card industry body, showed. But increasing numbers of cardholders are failing to repay the amount they borrow on the card every month. Repayments fell from 96 per cent of borrowings in August, to 94 per cent in September.

Apacs said that spending on cards has risen by almost 10 per cent compared to this time last year, but that outstanding balances had actually fallen year on year by £1.4 billion. The group said that it had readjusted its estimate for the number of rejected applications from one third at the end of last year to between 40 and 50 per cent this year, as a result of the squeeze on the market.

The fees charged by lenders for cash withdrawals have also increased by up to 40 per cent, a blow for cash-strapped borrowers who are increasingly dependent on their credit cards.

Credit card lenders are expected to rake in a further £460 million from balance transfer fees over coming months as borrowers seeking better deals shift their debts to other cards.