Credit card rates has reached their highest level in 12 years as providers become increasingly cautious over the ability of individuals and businesses to pay them back, according to data released by Moneyfacts.

The average credit card rate now stands at 18.8%, an increase of 4% from 2006 levels.

With recent data from the Institute of Directors showing that nearly 60% of companies seeking bank finance were rejected last year, small business owners are advised to seek alternative funding options before using their credit cards to finance their firm.

"Banks are pricing risk into their rates and they are trying to deter people from taking out credit card loans. In such a risk-averse market, lenders are only offering money to the most creditworthy applicants, and then at a premium," said Michelle Slade of Moneyfacts.