Credit card debt has grown to a record $44 billion but banks and other lenders continue to use slick marketing to get their customers to lift their credit card limits. With interest rates on outstanding debt on credit cards up to 21 per cent a year, it is the most expensive debt going.

Wizard, GE Money, Suncorp and Citibank are among those who have recently increased their credit card rates.

A report by the Consumer Action Law Centre exposes the manipulations used to persuade people to increase their credit-card limits.

Paul Harrison, a senior lecturer in consumer behaviour and marketing at Deakin University and the principal researcher of the report, Congratulations, You're Pre-Approved, examined letters sent to customers by banks, store card providers and other lenders to encourage them to take-up "pre-approved" deals to increase the limit on their existing credit card.

"We found that lenders frame their letters ... to make it more likely customers will not really think too hard about taking one more debt and just accept the limit increase," he says.

Harrison says the letters exploit a natural human instinct to trust "experts", in this case someone at the lender who says they can afford to increase their limit. They also indicate that the customer has been chosen to receive a "limited" offer and to make customers feel that they already "own" the limit increase. The letters also avoid the word "debt".

Reserve Bank of Australia data show the average credit card debt is more than $3200. Many households have more than one card.

Even after last week's 0.25 percentage point cut in official interest rates, mortgage rates are still the highest they have been for more than a decade.

Andrew Willink, the founder of financial comparison websites Cannex and RateCity, says that consumers previously used cards as a transaction tool, usually paying off the full debt within the interest-free period.

"Since then consumers have gone into more debt and interest rates are higher and, for many people, their credit cards have been seen as the saviour at the end of the road when they have bills to be paid," he says.

Willink says it is not just low-income earners who are incurring interest and feeling the stress of too much debt but also those with high incomes who are feeling the squeeze through higher mortgage rates, sharemarket declines and margin calls on their leveraged shares.

Carolyn Bond, the co-chief executive of the Consumer Action Law Centre, says a lot of the marketing is about "how can we get customers deeper into debt, how can we keep them in debt longer and how can we make them feel comfortable about that extra debt".

She says credit card stress is often hidden because when someone gets into trouble the lender will offer to consolidate their credit card debt into their mortgage or other debts.

Sometimes the letters have warnings but they are in smaller print and cannot counteract the strength of the other positive messages.

Information in these offers from the banks has improved after the Australian Bankers Association introduced some principles that its members must follow when approaching existing customers to extend credit limits.

They include stating the new minimum monthly repayments on the full outstanding debt (but not the interest rate and other costs of the card) and show how to request a lower credit limit than the one that has been pre-approved.

Some non-bank lenders have picked up on the lead but the degree of disclosure varies. Ian Gilbert, the director of retail regulatory policy at the Australian Bankers Association, says the banks' default rates on all lending, not just credit cards, remain very low. He says that credit cards balances are about 37 per cent of card limits and that has been steady for a decade.

"That strongly suggests the wheels are not falling off," he says.

But Bond says pre-approved, unsolicited credit invitations should be prohibited. That is because the approvals are mostly based on repayment histories on the card, not always on the customer's capacity to repay the debt.

She says a ban on unsolicited letters would not stop anyone from asking their lender to increase their credit card limit.

An offer good enough to refuse

In February I received a letter from my bank, the Commonwealth, saying I had been selected for a Gold MasterCard: "As a valued customer, we'd like to offer you a pre-selected Commonwealth Bank Gold MasterCard with a credit limit of $20,000."

It promised 10,000 bonus points, free international travel insurance and "premium gold awards" - yet another loyalty award program.

The letter had a space where it asked for my income and expenses and also "total limits on other credit/store cards". Seven weeks later my wife received the same letter. Between us we now had a potential limit of $40,000.

I looked at the card details. The interest rate on the outstanding debt, if not paid out in full within 55 days, is 20.74 per cent and there is an annual fee of $114 as well as a late-payment fee of $25.

I know that only because I looked it up on the banking product website InfoChoice.

Banks are only required to disclose minimum monthly repayments in their letters offering higher credit limits to existing credit card customers, not to potential new credit card customers such as myself.

Consequently, the letter was very big on the rewards and bonuses but mute on the important information - how much it will cost. That's a glaring omission from a big financial institution when so much is being done on the full disclosure of the costs of other services and products.

As with many recipients of such letters, I threw it in the bin. But it shows just how easy it is, even during a global credit crunch, to obtain credit that could turn toxic if the debt mountain is allowed to grow.JC