Two credit card companies - American Express and Citigroup - have blocked cardholders from using their cards to gamble on the internet.

The online betting industry last night attacked the card providers for creating a "nanny state".

American Express and Citigroup said their decision was intended to prevent fraud and reduce indebtedness.

The move by the UK arms of the two big American banks mirrors the stance they have taken in the US where they have decided to block the use of cards for online gambling.

"We implemented this rule in the US two years ago but did not have the right systems to do it in the UK until last month," said Citigroup. "As soon as we got the right systems in place we sent out statements to customers letting them know they would no longer be able to use their cards to gamble."

In 2002, Eliot Spitzer, New York State's high-profile attorney general, launched an investigation into internet gambling which led to companies agreeing to block the use of credit cards for online casinos and other internet gambling operations.

Credit card transactions can now be "coded" to indicate what is being bought or sold. By blocking certain codes, credit card issuers can withhold credit for a large proportion of online gambling.

Citigroup also said its new policy of blocking online gambling transactions for cardholders in the UK would prevent customers taking on too much debt.

"Although it restricts use of the card it benefits customers because it prevents losses and also deals with anti-money-laundering issues," Citigroup said.

The Citizen's Advice Bureaux welcomed the move and urged other card issuers and payments systems to follow suit.

However, credit card transactions are the lifeline of many of online gaming companies.

Trevor Beaumont, betting director of UK Betting, the live online gambling website, said the move "smacked of a nanny state".

"I am sure there will be plenty of customers who will be outraged at being told what they cannot do with their hard-earned money," said Mr Beaumont. "I do not think this is the major problem the banks make it out to be."

Mr Beaumont said the banks had not consulted his company about the move, which could affect the group's 230,000 registered users.

Research out this month by Arbuthnot, UK equity research said interactive gambling - which includes online and telephone gaming - was worth $5.6bn (£3.12bn) globally in 2003 having virtually doubled since 2000.