Using credit or debit cards to make a cross-border transaction should become easier and cheaper, according to an agreement reached by EU finance ministers in Brussels.

From January 2008 consumers and small businesses across the EU will avail of a new 'single payments area' which could save the EU economy between €50bn and €100bn a year.

Each member state currently has its own rules on making payments between fragmented banking systems across 27 member states.

Today's agreement aims to allow cross-border payments, by credit card, debit card, electronic bank transfer and direct debit, as cheap and secure as 'national' payments within one member state.

The directive, introduced by Ireland's Commissioner Charlie McCreevy in 2005, would mean that Irish businesses which operate in other EU countries could use their domestic bank accounts for payments and transfers, rather than have to set up bank accounts in the countries where they are doing business.

Equally, someone paying a utility bill in Spain could use a direct debit from their Irish bank account, rather than having to set up a Spanish account.

National payment rules currently can lead to wide variations between prices charged for payment services, and the European Commission estimates that the cost of making payments between these fragmented systems is between 2% and 3% of GDP.

The Minister for Finance, Brian Cowen, described the agreement as 'a good practical example of what EU can do in the interests of citizens', and one which could lead to greater competition between banks.

The directive applies to all EU member states both inside and outside the Eurozone.