Personal Finance: Barclaycard grants a new lifeline to students

The National Union of Students (NUS) has just clinched a deal giving its official seal of approval to Student Barclaycards, the junior version of the UK's first - and still its leading - credit card, in return for a donation of pounds 1 a head to the union's funds. The deal is worth a cool pounds 220,000 a year to the national union and to local student unions.

NUS national president Douglas Trainer insists that Student Barclaycards are consumer friendly because holders are limited to pounds 350 worth of credit and there is no real risk of financial novices being lured into a lifetime of debt. No annual fees are charged for the cards and students who now take out a card will qualify for free gifts or cash bonuses.

For many students, the Student Barclaycard is a lifeline. Only 32 per cent of the 1.7 million full-time students in the UK have a credit or debit card, but this is almost entirely due to the fact that a student living on a grant alone is unlikely to qualify for a conventional credit card from one of the existing credit card companies.

The qualifications for a Student Barclaycard with its lower monthly spending limit are much easier to meet, and 45 per cent of the 550,000 full-time students who use plastic to eke out their poverty-stricken existence have Student Barclaycards.

This fine for students who stay in credit, because they can enjoy interest- free credit if they pay off their bills every month before the payment date.

But, let's face it, how many students can afford to pay their credit- card debts off in full each month when they only get their grants three times a year? On unpaid balances each month, new Student Barclaycardholders taking advantage of the absence of an annual fee will pay 1.515 per cent a month, equal to 19.7 per cent a year, and existing customers pay1.65 per cent a month, equal to 21.7 per cent over a full year - and well ahead of the cheaper card companies like MBNA or RBS Advanta.