Credit Card Stoozing
Stoozing is a way that consumers can make money by exploiting the zero percent introductory period of a credit card. As competition is so hot in the credit card industry, a lot lenders give an introductory period which can be up to 18 months in some cases at a rate 0% on the balance. The idea of stoozing is to borrow money from such a credit card, move it to a high interest savings account and make money on it. When the period of zero percent interest comes to an end, the money is taken out of the savings account and used to pay back the credit card balance in full. The stoozer is left with the interest gained in hand. As ever, the interest is subject to normal tax rules.
Zero percent credit cards were first introduced in 2000, and credit card companies obviously know that the practice goes on, and they started to hit back, by introducing such things as fees for transferring debts to zero per cent cards. It is still possible to make money from cards – for nothing.
The fundamentals are the same: borrow money at 0% interest and save it away at a higher percentage saving rate. This is not for those with existing debt, such as an overdraft or an outstanding credit card balance. Those people should reduce their debt first.
There are cards that have a fee for transferring a balance, which then has zero percent interest. However, some cards still offer zero percent on purchases – these are the cards to target for stoozing.
Currently the longest period for zero percent on purchases is on an HSBC card, and this is for twelve months. Other good periods are Sainsbury’s Visa, Barclaycard Platinum and the Sky card, all with ten months. It is also useful look for other deals on the cards, such as reward points for Sky products on the Sky card. Mark & Spencers’ &More card has nine months of zero percent interest and gives £5 to spend in M&S for every £1000 spent.
Once you have your new card, do all your spending on it – you credit card spending, your debit card spending, your cash withdrawals. The cash you’re spending here is not being spent elsewhere, not being used at all – so you can save it into a savings account. The best place to keep your money is in an easy-access tax-free cash ISA, into which you can put £3,000 a year, or an instant access high rate savings account.
Make sure you save enough money to be able to pay off you credit card debt at the end of the 0% period. If you save £3000 at 6% you will make £180 over a year.
Or, you can move the debt from the 0% on purchases card to a 0% on transferred debt card, and continue to spend, save and earn more. You will have to pay a debt transfer fee, but at 2 or 3%, this still makes it worthwhile.
Morgan Stanley’s Fly and Buy card has a balance transfer of zero percent for nine months, and a fee capped at £50, so on £3000 you could earn £130.
And of course, in each case, the more you can save, the more you can earn in interest.
Does any of this have an impact on your credit rating? Check your free credit report
Multiple applications and high outstanding debt can reduce your ability to get credit that is competitive, so make sure to spread out you card applications.
Once again – do not stooze if you need a good credit score for real borrowing.