Stoozing: making money with a credit card
THE 0% deal is one of the most useful and most used credit card rewards around.
While these deals are traditionally used by cardholders to borrow for free or to repay credit cards, high-interest overdrafts or loans, they can also be used to make money using a crafty technique known as stoozing.
In this guide we'll explain what stoozing is and some of the very important rules that all stoozers need to follow to make this trick work.
We'll also guide readers through the two main types of stoozing that most people practise and end with a quick word of caution about this money-making method.
What is stoozing?
Simply put, stoozing is a way to turn money borrowed on 0% credit cards into profit.
The trick is to use credit cards with an introductory 0% period on borrowing and treat them as an interest free 'loan'. The capital, or money freed up by the capital, is paid into a high interest savings account to maximise earnings.
The trick can be performed with either a 0% purchases card or a 0% money transfer card - we'll look at the differences later in the guide.
This only works if the cardholder pays off the credit card in full before the 0% period ends - otherwise interest payments incurred on the credit card could negate any earnings from the high interest savings account.
Of course, there are some things to consider before borrowing at 0% and hoping to pocket extra cash.
First, there's the fact that this money-making trick requires successful applications to some of the UK's top credit card providers.
This means that stoozers need an excellent credit rating to get established.
A good credit rating helps to get these cards in the first instance, and bear in mind that credit card rejections show up on credit histories and can damage future applications.
To see what the phrase 'credit rating' actually means click through here, to our credit check and repair guide.
Secondly, stoozing requires discipline and faultless credit card behaviour.
Here's a list of rules that cardholders must follow:
- Do not use the card to withdraw cash or for any other cash transaction (for example, cashback at the checkouts, foreign currency, travellers' cheques, shopping vouchers or gambling.
- Use 0% purchase cards with caution - keep spending within everyday limits to ensure the card can be repaid in full.
- Don't miss any minimum monthly repayments or exceed the credit limit because this results in losing the 0% interest free period.
- Don't use money transfer cards for purchases or purchase cards for money transfers - the rates for each card vary massively.
Basically, stoozers want to avoid all interest payments and any fees that could come with credit card transactions and eat into profits.
Anyone who can't stick to these basic rules will never be able to make money through stoozing.
For those that are interested and can abide by the rules there are two ways to make money through stoozing.
We're going to look at them in detail below so make sure to pay attention - here's where it gets a bit complicated.
Stooze 1: 0% purchases + savings
The premise of this technique is extremely simple: just use a 0% purchase credit card (more information here, for those who are unsure about what deals are available) to pay for as much everyday spending as possible.
While the credit card balance builds up and the cardholder continues to make the credit card's minimum monthly payments, the cardholder puts all the cash that they're not spending - basically their current account balance which is normally used for these everyday expenses - into a high-yield savings account.
The credit card allows the stoozer to spend for 'free' - because they're not using the income held in their current account - and this income is used to generate extra money when placed in a savings account.
Still confused? Here's how it works step by step.
How stoozers use 0% purchase deals:
- Take out a 0% purchase credit card and open a high-interest savings account.
- As soon as the credit card arrives start to use it for all everyday spending.
- Move as much current account cash as possible - typically most of a monthly pay packet - straight into the savings account.
- Keep up this system - moving current account cash to savings, spending on the credit card and only making the minimum repayment - until the 0% period is nearly up.
- When the 0% interest period is about to expire use the savings cash to repay the credit card balance in full and keep the profits.
Making a profit:
To make money, cardholders need to continue with this trick for as long as possible.
Here's a simple example of how profit can be made.
Say a stoozer takes out £1,000 on a 24 month 0% purchases credit card and puts the money into a savings account with a fixed interest rate of 3% for two years.
Once the 24 months is up the stoozer would pay back the £1,000 but would have earned £60 (£30 each year) of profit.
The longer the stoozer has to earn interest before they pay back the credit card the better, so here are some of the longest introductory periods on purchases currently available:
For a wider selection of credit card deals see our main table here.
Bear in mind that, to make this technique profitable it's very, very important that the cardholder keeps up the minimum monthly repayments and is very careful not to exceed the credit limit.
Perhaps most important of all, the cardholder must not spend the savings balance because this will be used to repay the credit card balance in full before the 0% period ends.
Stooze 2: 0% money transfer + savings
Just as with the technique above the cardholder 'borrows' money - this time from a 0% money transfer credit card - and stores it in a high-yield savings account.
The main difference here is that with a 0% money transfer stooze, the cardholder places capital directly from a credit card into a savings account.
The cardholder does not spend or make any purchases on the credit card because a money transfer credit card usually has high interest rates for purchases.
So rather than using the credit card for everyday spending, this time it's the reverse. The current account balance is used as it normally would be for purchases and the credit card balance is used for savings.
When the 0% period ends the cardholder takes the cash out of the savings account, pays off the credit card and pockets the interest.
Here's how it works step by step:
How stoozers use 0% money transfers
- Take out a 0% money transfer credit card and open a high-interest savings account.
- Move the allotted credit limit to a current account then straight into a high-interest savings account. There's a money transfer fee to pay at this stage (likely added to the credit card balance).
- Keep up with the minimum monthly repayments on the credit card and collect any interest earned on the savings account.
- When the 0% period is about to expire, use the original savings cash from the 0% money transfer card to repay the credit card and keep the profits.
How to do it profitably:
As with the first stooze technique, a money transfer, which is also known as a super balance transfer, can be hard to get hold of.
Here are a couple of the current options available. Click through to the provider websites for specific application criteria:
For more options see our main table here.
Very importantly for this type of stooze, to make a profit the high interest savings account must offer a rate of interest that is higher than the balance transfer fee of the credit card.
For example, if there's a 4% fee for moving the balance then the savings account needs to offer more than 4% interest over the duration of the 0% period for the cardholder to make any money.
Here's an example to help make things clearer.
A stoozer transfers £1,000 from a 0% money transfer card with a 12 month interest free period to a savings account:
- Expenses: The credit card has a 4% transfer fee£40
- Income: The savings account has a 6% AER = £60
- Profit £60 from savings minus the £40 transfer fee = £20
A word of caution
The problem at the moment is that interest rates for savings accounts are at rock bottom, so it's hard to make a significant amount of cash.
Our guide here on how to get the best rate on savings is worth a look and could help.
Also, stoozers need to bear in mind that they need to be able to access the money placed in the savings account within a relatively short period of time - basically to pay off the credit card balance they owe.
So even if there is a great rate on a four year bond this won't work - simply because 0% periods on credit cards never last this long.
To complicate things further, it is also possible to move a new balance from a 0% balance transfer credit card to a money transfer credit card. This hugely increases the available money that can be used to earn interest.
However, the fees involved in transferring multiple balances can increase expenses substantially, meaning that it's difficult, if not impossible, to make a profit from this type of advanced credit card stoozing.
All in all, when cardholders are diligent, careful and plan well, it is still possible to make money from stoozing.
But low savings rates and the cost of balance transfer fees can add up to limit the profits that can be made.