Stoozing: making money with a credit card
The 0% deal is one of the most useful and most used credit card rewards around.
0% offers are best known for giving cardholders the opportunity to borrow for free or repay credit cards, high-interest overdrafts or loans for less but they can also be used to make money using crafty techniques known as stoozing.
What is stoozing?
Simply put, stoozing is a way to turn a profit on borrowed money.
We've all heard the phrase 'you need to have money to make money'.
Stoozers agree but with this addendum: 'you don't need to have it forever'.
Of course, there's some small print between borrowing at 0% and pocketing extra cash.
First, there's the fact that this money-making trick requires successful applications to some of the UK's top credit card deals.
That means stoozers need an excellent credit rating to get going. To see what that phrase actually means click through here, to our credit check and repair guide.
Second, stoozing requires discipline and faultless credit card behaviour. For example, while carrying out this trick cardholders cannot:
- Use the card to withdraw cash or for any other cash transaction (e.g. checkout 'cash back', foreign currency, travellers cheques, shopping vouchers, gambling).
- Use the card for purchases without extreme caution.
- Miss any minimum monthly repayments or exceed the credit limit.
Anyone who won't be able to stick to those basic rules will never be able to make money through stoozing.
For those that can, here's how it's done.
Pay attention class: this is just a little 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 unsure about these deals) to pay for as much 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 - i.e. their current account balance which is usually used for everyday expenses - into a high-yield savings account.
In other words, as a credit cardholder, the stoozer is spending for 'free'.
As a saver, however, they're raking in interest.
Still confused? Here's how it works step by step.
How stoozers use purchases deals:
- Take out a 0% purchases 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 to savings.
- Keep up this system - moving cash to savings, spending on the credit card and only making the minimum repayment - until the 0% period is nearly up.
- When the 0% 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 are some of the longest introductory periods on purchases currently available:
For a wider selection of credit card deals see our main table here.
Unfortunately, though, the longest 0% purchases deals often require excellent credit ratings.
It's worth noting that collecting credit card rewards during this technique can also boost profits, although the 0% deal remains the most important card facility.
In addition, 0% purchase credit cards are no good for using for cash transactions like ATM withdrawals, checkout 'cash back', foreign currency, shopping vouchers, gambling (including buying food and drink at a casino) etc.
Paying to make these transactions eats straight into profits.
Finally, to make this technique profitable it's very, very important that the cardholder keeps up with minimum monthly repayments, is very careful not to exceed the credit limit and doesn't spend the savings amount so the balance can be repaid in full before the 0% period ends.
Stooze 2: 0% money transfer + savings
Just as above, with this technique the cardholder 'borrows' money from a 0% money transfer credit card and stores it in a high-yield savings account.
When the 0% balance offer is up, they simply take the cash out of the savings account, pay off the credit card and pocket the interest.
The downside is that making a mistake - for instance, withdrawing money from the ATM with the credit card which is expensive and not covered by 0% purchase or 0% balance transfers - could easily capsize the whole technique and make it worthless.
With that in mind, then, here's 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 on to high-interest savings. There's a fee to pay at this stage (likely be added to the credit card balance).
- Keep up with the minimum monthly repayments on the credit card and collect the interest earned on the savings account.
- When the 0% period is about to expire, use the savings cash to repay the credit card and keep the profits.
How to do it profitably:
As with the deal above, a money transfer, 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.
To make a profit from this form of stoozing, the high interest savings account must offer a rate of interest higher than the balance transfer fee of the credit card.
For example, if there's a 4% fee for moving the balance, the savings account needs to offer more than 4% interest over the duration of the 0% period.
Here are the sums (approximately!) for transferring and saving £1,000 for 12 months:
- Income: 6% AER on savings = £60
- Expenses: 4% transfer fee = £40
- PROFIT: £60 - £40 = £20
The problem at the moment is that there's a dearth of savings accounts with high enough interest rates 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 but it's a tough market and stoozers need to bear in mind that they'll need to be able to access all the cash quickly to repay the card: great rate or not a four year bond isn't going to work out.
It used to be possible to move another balance from a 0% balance transfer credit card to a super balance transfer credit card, hugely increasing the money available to earn interest on but also increasing expenses substantially.
Now the extra costs mean that's difficult, if not impossible, to make a profit from these types of credit card offers.