What is stoozing?
With clever use of a 0% credit card, you could make a bit of extra cash.
What is stoozing?
Stoozing is a method of making money using a 0% interest credit card.
You simply use the 0% card for all of your everyday spending.
Meanwhile, you put the money you’d normally use for your daily spends into a high interest savings account, leaving it to build up.
When the 0% deal on your credit card ends, you either pay off the balance using the money from the savings account, or transfer it to a new 0% card.
You’ll be left with the interest earned on the money you put into the savings account as profit.
Who is stoozing right for?
While it can be a way of making a small amount of ‘free’ cash, it only makes financial sense for people who don’t currently have any credit card debt - and those who have a credit history good enough to qualify for 0% deals.
You’ll also need to be really organised - and self-disciplined. Forgetting to pay off the balance on the 0% card before the deal ends will leave you with soaring interest payments.
Overspending - going over the card’s agreed limit - could mean you lose the 0% benefit and be penalised with a charge which could quickly cancel out any interest you might have earned on your savings.
If you already owe money on a card, then you’d be better off focusing on using credit available to you - like a 0% balance transfer card - to reduce your debt and the interest you’re paying on it.
Stoozing only works if you don’t dip into the money in the interest-earning account. So it’s best-suited to people who have pretty comfortable financial circumstances with good salaries and savings they can use for emergency purchases.
Why do people use credit cards to make money?
Stoozing used to be an easy way of making ‘free cash’ if you were money-savvy and organised.
It was popular and profitable from 2000 until the credit-crunch in 2008, when The Bank of England base rate veered between 4 to 6%, with savings accounts offering generous rates. Card lenders were also more willing to offer high spending limits and lengthy interest-free promo periods on 0% cards.
Today, interest rates on savings are amongst the lowest the UK has ever seen and lending criteria is stricter too. The Bank of England base rate is sitting at just 0.25% at the moment so it’s difficult to make much money from stoozing these days.
But it’s still possible to make small profits, if you don’t mind putting in what might seem a lot of effort for little reward.
How to stooze
Apply for a 0% credit card
Look for a card with the longest possible 0% interest deal on new purchases. These can vary from three to 22 months.
Use the card for all outgoings
Spend on the card as you’d usually spend with your regular debit card, credit card or cash - for things like your shopping and meals out.
Move the same amount of money you spend on the 0% card from your current account into a savings account.
Look for a current or savings account with the highest interest rate - but make sure it’s an easy access account. You’ll need to be able to access the money quickly to pay off the balance on the 0% card when the time comes.
You could also look at paying the money into a top-cash ISA or into a flexible or offset mortgage if your mortgage rate is higher than what you can get in a savings account.
Set up a direct debit to pay back the minimum amount every month.
If you miss a payment, you could lose the 0% deal.
Make a note in your diary of when the 0% interest period ends
Don’t be caught out and miss the deadline or you could be hit with interest rates of around 21.9%.
Pay off the debt or do a balance transfer
When the time comes you need to pay off the debt using the money from your savings account.
Alternatively, you could look at shifting that debt onto another 0% balance transfer credit card, allowing you to keep the money in your savings account, accruing interest.
There may be a fee to do the balance transfer, so look for cards which offer the lowest transfer fees.
If you move the debt to a card that offers 0% on balance transfers and new spending, as long as the card offers a higher credit limit than the first, you can keep on adding to your savings as you spend on the new card.
What are the benefits and drawbacks of using a credit card to make money?
It can be a fairly easy, risk-free way to make a little extra money - but only if you’re extremely organised, never fall behind on minimum repayments or go over the card’s limit and are disciplined about your spending. You’ll also need to be sure you pay off the card’s balance before the 0% period ends.
- It can take a lot of research to find the best 0% deals on credit cards plus the most competitive easy-access savings accounts. Some accounts offering the highest interest rates may require minimum monthly deposits.
- If you miss the minimum monthly payment on the credit card, your 0% interest offer could be withdrawn.
- Failing to pay off the balance of the card at the end of the 0% interest period can see you hit with very high interest rates.
- If you choose to do a balance transfer onto another card at the end of the card’s 0% interest period, make sure the transfer fee doesn’t amount to more than the interest you’ve accrued.
Will stoozing affect your credit score?
Taking out any form of credit can lower your score slightly. Just try to avoid applying for too many cards at one time as this can have a bigger negative impact.
High debts, even on a 0% card, can also have an effect on your credit score.
What to watch out for when it comes to stoozing?
The main thing to be mindful of is that you repay the balance on your card before the 0% period ends. If you forget - or if you’ve spent the money in your savings account so don’t have enough funds to pay off the card - you’ll be hit with high interest rates.
If you think there’s a chance you may forget to keep tabs on all that stoozing entails - or if you simply don’t fancy the hassle of transferring money into a different account every time you spend on the 0% card - then you could look at using a cashback credit card as an alternative way to make a little extra cash instead.
Cashback credit cards pay you back a percentage of what you spend on them.