Rhiannon Philps
Ceri Roberts
Adam French
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We all want to make our money stretch as far as possible, and stoozing is a popular ‘money hack’ that can help maximise the amount of interest you can earn.
In a nutshell, stoozing involves borrowing money with a 0% credit card and then depositing it in a high-interest savings account. Provided that you pay off the credit card debt before the interest-free period ends, you should make a profit, because you’ll keep any interest you earn.
Although interest rates on savings aren’t quite as high as they were, the best rates are still higher than inflation, with many providers offering 4-5% even for easy-access accounts. Admittedly, you’re unlikely to make a sizable profit, but if you deposited £5000 for a year, you could stand to make around £250 in interest – and the more money you can deposit, and the longer the stooze, the more interest you can earn.
How to stooze
There are a couple of different ways to make stoozing work for you, but both are dependent on being accepted for a 0% credit card with a long interest-free period – at the time of writing, the best deals offer up to 21 months.
- Option 1: Take out a 0% interest credit card and use it to cover all your regular household costs, such as supermarket shops, fuel and general expenses. When you spend on your card, transfer an equivalent amount from your bank account into a high-interest savings account and leave it there until it’s time to repay your credit card balance. You won’t pay any fees, with this option, but you will need to remember to regularly transfer money into your savings account.
- Option 2: Get a 0% money transfer credit card that allows you to transfer money directly into your bank account. You can then move this into a high-interest savings account. At the time of writing, the best deals offer an interest-free period of up to 29 months, although you will have to pay a transfer fee of 3-4%, so make sure you’re in a position to earn enough interest to cover this and make the stooze worthwhile.
Whichever option you choose, you will need to pay the minimum monthly amount to your credit card every month in order to protect your credit rating and ensure that your 0% interest deal isn’t cancelled. You can set up a direct debit to do this. In both cases, you can then use your savings to pay off the credit card balance before the 0% period ends. Alternatively, you can move the debt to another 0% card and continue the stooze.
Crucially, you will need to have a good credit score to qualify for these 0% cards, and you will need a high credit limit – unless you can put away a large sum of money you won’t see a significant return.
How much money can you make from stoozing?
In a best case scenario, you could earn hundreds of pounds from stoozing, simply by putting your money into a high-interest savings account. However, the reality is that most people are unlikely to make a sizeable profit
Andrew Hagger, personal finance expert at MoneyComms, said: “You can make some money doing this, but it’s not a life-changing sum and some people will feel the rewards don’t justify the time involved. It’s most suitable for people who are highly organised and have spare time on their hands to make the most of stoozing.”
To get the best interest rates, you will likely need to lock away your money in a savings account for a set time, which means that you may not be able to withdraw any money in an emergency, or if you need to clear your credit card bill earlier than planned. Don’t forget that you need to be able to pay off your credit card before the 0% rate ends to avoid paying interest.
“Easy access pays a lower rate, but that’s because you have the flexibility to be able to access your cash whenever you need it,” Hagger explained. “Locking your cash away will see you earn a higher rate, as long as you are comfortable that you won’t be able to access it early in case of a financial emergency.”
To get an idea of how much money you could make give an online stoozing calculator a try. When you input basic details including the interest rate of your savings account, the interest-free term, transfer fees and your minimum payments, it should give you an idea of the potential return. There are a few different ones available, including:
Nerdwallet can’t guarantee the accuracy of these third-party calculators, so always do your own calculations before making a decision.
Is stoozing worth the effort?
Michael Taylor, professional trader and founder of Shifting Shares, knows from personal experience that it’s possible to make money from stoozing – but it’s really only worthwhile if you can borrow a large amount and the interest and fees stack up in your favour.
He told Nerdwallet: “I can see why people do it. If you can get 5% interest from the bank on your savings, even if you pay a 3% transfer fee, you’re looking at a 2% profit. So if you can borrow £20,000 at 0% interest, making 2% profit on that isn’t bad for what might just be a few hours’ work.”
Instead of depositing the money in a savings account, Taylor invested the money into the stock market – which is a high-risk strategy. He said: “I did this twice, in 2020 and 2021. I borrowed £10,000 each time and paid off the credit cards before the teaser rate expired. It’s impossible to say how much I made as the money was amalgamated into my trading accounts, but I definitely saw a return of more than 20% on the amount I borrowed.”
Even though stoozing worked for him, Taylor urges caution. “This approach is not something that I would recommend. If you’ve lost money in that time – which you absolutely can when investing – then you’ve got to pay high interest when the 0% rate expires.”
What are the risks of stoozing?
While stoozing may seem like an easy way to make some money, Helen Morrissey, Head of Retirement Analysis at Hargreaves Lansdown, warns that it isn’t suitable for everyone. Morrissey said: “[Stoozing] should only be attempted by the most organised people as missing making minimum payments or breaching your credit limit could result in your deal being suspended and your credit score could be negatively impacted. Any mortgage or credit applications could also be affected if you make mistakes.”
There’s also the possibility that your circumstances could change and affect your ability to clear your debt.
Stephanie Buckley, Director at The Insolvency Company, recalls a scenario when stoozing backfired on one of their clients. She told Nerdwallet: “Our client had been unwell and not earning as much as she was accustomed to, so she was exploring ways to make a little extra money. She received an offer for 0% interest for the next 24 months and thought, “Why not?” She already had a savings account open so she thought it would be simple to transfer the money and earn a little extra interest.
“However, things went wrong when her health took a turn for the worse. Although she had been managing her money well month-to-month, one of her clients didn’t pay her on time, and everything started to unravel. As a result, the monthly direct debit for the credit card minimum payment bounced. This meant that her 0% credit card wasn’t paid that month, and the offer was withdrawn. She also had to wait to access her savings, so she ended up paying high interest on the credit card while waiting for the bank to release her savings. While she was able to sort out the mess… she was left out of pocket. The amount she would have made was so low that, in hindsight, she realised the risk was not worth it.”
Things to consider before stoozing
Even if you’re confident about your ability to meet all the minimum payments and clear your debt before the 0% offer expires, there are a few things to bear in mind before your first stooze.
- Building up significant debt on your credit card can harm your credit score. You may know that your credit card debt is under control and that you have the money in savings to pay it off, but lenders checking your credit file will only see the size of the debt.
- It could impact your mortgage application. Large amounts of debt can be a concern to mortgage lenders, so you need to be mindful of this if you are planning to make an application in the near future.
- It will only work if you stick to your usual spending habits. The 0% credit card isn’t free money. Can you resist the temptation to splash out just because you can access extra cash?
- Don’t dip into your savings! You need to be disciplined about not touching the money in your savings account until it’s time to pay off your card otherwise you stand to earn less interest and may not be able to repay your card balance in time.
- Are you financially stable, largely debt-free, and in a position to put a significant sum of money into savings? If so, you may be well placed to try stoozing. If not, it probably is not for you.
Alternatives to stoozing
If you want to make your money work harder, but don’t think that stoozing is right for you, here are some alternatives that you could try.
- Reward credit cards: There are several different types of reward credit cards which offer cashback, air miles or points which can be exchanged for vouchers. These are only worthwhile if you can pay off your balance in full each month so you don’t have to pay interest. But they can be a convenient way to earn rewards on your everyday spending.
- Balance transfers: Simply transferring your debt to a different provider could save you a substantial amount in interest if you’re eligible for a low or interest-free offer.
- Bank account switching: Some bank accounts offer up to £200 to new customers, along with other perks such as a 0% overdraft, cashback, free subscriptions and shopping vouchers. You will usually need to pay in a minimum amount each month and pass a credit check. The cash reward is often paid within a month or two.
Image source: Getty Images
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