Stoozing: Free Cash or Debt Trap?

Stoozing is a way of using a 0% interest credit card to allow you to maximise the money you can make on your savings. But there are risks involved with this money hack, so is it worth trying?

Rhiannon Philps Last updated on 23 November 2022.
Fact Checked
Stoozing: Free Cash or Debt Trap?

Interest rates on savings accounts are higher than we have seen in years, with some top accounts currently offering over 3% for easy-access and over 4% for fixed-rate savings accounts. As a result, people have been talking about a so-called money hack called stoozing.

Stoozing is a way of using 0% interest credit cards and high-interest savings accounts to maximise the amount of interest you earn on your money.

The theory is that you use the 0% interest card for all your spending, putting the cash you otherwise would have spent into a savings account with a high interest rate. This means as much of your money as possible is earning interest, and you can then use your savings to pay off the card before the 0% rate ends.

As the current cost of living squeezes our incomes, we are all looking for ways to get more from our money. But is stoozing the answer?

More for your money

In the best cases, stoozing could allow you to earn hundreds of pounds by putting your money into high-interest savings accounts. However, the reality is that the majority of people are unlikely to be able to make a sizeable profit.

Andrew Hagger, personal finance expert at MoneyComms, says: “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.”

You will typically need to have a good credit score to qualify for credit cards with the longest interest-free periods (currently around 24 months) and the highest credit limits, and you need to be able to put away hundreds of pounds a month into savings to see a significant return.

To get the best interest rates, it’s likely that you would need to lock away your money in a savings account for a set period, which means that you won’t be able to withdraw any money during that time.

“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 explains. “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.”

Crucially, wherever you save your money, you need to be able to pay off your credit card before the 0% rate ends to avoid paying any interest.

You’ll also need to make the minimum repayments each month as missed payments can affect your credit score and the card provider could cancel your 0% interest deal.

Worth the effort?

While stoozing has its perks, Helen Morrissey, senior pensions and retirement analyst at Hargreaves Lansdown, warns that it may not be suitable for everyone.

“[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.”

But even if you do everything right, building up significant debt on your credit card could still have a negative impact.

You may know that your credit card debt is under control and that you have the money in savings to pay it off, but anyone checking your credit file will only see the size of the debt.

Large amounts of debt can be a concern to mortgage lenders, for example, so you need to be mindful of this if you are planning to make an important application in the near future.

A key point to remember if you decide to become a “stoozer”, is that the 0% credit card isn’t free money. Stoozing will only work if you stick to your normal spending habits and if you pay the equivalent amount of money you spend on the card into your savings account.

Hagger comments that you need to be disciplined about not touching the money in your savings until it’s time to pay off your card, because “if you start dipping into your savings balance, your interest reward will be lower and you may not be able to repay your card balance in time.”

Ultimately, stoozing is only likely to be worthwhile if you are financially stable, debt-free, and in a position to put a significant sum of money into savings.

For some people, the risk of building up debt on a credit card outweighs the money they could make from stoozing. This is because while interest rates on savings accounts are high, the return you could make is still relatively small. Stoozing isn’t a get-rich-quick hack for everyone, but it is a way that some people could pocket some extra money on their savings.

Image source: Getty Images

About the author:

Rhiannon is a financial writer for NerdWallet, with a particular interest in personal finance and insurance guides for consumers. Read more

If you have any feedback on this article please contact us at [email protected]