Stoozing: how to make money with a credit card
You might have heard of credit card stoozing, but what exactly is it? Could you do it? And is stoozing worth it? Find out how stoozing works, its pros and cons, and risks, in our guide.
You might have heard of credit card stoozing, but what exactly is it? Could you do it? And is stoozing worth it? Find out how stoozing works, its pros and cons, and risks, in our guide.
IMPORTANT RISK WARNING: Before we go any further, we need to be clear that stoozing can be beneficial for some but it is very risky if you’re not uber disciplined, so think carefully before you go ahead as you risk a debt nightmare if you get it wrong.
What is stoozing?
Stoozing means using money borrowed on a credit card to earn interest on savings.
When you stooze, you use a 0% credit card for purchases for your everyday spending (as it’s not an excuse to over-spend) and put roughly the equivalent amount from your current account into a high-interest savings account. You make minimum monthly payments on the credit card and then pay it off before the 0% period ends from your savings, leaving you with the interest you’ve earned on your money in the interim.
Did you know…?The term ‘stoozing’ can be traced back to online forums. Depending who you ask, it’s named after a user with the handle ‘Stooze’ who came up with the idea. Or it’s a mix of the words ‘student’ and ‘booze’, because students used the technique as a side hustle to supplement their drinking habits. Truth is, no-one knows for sure. |
Who can stooze?
In theory, anyone can but be wary of only doing it if you’re 100% certain of making the minimum repayments on your credit card and clearing your debt within the 0% period. If you don’t, you’ll be hit with interest charges, probably undoing all the good work of having your money in a savings account.
What are the key risks of stoozing?
Here’s what to think about:
- Any late payments or breaching your limit could mean you lose the 0% benefit.
- If you don’t pay off the debt after the 0% period ends, you risk paying high interest rates.
- 0% credit cards can be useful if used well, but by their nature can be risky for those who often overspend given they can be seen as easy money. They’re not easy money, and debt can be dangerous.
- Late payments can also damage your credit score and your chances of getting credit in the future.
- You also need to have a good credit history to get the longest 0% credit card deals to make the most of it.
- There’s no guarantee you’ll get the credit limit to match your spending, so you may need to settle for something less than hoped for.
- If you’ve an important credit application coming up, such as a mortgage, then getting a card just for stoozing may have a negative impact.
Are you sure you want to stooze and interested in taking out a 0% purchase credit card? See which cards you might be eligible for without impacting your credit score.
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How to stooze
If you’re comfortable with the risks, here’s how to potentially make money with a credit card.
- Apply for a 0% purchases credit card with the longest 0% interest period.
- If your application is approved, set up a direct debit to cover the minimum repayments.
- Make a note in your diary when the 0% period ends, and perhaps an alert a month or two before, to make sure the debt is paid off on time.
- Find a savings account that offers a high rate of interest. Be careful not to lock away your money for longer than you can afford or longer than the interest-free period on the card.
- Use the card for everyday spending, such as food, travel and nights out. Don’t see a 0% card as an excuse to overspend.
- Pay roughly the equivalent amount from your current account into the savings account.
- Towards the end of your stoozing credit card’s interest-free period, withdraw the money you’ve been saving to pay off the credit card debt.
- Alternatively, rather than paying off the debt, you could move it to a 0% balance transfer credit card. This would mean you could keep your money in the savings account to earn even more interest. Bear in mind, though, that there’s usually a fee for transferring a balance of up to 4% of the amount you’re transferring. Plus, you need to stay disciplined for longer.
How much can you make from stoozing?
Everyone’s circumstances are different, so it depends how much you spend and what products you have. For example, if you put £500 of spending per month onto a 0% card and saved that equivalent in a 4% interest savings account, you could make over £200 in interest over a year.
However, a lot depends on getting a big enough credit limit, how savings rates move (unless you go for a fixed rate), your tax status and more, so don’t see that as a sure-fire bet.
Advantages of stoozing
- Earn money on your borrowing: stoozing allows you to use the money you borrow interest-free to earn interest.
- Potential for profit: if the interest earned on the savings is more than any fees or charges for the credit card, you can make a profit.
- Flexibility: you can use the borrowed money for whatever you like, though it’s best to use it for everyday spending, as we’ve said already.
- Improved credit score: you could improve your credit rating if you use your card responsibly.
Disadvantages of stoozing
- Risk of interest charges: if you don’t pay off the credit card balance before the interest-free period ends, you’ll be charged interest, potentially wiping out any profits.
- Fees and charges: some credit cards may have annual fees, transaction fees, or other charges that can reduce the potential benefits of stoozing.
- Impact on credit score: late payments can negatively impact your credit score. High outstanding debts might also impact your ability to get other credit. If you’re likely to apply for a mortgage or to remortgage in the near future, it’s a good idea to hold off stoozing until that’s sorted.
- Complexity: stoozing can get complicated. You need to keep track of your spending and saving to make sure they match and you don’t end up with a deficit.
- Financial risk: if you can’t pay off the credit card balance at the end of the interest-free period, you’ll be hit with high interest charges.
Alternatives to stoozing to keep it simples
If you think it’s not the best choice for you, you might want to consider some alternatives to stoozing by simply getting good value products, such as:
- Savings accounts: saving regularly into an account with a decent rate of interest can help you build your nest egg.
- Cashback credit cards: they typically give a percentage of what you spend back as cashback. It’s best to repay them in full each month to avoid interest, which can offset any gain.
- Rewards credit cards: offer perks such as points for shopping or air miles. Like cashback cards, always pay them in full each month.
- ISAs: any interest or capital gains earned on your savings or investments are protected from tax.
- Lifetime ISA: a government-backed ISA designed to help certain first-time buyers save for a property or retirement.
Frequently asked questions
Is stoozing legal?
Yes, stoozing is perfectly legal. It’s wise to keep up with your 0% credit card’s terms and conditions though, as they may change during the period you have the card. For example, some credit card firms change people’s minimum payments every now and then, so keep on top of things like that.
Does stoozing affect my credit score?
Stoozing can impact your credit score – positively or negatively – depending on how you manage your card.
Making repayments on time and managing debt responsibly could help show you’re a responsible borrower and boost your credit score. On the other hand, missing payments and going over your limit is likely to damage it.
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The Editorial Team - Compare the Market
Experts in personal finance, insurance and utilities
Compare the Market’s Editorial Team is made up of industry experts with decades of experience in personal finance, insurance and utilities. Each of our authors has an area of expertise, where they can share their extensive experience to help you get a better deal, by finding the right product and saving money.