New to stoozing

milliemonster

Right, I have never done this stoozing thing before but we have recently got an Egg card on 0% BT for 14 months, primarily for accelerating paying our debts off, we have BT more of less up to the limit to clear our highest APR C Card and the first repayment to Egg starts on 2nd Nov, it will be about £68.

I am thinking of then setting up an ISA for a year to stooze £50 a month out of this, to then pay off as a lump sum at the end of the year (inc the interest earned) is this worthwhile doing? or will I get charged a fee every month for doing this which will negate any interest I will earn on what goes into the ISA? I am a complete novice to stoozing so some expert advice on whether this is a good idea or not would be helpful

thanks!

moominyak

Hi milliemonster,

I'm a little confused, so just want to make sure I'm understanding you correctly.

You're going to transfer all of your interest-charged credit cards to the Egg 0% card and close all the other card accounts.

You're then going to repay the Egg card at about £68 per month, and put £50 into an ISA, so your total c/card "payments" will be £118 per month.

And then at then end of the Egg 0% period you'll use the ISA to pay off the outstanding balance?

That sounds fine imho, but are you confident that you'll have enough to pay off the balance (sounds like you'll have about £600 in the ISA)?

If your monthly min payment to Egg is about £68, at 2.5% of the balance your debt must be approx. £2700? (I don't know the Egg's min. % off the top of my head so I'm guessing).

So if you pay off 12 x £68 = £816 plus you'll have 12 x £50 in the ISA = £600, you'll still be short by about £1300.

Or have I got the wrong end of the stick entirely?

JimmyTheWig

I don't think you've quite got the wrong end of the stick, but I think you've missed that maybe they can't pay off the debt in 14 months.

OP, I presume from what you have said is that you have £118 monthly to go towards debt repayment. At the end of the 14 months you will either pay Egg's standard rate or switch the balance elsewhere (rate tart).

Option 1.
You pay £118 each month to Egg.

Option 2.
You pay £68 each month to Egg and £50 each month to your cash ISA.

This is, in theory, a good idea, and is very similar to stoozing. The principle is why pay more than you need to on a 0% loan.
Firstly, don't do this if it means using up ISA allowance that you would otherwise use. But given that you've got this debt I presume that you don't currently have cash ISAs.
To answer your question, there are no charges for putting money into a cash ISA. They are just like a savings account, just in a tax-free wrapper.
Thirdly, you need to consider what would happen if the bank you have your ISA with goes belly up and your 0% deal ends before the FSCS pays out. For this reason I would suggest moving the money from your cash ISA to an Egg savings account. Fair enough you'd pay tax on this, but at least you'd be safe.

Fourthly, then, how much is it worth to you?
Your deal is for 14 months, but you have to allow time for the transfers to happen, etc, so I will work on the basis of 13 months.
I will assume interest rates of 6% and that you pay basic rate income tax.
£50 a month for the first 10 months at 6% tax free will earn you about £12.50, giving you a balance of £512.50.
then move this into a tax-attracting Egg savings account and continue to add £50 a month for three months. That will earn you another £8.81, leaving you £7.05 after tax and a balance of £669.55.
So by doing all of this you will be £19.55 better off than if you just paid the £118 to Egg each month.

Up to you whether you think it is worth it or not.