Confused

philljp

Hi,

Im a bit confused about how ISAs work. I dont have much to save each month, but ive managed to save up about £600 in an ISA so far. I know that its best to use up your £3000 allowance each year, so is there a way for me to do this?

Ive been reading the articles on this site about lending money off credit cards to put into savings and making the interest etc.... So can I do a similar thing here?!

Hope you know what I mean, and help appriciated.

isasmurf

It's only best to use up your £3000 Cash ISA allowance if you CAN AFFORD to do so. Don't go borrowing money just for the sake of using up an allowance.

You could borrow of 0% credit cards and stick the money into an ISA, but as I say I wouldn't do this just to use up your ISA allowance. Also, as Martin says in his articles you must be extremely disciplined to do this. Failure to pay off the credit card at the end of the promotional period will wipe out any savings made.

philljp

ok. So cant i get a 0% credit card, and take out £2400, put it into the ISA, and on April 6th (after the tax year) get the interest in the ISA then just shift the money back into the credit card?

philljp

anyone?

isasmurf

You could, but it wouldn't be worth it. For a start if you applied for a CC now, you wouldn't get until the end of March.

I think you're misunderstanding how interest works. If an ISA pays interest annually, just because you have £3000 in the ISA on the day interest is paid doesn't mean you'll get a full years interest. Interest is calculated daily and put into a seperate pot you don't actually see until the annual date when it is paid into your account. So you will only get interest on the portion of the year the money was in the account.

For example if you put £3,000 into an ISA paying 5% on 29th March and interest was paid on the 5th April, you would get (very roughly)

3000*5%/365=41p/day
The period you have the money in (29th March -5th April)
41p*7 days=£2.87 interest paid

Hardly worth going through the hassle of opening a card and an ISA for £2,87 is it?

philljp

isasmurf wrote:

You could, but it wouldn't be worth it. For a start if you applied for a CC now, you wouldn't get until the end of March.

I think you're misunderstanding how interest works. If an ISA pays interest annually, just because you have £3000 in the ISA on the day interest is paid doesn't mean you'll get a full years interest. Interest is calculated daily and put into a seperate pot you don't actually see until the annual date when it is paid into your account. So you will only get interest on the portion of the year the money was in the account.

For example if you put £3,000 into an ISA paying 5% on 29th March and interest was paid on the 5th April, you would get (very roughly)

3000*5%/365=41p/day
The period you have the money in (29th March -5th April)
41p*7 days=£2.87 interest paid

Hardly worth going through the hassle of opening a card and an ISA for £2,87 is it?

Thanks for clearing that up!! much appriciated, Im only just starting to learn about savings so i dont know how it all works yet.

Am I right in thinking (the way Martin explains to make cash from credit cards) then is by apply for a credit card with 0% for say 9months. Take out £3000, put this into an ISA on April 6th. Then after 9 months transfer the balance to another 0% interest credit card. All the while paying off the minimum payment off the credit cards.

Is that the way your spose to do it?

Reaper

Yes, that's how to do it, although it doesn't matter whether it is the 6th April or not, just as long as you don't try to put in more than £3000 per year.

The golden rule is to make sure you always have the money available to pay off the credit card at any time in case you have to (don't spend it!). An ISA would do fine as they are usually instant access.

You will need an SBT card (one that allows you to balance transfer money with your bank account) such as Egg or Virgin.

If you have any more queries you can find in-depth explanations at https://www.stoozing.com (although the site seems to be down just now) and can always ask for help over on the credit card forum.

philljp

ok, thankyou!

lipidicman

The best piece of advice: Know what you are doing - stoozing can easily go wrong - just one slip-up penalty could wipe out most of your gains and seriously, if you are struggling to understand how savings interest works you are going to get yourself in trouble. You have to be the sort of person who can do the calculations, manage a spreadsheet, be disciplined with your money and read the terms and conditions. Money you make from stoozing isnt free when you consider the time and effort you put in - the gains should be called 'stoozers wages'

Its too much effort for me personally. I think 0% and SBT's days are numbered and I need to get a mortgage soon so I'm leaving it! Im concentrating on building up a good credit history. Maybe if I had known about it a few years back I would have taken advantage. For some it is great, but heed the warnings!

philljp

Yep, thanks. Im busying reading and learning at the moment.