Stoozing and inflation question?

goldnet

Maybe my maths is awry but would appreciate expert guidance! I have 7k on 0% credit card offers (which it has been for several years, transferring as each offer comes to an end). The cash plus a bit more in savings is in an ISA earning around 500-600pa in total. Inflation running at a real 4-5% pa. I don't have use of the cash for the year plus I am losing the use of the 1200 pa I need for monthly repayments. The 1200 averages 600 over the year and the money tied up in the ISA erodes by about the same (being equivalent to the amount of the interest I earn) so my net profit is around zero. Aren't I better off saving the 1200 of monthly repayments by paying off the card and improving my cashflow and also, if I want to, spending the remainder of the cash to realise its value pre-inflation erosion?

Milarky

goldnet,

You're saying (I believe) that you have no net savings - the balance in the ISA matching the stoozed sum. And the interest paid (as a 'reward') on this ISA just matches (or only slightly exceeds) the 'real' rate of inflation on it.

But what you seemed to have overlooked is that the money in your ISA is the bank's - in reality - so the impact of inflation falls on them (not you.) You are being 'compensated' for their inflation (on this particular sum.) So you are realising a profit on the all this stoozed money.

goldnet

Milarky wrote: »

goldnet,

You're saying (I believe) that you have no net savings - the balance in the ISA matching the stoozed sum. And the interest paid (as a 'reward') on this ISA just matches (or only slightly exceeds) the 'real' rate of inflation on it.

But what you seemed to have overlooked is that the money in your ISA is the bank's - in reality - so the impact of inflation falls on them (not you.) You are being 'compensated' for their inflation (on this particular sum.) So you are realising a profit on the all this stoozed money.

But if I were to withdraw the money and spend it now, it would be worth £600 more than it will be worth (to me) in a year's time because of the effect of inflation. In a year's time, I will receive £600 interest, which will compensate me for the inflation-caused reduction in real value to leave me in the same position in terms of spending power. In addition, I have the loss of use of a further £600, being the average amount over the year needed to make the minimum repayments on the stoozed amount. Where's the gain for me?

Lomion

goldnet wrote: »

But if I were to withdraw the money and spend it now

How would you pay the credit card off?

goldnet

Lomion wrote: »

How would you pay the credit card off?

Withdraw the sum from my cash ISA - where I think its value is depreciating at around 5% a year, roughly the same as it is appreciating in interest...

Lomion

Why not just withdraw your money and spend it on something nice for yourself then? The whole point is that this is NOT your money that you are saving, it belongs to the Credit Card company.


If you have 7k of credit card money saved and 7k of your own money, spend your own 7k. If you really want to...spend the interest from the 7k that's not yours as well