Stoozing Query

Cotta

Hello All,

I have a quick question to ask in relation to Stoozing. I am completlely new to the concept, however I have read the MSE article on it and don't some general research.

My question is this, Martin Lewis advises to put all current spends onto a 0% interest credit card, however if such a card was taken out is it possible to use the full loan allowance to place straight into a saving's account?

tripled

Some card providers allow you to transfer to a bank account, but there is usually a balance transfer fee involved which offsets some or all of the gain.

Cotta

tripled wrote: »

Some card providers allow you to transfer to a bank account, but there is usually a balance transfer fee involved which offsets some or all of the gain.

How can such cards be used most effectively then?

MallyGirl

In these times of low interest they can't really.
Once the money is in a bank account it can be used to 'pay off' other debts at APRs above the transfer fee. Good idea as long as you can pay off before the 0% ends.
Many years ago you could get zero fee 0% money transfer cards - I had a mortgage rate of 14% back then and it was well worth that money offsetting the mortgage for a bit.

jamesd

Depending on your local authority you may be able to pay your Council Tax with a credit card without charge. Same for some gas and electricity suppliers who allow extra payments that way.

zacchaeus_2

You're not going to make staggering returns on stoozing, for the reaon MallyGirl has referred to: low savings interest rates available at the moment.

In particular, while you can turn a profit by shifting existing credit card balances to the 0% card, the cards that allow you to transfer funds to a bank account generally have much higher fees that mean you won't turn a profit. (Deterring stoozers is one of the key reasons the banks set the fees so high for this sort of card, I suspect.)

However, there are still ways/reasons to make stoozing work:

• Slow stooze: use 0% purchase cards for all your spending. Each month, transfer into a savings account an amount equal to the full amount you've spent on the card. (Regular saver accounts are good to boost your return here.)
• Once the 0% period runs out on your purchase card(s), shift the debt onto a 0% balance transfer card.
• Repeat. Over time, you can build up quite a big balance through this technique. Because of the low savings rates, you need a big CC (and equal savings) balance to make stoozing pay, so you need to be patient doing it this way.

• A variation on this slow stooze, which I've been doing recently, is to do the spending on cashback cards, and then do a balance transfer at the end of each month onto the 0% BT card. At current interest rates, the cashback is worth nearly a year in a savings account, and is more than the BT fee. (I am fortunate in that I have a couple of decent cashback credit cards that are fee-free, because I took them out before a lot of the issuers started adding monthly fees to new cashback cards.)
• One thing to watch out for with this technique is that you stop before you get too far into your 0% balance transfer card's interest free period. The obvious reason is that some of them only offer 0% on transfers done in the first (e.g.) 3 months. Even if that's not the case, you still have to watch whether it's the best course of action, because your return goes down the less time you have the stoozed funds sitting in your savings account.

• Offset mortgages can be a good one, though I've never done it myself. If you're a home-owner, rather than put the stoozed funds into a normal savings account (or an ISA etc), you set them against an offset mortgage. That way, rather than earning pitiful savings interest, your return is the saving you're making on the (higher) mortgage interest.
• The problem with this is that offset mortgages often have a higher interest rate than normal mortgages, so you need to watch out that the amount you're paying on the remaining mortgage borrowing isn't still more than you'd be paying on a larger but lower-rate mortgage.
• Having said that, I've heard of people reducing their mortgage interest to zero using this with 6-figure stoozed sums...

• The other good thing about stoozing, and the reason I'm doing it now, is it can help with cashflow during a lean period. (Though be careful, as here be dragons!) We normally live comfortably within our means, but my wife is currently on maternity leave and we knew there was a risk that we'd be temporarily living beyond our means by the end of her leave. We have enough cash in ISAs to mean that this would never be a serious problem, but we didn't want to break into them if we could help it. Solution: stoozing! We make a modest but positive profit on the interest but our ISAs remain intact to keep our longer-term goals on track.

• Finally, one bugbear of mine, which is admittedly off-topic but which I mention any time I'm off on one about stoozing, is beware the size of the minimum payments. When comparing two cards, there will often be one with lower BT fees and/or a longer interest-free period that actually gives a lower stoozing return than one with a higher fee (and/or shorter interest/free period) but lower monthly minimum payment. This often happens with the Barclaycard deals and the reason for it is that the effective interest you're paying for the borrowing (i.e. the BT fee) is calculated at the start of the stooze by reference to the total amount borrowed, whereas the interest return on the savings is calculated by reference to the (diminishing) balance in the savings account. If the balance (both on the card and in the savings) drops more quickly, the reduction in savings interest earned can outweigh the saving from paying a lower BT fee.

Good luck!

Fruit_and_Nut_Case

Nice post, zacchaeus. Thanks for taking the time :T

Cotta

Good information everyone, thanks to you all.

Stoozing is starting to make more sense now. I have a mortgage that allows me to make 10% overpayments, I could use cash from Stoozing towards this.

What are the repayments with such interest free cards like, I assume a DD would be the way to go here?

bsms1147

Cotta wrote: »

What are the repayments with such interest free cards like, I assume a DD would be the way to go here?

See here: http://www.moneysavingexpert.com/credit-cards/best-0-credit-cards
Many of them quote; 'Greater of 1% of balance plus interest or £5', but some might be higher (eg Minimum repayment: Greater of 1% of balance plus interest or £25)

Stoozing is starting to make more sense now. I have a mortgage that allows me to make 10% overpayments, I could use cash from Stoozing towards this.

As long as you've run the numbers and you have the capability to pay it back regardless of circumstances you find yourself in, then it can make sense.

shaz77_2

bsms1147 wrote: »

See here: http://www.moneysavingexpert.com/credit-cards/best-0-credit-cards
Many of them quote; 'Greater of 1% of balance plus interest or £5', but some might be higher (eg Minimum repayment: Greater of 1% of balance plus interest or £25)

Sorry for intruding but I thought these cards were zero interest, what you've just said seems to indicate there are charges/interest?

bsms1147

shaz77 wrote: »

Sorry for intruding but I thought these cards were zero interest, what you've just said seems to indicate there are charges/interest?

They do in effect 'charge' interest it's just for the first x number of months, the interest rate they charge is 0%. After this the rate you pay will have been clearly outlined at the start of the agreement.

The minimum payment terms remain the same throughout.

For example, taking 'Greater of 1% of balance plus interest or £5': During the initial term the interest rate is 0% so the interest is £0 - so long as you don't do anything that causes that 0% rate to be withdrawn. You would simply pay 1% of the balance each month so long as the balance is over £500, otherwise the payment is £5 a month.