What's the point?

frivolous_fay

I just received a link to this article on Motley Fool

http://www.fool.co.uk/news/your-money/credit-cards/2007/08/23/how-to-dodge-the-balance-transfer-fee.aspx?source=ioowfeml0040016

Here's a snippet:

'
Running some quick figures, I see that for a basic-rate taxpayer who has a decent savings account (so, receiving about 6% interest per year before tax, 4.8% afterwards) you should pretty much break even with a 12 month/2% fee card.

Here are the numbers. A £3,000 balance, plus 2% fee, which is £60, brings the total to £3,060. That's £255 per month in your savings account, less the minimum monthly payment to the card (typically 2-3%). you'll earn around £60 in savings interest. This means you've borrowed £3,000, paid £60 and earned £60ish, so you've actually borrowed £3,000 and paid nothing!'

Forgive me... but I must be missing the point. Why bother? All you've done is move money around for no reason, and affected your credit record. What's the point of cheating the system in order to break even?

Surely a better (and shorter) article would have been achieved along the lines of 'Make sure any interest you will earn exceeds the interest you'll lose, otherwise don't bother'





(I posted here because the MF feedback page is too confusing!)

Bokkens

You may have posted several thousand times but you obviously have not yet grasped stoozing.
I suggest you read Martin's articles again.
The last couple of lines you wrote are clearly "wrong" so why is that?
Martin's articles have the answer.
To be honest if your thoughts are as you stated then perhaps you shouldn't be stoozing anyway.
How are others getting around it?
How are others making money?

frivolous_fay

Wow, forgive me for daring to poke my head in this forum. FYI I've rate tarted for years and only once paid any interest.

If the author is proposing there's something additional to breaking even... he didn't bother mentioning it. Again - why bother breaking even?

I'll crawl back onto the ebay board where my opinion counts for something.

frivolous_fay

Incidentally, did I say at any point that I was stoozing? Did I post on the stoozing board?

The answer to these questions begins with N.

Milarky

The MF article is with reference to someone who has an existing debt (say £3000) which they repay during the course of the 0% promotional period. In the example, they have the capacity to pay down debt (presumably from income) at £255 per month. They only pay 2% minimum payments instead and divert the rest to an instant access account paying 6% gross (4.8% net). The interest from the savings account just equals the fee charged.

This is worthwhile because it converts a '12months-at-standard' declining debt into a '12months-at-no-cost' debt - so the savings are, in effect, what the interest would have been in that last year.

The example could also be reworked where the cardholder had £3000 of existing debt but was lucky enough to be offered a card with (say) £6000 credit limit. Assuming that they could get the additional credit limit out as cash and stick this in the savings account too, they can effectively make an extra 2.8% - that's 4.8% net minus 2.0% additional fee on £3000 that remains untouched during the 12 months. At the end of 12 months they would then have the same amount of debt as they 'started' with - £3000 (Actually £6000 of debt and £3000+ left as savings)

So it is possible to 'stooze' even in a net debt position - the trick is to 'lever' a smaller debt at standard rates into a larger debt at either lower rates or even 0%

noh

With the example you have given I calculate that you would make £68.
This is using the calculator at http://www.whatsthecost.com/stoozing.aspx
Stoozing is of course only worthwhile if the numbers add up. So a calculation needs to be done for each individual case. To make the most money look for offers with capped or no fees over the longest period and large credit limits.

Nigel