Stoozing question

Im a new stoozer, I've just opened up two credit card accounts, 1 post office money credit card with a £1,450 credit limit and and a sainsbury's credit card. (the two top recommended 0 per cent purchase cards on this site)

My question is, how can I stooze on any of these cards when the minimum monthly payments (2.5%) i make will cancel out any interest i gain on the savings i have made, in other words

Post Office minimum monthly payment for a credit limit of £1450 is: £36.25
Save the £1450 borrowed from the credit card in santander 123 and get monthly interest of £43.50

profit: £7.50

Am I doing something wrong???
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Replies

  • edited 25 June 2016 at 9:21AM
    vacheronvacheron Forumite
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    edited 25 June 2016 at 9:21AM
    Say you had £100 owing on your card, you would pay £2.50 off the balance each month so the next month you would still have £97.50+ any subsequent spending) on your credit card balance.
    The same amount (which you would have spent using cash if you hadn't had the cards) is now sitting in your bank earning interest.


    PS. You need to check your calculations on your Santander Monthly interest, I have £20k in my Santander account and only get about £50 per month.
    • The rich buy assets.
    • The poor only have expenses.
    • The middle class buy liabilities they think are assets.
    Robert T. Kiyosaki
  • Strummer22Strummer22 Forumite
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    I'm not too sure why you went ahead and applied for the cards before you fully understood stoozing, but no harm done I suppose! Vacheron has given a brief explanation, but in more detail, here's how it works:

    First point is to do as much of your regular spending as possible on your stoozing cards. Don't increase your spending to build up the stooze balance faster, that would defeat the object of the exercise.

    So let's say you've got a certain balance in your bank account earning interest and after a few months you've maxed out the stooze cards at, let's say, £3000.

    In an alternative universe, you didn't stooze, so now you've got £3000 less in the bank. In reality, you've got your original balance earning interest and £3000 of debt. The monthly repayments to the debt are fairly irrelevant, except they reduce your stooze balance, because crucially they are money you've already spent, and indeed money you would have spent from your bank account if you weren't stoozing.

    Taking a very broad brush approach to the numbers, if your account earns 3% interest and you stooze for 2 years, your average balance in the stooze pot might be £2500 (due to having to repay some of it, though while it's on 0% you can just do more regular spending to top the balance up). The interest you earn on that balance will be just over £150 (due to compounding). This is interest you could not otherwise have earned because you would have just spent the original balance anyway. Therein lies the attraction of stoozing: £150 you otherwise wouldn't have had, earned very easily.

    Monthly interest at 3% on £1450 is £3.63, by the way.
  • Thanks for that, I have another question.

    When i reach my credit limit on this post office credit card, say after a year, would it be better to:
    1) keep paying the minimum monthly payment and not use the card for purchases any more and start stoozing with a new credit card or,
    2) Pay off all the outstanding balance and start the stoozing process over again with this post office credit card?
  • edited 28 June 2016 at 3:11PM
    vacheronvacheron Forumite
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    edited 28 June 2016 at 3:11PM
    Thanks for that, I have another question.

    When i reach my credit limit on this post office credit card, say after a year, would it be better to:
    1) keep paying the minimum monthly payment and not use the card for purchases any more and start stoozing with a new credit card or,
    2) Pay off all the outstanding balance and start the stoozing process over again with this post office credit card?

    You would maximise the Stoozing benefit by keeping your first card and starting a second one in parallel for as long as the interest free promotion is active on the first card.

    Just remember to fully pay off the first card before its interest free period ends or else you could wipe out your profit pretty quickly in a couple of months interest charges!

    Also remember to fully close the first card at the same time you pay it off otherwise you may find it difficult to get a decent credit limit on any third card you may apply for in the future.
    • The rich buy assets.
    • The poor only have expenses.
    • The middle class buy liabilities they think are assets.
    Robert T. Kiyosaki
  • moleratmolerat Forumite
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    And make sure you understand the exact date the interest free period ends, it rarely aligns with a statement or due date and it is very easy to get caught out.
  • This may seem a silly question but bear with me lol.
    If I have 20 k in Santander 123 I get £600 a year or £50 pound a month interest.
    If I payback the minimum monthly payment (2.5%) of my £4350 credit limit I have to pay £108.75 a month
    Why do I have to payback more on minimum monthly payments than I gain in interest on my Santander 123 particularly when the Santander has an interest rate of 3% and the post office has a payback rate of 2.5%?
    Like I say bear with me lol
  • edited 30 June 2016 at 6:48AM
    vacheronvacheron Forumite
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    edited 30 June 2016 at 6:48AM
    This may seem a silly question but bear with me lol.
    If I have 20 k in Santander 123 I get £600 a year or £50 pound a month interest.
    If I payback the minimum monthly payment (2.5%) of my £4350 credit limit I have to pay £108.75 a month
    Why do I have to payback more on minimum monthly payments than I gain in interest on my Santander 123 particularly when the Santander has an interest rate of 3% and the post office has a payback rate of 2.5%?
    Like I say bear with me lol

    I think you are still confusing / comparing capital repayments vs earned interest.

    Look at it this way: not exactly the same but the logic is similar:

    You want a new TV and have £2000 saved in the bank for it.

    Your friend says "I'll lend you the £2000 interest free for 1 year if you give me back at least £10 every month so I can pay my phone bill.

    You buy the TV with his £2000 and leave yours in the bank earning 3% interest (£5 per month).

    At the end of the first month, the bank gives you the £5 interest meaning you now have £2005 in the bank. You give your friend back £10 leaving you £1995 in the bank (£2005-£10) but you now only owe your friend £1990 (£2000-£10)... You are £5 richer!

    Do this for the next 12 months and you have earned £60 (£12x£5) from your bank in interest (it will actually be slightly less but we'll keep it simple) and will have paid your friend back a total of £120 (£12x10) so you owe him £1880. Your bank balance will therefore be £1940 (£2000+£60-£120). You give him his £1880 back leaving you with a £2000 TV, a fully repaid friend and £60 in the bank.

    So in summary, you still paid your friend back MORE than you earned in interest each month, but now you have an extra £60 left over.....free money! :)
    • The rich buy assets.
    • The poor only have expenses.
    • The middle class buy liabilities they think are assets.
    Robert T. Kiyosaki
  • Ive applied for a second credit card.

    Will the 0 percent interest period commence when i make my first purchase or when i open the credit card account???
  • SuzieSueSuzieSue Forumite
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    Ive applied for a second credit card.

    Will the 0 percent interest period commence when i make my first purchase or when i open the credit card account???

    From date of opening.
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