1% Chase cashback vs Stoozing

itm2

I have a Chase UK account and a 0% spending Virgin Money credit card. If I use the Chase Mastercard for spending I get 1% on certain (i.e. most) types of spending. I've been working on the assumption that eligible spending on the Chase card is a better bet than stoozing into a 1.5% savings account, as the cashback provides an "immediate" 1% return, whereas the 1.5% savings account would only offer an annualised 1.5% return (i.e. 0.125% per month). 
Am I right in this assumption, or have I missed something?

smithers1981

Santander 2.75% then redo figures 

itm2

smithers1981 said:

Santander 2.75% then redo figures 

Santander 2.75% = 0.23% monthly, so the Chase cashback still wins?

wiseonesomeofthetime

Depends on how long you have left on the Chase 1% cashback deal and how long left on the Virgin Money credit card 0% purchases deal imo.

I have 4.5 months left on the Chase promotion atm, and have just been granted a 23 month 0% purchase credit card, so, with rising interest rates for savings also likely over that time, plus the opportunity to fix some of it for 12-18 months, it's extremely likely my return will be greater stoozing, as things stand.

itm2

My Chase deal runs until April, so presumably it will remain the best option until then? (unless someone offers a 12% savings account between now and then?)

wiseonesomeofthetime

I would concur. Over the six months anyway.

phillw

itm2 said:
Santander 2.75% = 0.23% monthly, so the Chase cashback still wins?

It depends on when you're talking about.
If you stooze a purchase on the first day of a 1 year 0% purchase card & keep your money in a 2.75% account then you've made 2.75% over the year on it. A purchase on the first day of the second month will make 2.52% etc

The last 4 months the amount of interest you would achieve would be less than the chase 1% cashback, but by that point you could just apply for a new 0% credit card & possibly by then you'll be getting >2.75% interest anyway.

itm2 said:

My Chase deal runs until April, so presumably it will remain the best option until then? (unless someone offers a 12% savings account between now and then?)

You need to rethink your calculations, you don't need 12% interest rate to beat chases 1% cashback stoozing. You might only get 0.23% monthly, but you're getting that every month until you repay the credit card. Which might be in 12/18/36 months time.

1% cashback is only good if you don't qualify for a 0% purchase card, or you're predicting an interest rate crash. 0% cards will probably become harder to get, I don't think we'll see a rate crash any time soon.

itm2 said:

I've been working on the assumption that eligible spending on the Chase card is a better bet than stoozing into a 1.5% savings account, as the cashback provides an "immediate" 1% return, whereas the 1.5% savings account would only offer an annualised 1.5% return (i.e. 0.125% per month). 
Am I right in this assumption, or have I missed something?

You're wrong.

You spend £100 on your debit card and get £1 now and put it in a Santander eSaver @ 2.75%. At the end of the year you have £1.02 in the account.

I spend £100 on my 0% credit card that has 12 months left, and keep my £100 in an eSaver @ 2.75%. At the end of the year I have £102.75 in the account, I repay the £100 and am left with £2.75. Which is 2.6 times as much.

You can make up to 4.95p per transaction on save the change, so you'd about break even if that £100 was in 35 transactions that end in £0.01 on the first day of the save the change pot (it empties after 12 months and starts again). As you move through the year and the transaction count decreases and the prices >£x.01 then the effectiveness of save the change decreases. The only interesting situation is if you sit all night paying all your utility bills by multiple £1.01 payments, however I think the T&C might have some rule against you gaming it & they don't have to give you a bank account. It was painful doing the 50 transactions for spend and save, I'm not going through that again.

Also, a 1.5% savings account is terrible. Open a Santander eSaver before 1st November.

itm2

Thanks for that. So a crude calculation indicates that, assuming a minimum 5% of the balance needs to be repaid every month with the 0% spending card, and assuming that a £100 purchase is made on the first day of each month, the stoozing approach makes more sense for savings rates above about 1.9%. So the Santander 2.75% account is the way to go. 
I haven't factored in round-ups on the Chase account, but they would probably not change the overall picture too much.

phillw

itm2 said:

the stoozing approach makes more sense for savings rates above about 1.9%.

For a £100 purchase stoozed over 12 months, paying 5% minimum every month. I make it 1.39%

£ 100.00  £       0.11  £   95.00  £       0.11  £   90.25  £       0.10  £   85.74  £       0.09  £   81.45  £       0.09  £   77.38  £       0.08  £   73.51  £       0.08  £   69.83  £       0.08  £   66.34  £       0.07  £   63.02  £       0.07  £   59.87  £       0.06  £   56.88  £       0.06  £       1.00

Payment due dates and daily interest will affect the calculation some what, but I doubt to the extent that cashback is worth it.

The_Urbanite

I’d go for Chase any day. I’ve been using it to deposit to my bank account which pays out cashback. The return from a saver, a regular saver at that would only earn a tiny fraction of what is possible with the Chase card. 

phillw

The_Urbanite said:

I’d go for Chase any day. I’ve been using it to deposit to my bank account which pays out cashback. The return from a saver, a regular saver at that would only earn a tiny fraction of what is possible with the Chase card. 

What exactly have you been doing? Cashback on purchases gives you a fraction of what is available by stoozing, are you recycling cash through Chase somehow?