Provided you pay the minimum monthly payment on the credit card and clear the balance (using the money you’ve saved) before the 0% ends, you could potentially make hundreds of pounds in interest. However, this hack isn’t for everyone and comes with its own risks.
Here, we explain how to stooze, including the dos and don’ts, how much you could earn on a £500 monthly spend, and the risks to watch out for.
How do you stooze?
Here are the steps you can take to master the art of stoozing.
Please note that the information in this article is for information purposes only and does not constitute advice. Please refer to the particular T&Cs of a credit card provider before committing to any financial products.
1) Choose the best 0% interest credit card
Ideally, you want the longest period possible paying no interest, to make the most of your savings.Remember, you’ll have to continue to make the minimum repayment each month or you’ll lose your 0% rate. You can set up a direct debit each month so you won’t forget.
2) Spend on the card
Once you’ve been accepted for the credit card, you can begin spending – the key is to carry out all of the everyday spending you would usually do in cash or on a debit card on the 0% credit card. This could include clothes, groceries and fuel.
Keep an eye on your credit limit, as you may be charged a fee if you go over this.
It’s also important not to spend beyond your means, as you’ll need to pay this back when the 0% interest period ends.
3) Find the best savings account
As you use your credit card to carry out everyday spending, deposit the money you would have otherwise spent from your current account into a savings account that pays interest.
Ideally, you want an instant-access or regular savings account that allows you to deposit money each month, as opposed to a fixed-term savings account that normally requires you to put in a lump sum.
You'll also need to be able to withdraw the money with no penalties when it's time to pay off your credit card.
Excluding accounts with limited withdrawals or other restrictions, the best instant-access savings account on the market right now pays 5.04% AER and is offered by Family Building Society Online Saver, however, it’s worth noting that the rate is variable so can change over the year. Find out more:4) Bonus step – shift debt to a balance-transfer credit card
This would involve applying for another credit card before your interest-free period ends and then shifting the debt onto the new card.
Ideally, you should select a credit card with no balance transfer fee, as this will eat into your profits. The longest 0% balance transfer credit card with no fee is 15 months offered by Santander.You will still need to make the minimum repayment each month and pay off the card in full once the 0% balance transfer period ends.
By this time you will have built up a lump sum that you could put in a fixed-term account and earn even more interest.
Find out more:5) Pay off the card
Once your 0% interest-free period ends, you'll need to take the money out of the savings account and pay off your credit card in full.
However, you'll be left with extra money, which you can keep as profit.
This means you shouldn't touch the money deposited in your savings account for anything else – you’ll earn less interest and risk being saddled with a debt you can’t repay.
It's a good idea to keep these dates in a diary or set a notification so you don't get stung by high interest charges.
Find out moreHow much could you earn by stoozing?
We've crunched the numbers and worked out that if you were to spend £500 a month on a 12-month interest-free credit card and put away a similar amount each month, you could earn around £157 profit over a year. Over 12 months you would spend £6,000 on your credit card and you would need to repay around £376 in minimum repayments (we've used a minimum repayment of 1% or £5, whichever is higher, in our calculation). By regularly putting what you would normally spend in cash or on a debit card in the best instant-access savings account paying 5.04% AER (the top instant-access account when we checked on 4 October), you would earn around £157 in interest. If you took the £5,629 (the amount saved minus any minimum repayments), along with your interest of £157 you'd have £5,786 in total. You might be able to earn even more if you have a longer 0% period or used a 0% balance transfer deal and deposited the lump sum you've built up over 12 months in a fixed-rate bond. If you put the £5,786 into a one-year fixed-rate bond paying the current top rate of 6.2%, you would make an extra £359. Find out moreWill stoozing affect my credit score?
Generally, if you're using more than 90% of your credit limit (which takes into account all of your credit cards), this can impact your score.
According to credit reference agency Experian, a lower percentage will be seen positively by lenders and will increase your score as a result.
You’ll also be taking on a potentially large amount of debt for the duration of your stooze, so don’t attempt to take out multiple cards in quick succession, as you could be turned down.
Find out more:Do you need to pay tax on the savings interest?
Depending on how much interest you earn on your savings, you may have to pay tax on it.
personal savings allowanceThe allowances for this are as follows for the 2023-24 tax year:
However, this applies to all your savings so, if you want to give stoozing a go, you’ll have to take this into consideration.
Find out more:Should you stooze to make extra money?
Stoozing is only suitable if you are debt-free and have a healthy credit history so you can get access to the longest 0% deals.
You will also need to be disciplined and not spend more than you can afford on the credit card or dip into the savings you set aside.
Find out moreThis story was first published on 3 July and updated on 4 October to reflect new savings rates.
source https://www.which.co.uk/news/article/can-you-make-money-stoozing-with-a-0-purchase-credit-card-aMOYz0a90Doj