How Stoozing Can Help You Make Money While Spending

A financial trick that uses credit card debt to make money has returned due to relatively high savings rates.

According to The Telegraph, financial conditions are currently in an “optimal” state for the strategy known as stoozing.

A “successful Stoozer,” according to MoneySuperMarket, effectively converts credit card debt into a short-term interest-free loan while keeping the actual money in a high-paying savings account.

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The difference between the savings interest and any credit card fees is your profit. But while the concept is “relatively simple,” successful stoozing requires “careful organization and financial discipline.”

What is Stoozing?

Stoozing is a way to “tamper with 0% credit cards to make money,” said MoneySavingExpert.

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The method means you can “maximize interest returns”, says The Independent, by spending on a 0% interest credit card “while redirecting your actual money into high-yield savings accounts”.

How Stoozing works

Stoozing involves taking out a long-term credit card with 0% spending and using it for your normal day-to-day expenses, while the unspent money flows from your bank account – like your paycheck – into a top savings account to earn interest.

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You need to make sure that you pay off the credit card bill every month. When the 0 percent offer expires, you’ll either have to “pay off the balance using money from your savings account or transfer it to a new credit card with a 0 percent balance transfer,” according to Go.Compare. Meanwhile, any interest you earn on the money in the savings account is reported as profit.

Pros and Cons of Stoozing

The method can be “lucrative,” MoneySavingExpert said, but it won’t work if you “are not very financially organized, are not sure how it works, have a poor credit history, lack financial self-discipline, or have other credit card, overdraft or loan debts.”

It’s a “relatively low-effort” way to earn some extra money and maximize savings interest, according to Moneyfacts.

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But there are risks. If you don’t pay off the debt, you could incur interest charges, says CompareTheMarket, “which undoes the good work of having your money in a savings account.”

Taking on too much debt can also have a “negative impact” on your credit score, according to Money to theMasses, potentially making it harder to borrow money for “legitimate reasons,” such as needing a mortgage.

Additionally, you may regret “locking away your savings” if you suddenly need the money sooner than expected, as early withdrawals may incur penalties.

Is it worth the stoozing?

Stoozing “only really works,” according to uSwitch, when “the savings interest rates are high.”

The method can be “worth the effort,” Go.Compare said, if you have “good credit” and “discipline for making repayments on time.” Stoozers must also be able to invest borrowed funds “profitably.” It is risky if you have difficulty paying the credit card bill or “the return is too low for the effort”.

There are alternatives to stoozing, such as rewards or cashback cards that “pay back a percentage of your money or earn points that you can redeem in stores.”

https://theweek.com/personal-finance/how-stoozing-can-help-you-make-money-while-you-spend