When you start researching options on creditcards, you are likely to come across something known as stoozing. This is a practice carried out by some credit card owners as a way of making their money go further, enabling them to actually make money by borrowing. But what is stoozing and how does it work?
To put it simply, stoozing is a practice in which you borrow money from a credit card company and put it in a high interest savings account so you can make money on it. You need to find a credit card with a long 0% interest period, which means that for a certain period of time (i.e. 12 months), you won?t pay any interest on your purchases. You will also need a savings account with as high an interest rate as you can find. With both of these set up, you can stooze by following these steps:
- Do your usual spending on the credit card but only pay the minimum payment each month ? on a normal credit card, this would result in interest mounting up, but on a 0% interest card there is no interest charged.
- Put the money you would have spent paying off your credit card bill into the high interest savings account, where it will start to earn you interest
- Just before the 0% interest period ends, pay off the credit card in full
- At the end of it all (i.e. at the end of a year), you will have more money than before thanks to the interest earned in the savings account
What you need to know before you stooze
If you want to look at giving stoozing a try, there are a few crucial things you need to know:
You need to be really, really organised. Only those who are good at managing their money, and who are very organised, should even attempt stoozing. You will need to put the date the 0% interest period ends in your calendar and make sure you have enough money to pay off your credit card balance before this deadline. If you routinely forget to pay bills or are easily baffled by financial products, stoozing is not for you.
- You need a good credit rating. If your credit score is low or you have existing credit card debt, taking out new credit cards will only harm your rating further.
- ?You?ll need a bit of time on your hands to find the best products. Taking the time to compare credit card products and savings accounts is the only way to get the best deals, and it?s essential to successful stoozing.
