Can you make money from stoozing?

When interest rates on savings accounts are high, stoozing can be a popular money hack among savvy savers.

While its name sounds odd, this method is simply when you use a 0% interest credit card for your spending to enable you to put as much money as possible into a high-interest savings account.

As long as you manage your spending effectively and are able to pay off your credit card before interest charges apply, stoozing can be a relatively low-effort way to earn more interest on your money.

How does stoozing work?

Stoozing is when you use a 0% purchase credit card for as much of your spending as possible, instead of cash or a debit card, for example.

You then put the money you otherwise would have spent into a savings account that pays a high rate of interest.

But even though you want to move as much money into savings as possible, you should ensure that there’s still enough money in your main current account to cover any bills and direct debits.

If you use the stoozing method, it’s important to make the minimum monthly payments on your credit card and to stay within your credit limit to avoid any penalty charges. You should also only spend as much as you put into savings; using your credit card to spend more than usual will counteract any benefits stoozing may bring.

Furthermore, make sure you know when the 0% interest period expires on your card so you can pay off your balance before interest charges apply.

Alternatively, you could consider moving the balance to a 0% balance transfer credit card to allow you to keep your money in savings a bit longer. However, balance transfers usually come with a fee and your eligibility for the card will be subject to a credit and affordability check.

Where to save your money

To make the most of the money you deposit into savings, you should look for accounts that pay the highest rate of interest. But you also need to think about the type of accounts you use.

While fixed rate bonds can offer a guaranteed rate of interest, you often won’t be able to add to your account during the term, which could be a problem if you want to deposit a proportion of your monthly income on a regular basis. Furthermore, you typically won’t be able to access your money before the end of the term, so you need to make sure you’ll have the money available to pay off your credit card when the 0% period ends.

An easy access savings account offers more flexibility as you can deposit and withdraw money without restriction. However, because the rate on these accounts can change, the interest you earn could be less than you initially expected.

If you know you’ll be depositing a certain sum each month, a regular savings account could also be worth considering.

If interest rates are high and you have a lot of money in savings, you should check if the interest you earn will breach your Personal Savings Allowance. You can only earn up to £1,000 in interest without paying tax, and this drops to £500 for higher-rate taxpayers. Additional rate taxpayers don’t receive an allowance.

To avoid paying tax on your savings interest, you can deposit your money into an Individual Savings Account (ISA). You can save up to £20,000 in ISAs each tax-year, with easy access and fixed-rate cash ISA options to choose from.

Is stoozing worth it?

If you’re organised, have a good credit score and feel confident at managing a credit card without building up unaffordable debt, stoozing may be worth considering.

You could potentially earn hundreds of pounds by using the stoozing method, although this will depend on:

• the amount of money you can deposit into savings
• the credit limit on your credit card(s)
• the interest rate on the savings account(s) you deposit into.

The reward of earning as much interest as possible on your money can make stoozing worthwhile for those who don’t have any existing debts, are financially stable and can afford to put a decent sum into savings.

You need to be strict with yourself and not be tempted to dip into your savings or overspend, otherwise you could earn a smaller amount of interest or, worse, not have the money to pay off your credit card when needed.

Bear in mind that stoozing may not be the best idea if you’re planning to apply for a mortgage or other form of credit, as having a large amount of credit card debt could affect your application.

For some, the potential risks of stoozing could outweigh the benefits of the extra interest they could earn.

Building up debt on a credit card can be risky, so you need to be comfortable that you can manage your credit card, make all the necessary payments, and clear your balance before the 0% period ends.

You also need to be confident that you won’t spend more than usual and build up debt that you can’t afford to pay off.

If you’re unsure about this, or if you’re already managing existing debts, using a credit card to “stooze” is unlikely to be the right option for you.

However, it would still be worth comparing savings accounts to maximise the return on any money you can afford to put away in savings.

Alternatives to stoozing

Stoozing using a 0% purchase credit card isn’t the only way to get a return on your money with relatively little effort.

Money transfer credit card

A 0% money transfer credit card is specifically designed to allow you to withdraw money from the card straight into your bank account.
It’s possible to withdraw money from one of these cards, put it into a high-interest savings account, then pay off the card before interest charges apply.

However, although there are cards that come with a 0% interest period, you will typically need to pay a small fee. As a result, you’ll need to consider whether the interest you could earn on the money you withdraw from the card and put into savings outweighs the cost of this fee.

As discussed above, you’ll also need to make sure you clear your card balance before the 0% interest period ends, as well as making the minimum repayments and keeping to any other terms and conditions of the credit card agreement.

Bear in mind that, if you try to withdraw money from a standard credit card, you will usually be hit with a sizeable fee and interest is usually charged on the amount withdrawn from day one.

Cashback credit card

A reward or cashback credit card could be another way to earn some extra money on your regular spending.

Providers offer cards with different types of rewards, so it’s worth comparing the available deals to see if there are any that could be useful for you. For example, you might receive a percentage of the amount you spend as cashback or discounts when you spend at certain shops and supermarkets.

Some credit cards may also come with attractive welcome offers or bonuses.

The best card for you will depend on your spending habits, so you should compare deals and check the terms of a card before applying, as some will set certain requirements.

As with stoozing, it’s important that you continue to spend as normal when using these cards, otherwise you could cancel out any benefits you may receive. Similarly, you should stick to the terms of the credit card and aim to pay off the card balance before interest charges apply.