nigel woollsey

Nigel Woollsey

Online Writer
Published: 25/03/2020

At a glance

  • Stoozing is a method of generating a modest income from the interest earned on borrowed funds in a savings or current account.
  • This is most often done using a 0% money transfer credit card but can also be used against other loans, such as a student loan.
  • Stoozing is most suitable for those who have savings and a decent income so they do not need to touch either the invested funds or use the credit card for anything else.

It's always good to get something for nothing, but what if you could make money from it? That's exactly what some savvy borrowers are doing through a process known as 'stoozing', but how does it work, and how can you take advantage?

What is stoozing?

Stoozing is a clever way of moving money around to benefit from high interest rates without having to lock any of your own cash away in a fixed rate savings account. It sounds impossible, but it can work: borrowers take out a 0% money transfer offer on a credit card and use the cash to fund a high interest current account, which they can then leave untouched to benefit from a high interest rate.

If they pay off the credit card balance when the 0% offer ends – which they could do with the original sum they borrowed – they're left with a nice little pot of interest, without committing any of their income or savings. This means you could quite literally get something for nothing, but as with anything that sounds too good to be true, it's important to go about it the right way.

Points to remember

The first thing you need to think about is the money transfer fee. Our data shows that there are about 12 cards that allow for money transfers but don't charge a fee at the moment, so this cost would need to be taken on board and compared against the potential gains of putting the money in a high interest current account.

You'll need to consider the restrictions on these accounts, too, with many coming with monthly funding requirements, fees and a maximum amount that interest can be earned on. And remember to make at least the minimum repayment on the credit card, too, otherwise the 0% interest deal could be revoked, and you wouldn't have achieved a thing.

Top tips to make stoozing work for you

Despite the potential drawbacks, stoozing could still be a viable way to earn a bit of extra interest in a low rate environment, but you'll need to make certain you're the right candidate for the job.

  • Stoozing is most appropriate for consumers who already have savings and a decent income. This way, they can leave the deposit untouched in a high interest current account, while also meeting any minimum funding requirements to be eligible for interest, and at the same time managing repayments on a credit card.
  • Before applying for a card, make sure you have a good credit history by checking your credit report to give yourself the best chance to get the best possible deal (and remember that opening a bank account and credit card leaves marks on your credit history, so don't even consider it if your score is already suffering).
  • Keep your current account in credit – some have funding requirements and need a minimum amount of active direct debits, so don't fall behind on any criteria.
  • While you can have more than one current account at any time, be mindful of how you are moving your money around, as some banks may frown upon this activity and some may even become suspicious that it's fraudulent.
  • Make sure you keep up credit card repayments – this could be as little as 1% of the outstanding balance (always check with the provider).
  • If you're looking at repaying the card debt in 12 months, make sure the deal you have has an interest-free period of this length as a bare minimum, and don't be tempted to spend more on the credit card.
  • Any personal debt, such as loans and credit cards, can count against you in terms of your credit score, so keep this in mind if you're hoping to apply for a mortgage anytime soon.

How much could you earn?

So, you fit the bill and have a financially savvy head on your shoulders. Just how much could you earn from stoozing?

Let's say you borrowed £2,500 on a 0% money transfer card that charges a 2.90% fee resulting in a £72.50 transfer charge.

You then put the £2,500 in the Nationwide FlexDirect account and left it untouched for a year. This account offers a top in-credit interest rate of 4.89% gross (5% AER), which would result in interest of £122.25 after 12 months. This, minus the £72.50 transfer charge, gives a profit of £49.75.

Want to give it a go? Compare the top 0% balance transfer credit cards and be on the lookout for those that come with lengthy money transfer terms then combine one of these with one of the high interest current accounts on our comparison charts to see how much you can benefit.

Pros and cons of stoozing:

  • Generates a modest income earned from a high interest account.
  • Money borrowed at 0% interest funds the deposit.
  • No interest charges from the credit card if monies are repaid before the 0% money transfer period ends.
  • You must still pay the minimum payment on the credit card every month – failing to do so will likely end your 0% interest period early.
  • Taking out a new credit card will be reflected in a lower credit score for a period.
  • You may need to pay a fee for the money transfer from your card.

Moneyfacts tip

Moneyfacts tip nigel woollsey

Card fees can eat into any 'profit' you make from stoozing, so be wary of these when looking at money transfer cards.

Disclaimer: This information is intended solely to provide guidance and is not financial advice. Moneyfacts will not be liable for any loss arising from your use or reliance on this information. If you are in any doubt, Moneyfacts recommends you obtain independent financial advice.

At a glance

  • Stoozing is a method of generating a modest income from the interest earned on borrowed funds in a savings or current account.
  • This is most often done using a 0% money transfer credit card but can also be used against other loans, such as a student loan.
  • Stoozing is most suitable for those who have savings and a decent income so they do not need to touch either the invested funds or use the credit card for anything else.

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