Stoozing: how to make money from your credit card

Rising returns from savings accounts mean that you can use lengthy 0% credit cards to earn a decent chunk of interest.

Stoozing is not a term that most people will be familiar with.

Frankly, it’s a pretty daft word, but it’s the name of a sneaky technique used to make money from credit cards.

It’s a trick that has fallen out of favour in recent years, but may now be staging something of a comeback and could offer smart shoppers the ability to top up their bank balances.

How stoozing works

So, what actually is stoozing? 

The idea is to make use of the combination of a credit card that offers 0% interest on spending and an easy access savings account.

You put as much of your regular spending as possible on the credit card: grocery shopping, takeaways, travel... anywhere that accepts credit card. 

When the credit card bill comes in, you only make the minimum repayment.

That doesn’t mean you ignore the rest of the bill though ‒ you put the money that would have been devoted towards clearing the bill into a savings account instead.

You then repeat this for the length of the 0% period on the credit card.

Then, when you get to the end of the interest-free term, you use the money that you’ve saved to clear the balance.

However, with the interest earned on your savings balance, you’ll have a nice chunk of cash left over as a reward.

You can even look to stretch out the stooze by moving the credit card balance to a balance transfer card, which will offer a further 0% period.

Then you carry on putting the money you would use to repay the balance to continue to top up that savings account.

The longer you manage to continue to stooze, the larger the rewards you’ll be able to build up.

Why stoozing looks more attractive now

Stoozing has become a more enticing tactic because of the sharp increases in interest rates that we have seen in recent months.

For a long time, the rates paid on savings accounts have been, to put it politely, a bit rubbish. 

It meant that going through with the effort and discipline involved in stoozing was not really worth the rewards on offer.

That is changing somewhat now, with the rates paid on savings deals having increased markedly off the back of the series of Base Rate increases which have taken place since Christmas.

For example, the highest paying easy access account in September last year paid a measly 0.65%.

Today, the highest rate is 2.55% from the likes of Santander and Cynergy Bank. 

Given Base Rate is only likely to increase further from here ‒ EY Item Club for example expects it to hit 4% next year, while there have been forecasts that it could reach as high as 6% ‒ that is likely to result in easy access rates increasing still further.  

That in turn will mean that the rewards from stoozing become even more attractive.

This of course is only possible if you have decent 0% periods on credit card purchases.

The longest terms at the moment are a whopping two years from the likes of Barclaycard, M&S Bank and Sainsbury’s Bank. 

Stoozing isn’t for everyone

There are some serious downsides to bear in mind before you even think about stoozing.

For starters, this sort of trick takes enormous discipline.

There are no ifs or buts about it, you need to be putting enough cash to cover those repayments aside into your savings account. Otherwise, when you get to the end of the 0% period, you’ll end up out of pocket.

It also takes discipline in the way that you spend your money.

While you need to put as much of your usual spending as possible on the card, that can’t be taken as a signal to start spending more than usual, putting your finances under greater strain.

What’s more, stoozing is only really an option if you pay off your credit card in full each month as a matter of course, while you’ll also need to be an attentive person ‒ you can’t simply forget about when your 0% deal is due to end.

What stoozing means for your credit score

It’s also worth bearing in mind that stoozing may have implications for your credit score, or at least your attractiveness to lenders.

For example, from the outset you need to be sure not to over-apply for 0% credit cards ‒ if your record shows a series of applications within a short period of time, then lenders may interpret that as you being in a somewhat desperate position and so be wary of approving your application.

As time goes on, stoozing means that you will use an increasing amount of your credit card limit too.

Your credit utilisation ‒ how much of your card limit you’re using ‒ is a factor in your overall credit score, with lenders generally looking more favourably if you keep yours under 30%.

That could have an impact on your ability to secure other forms of credit, such as a mortgage.

However, if you are disciplined and aren't looking to add to your borrowing any time soon, it could be a smart way to make a few quid.

Still interested? Start stoozing now

If you want to get stoozing, start by checking out our round-up of the best 0% purchase credit cards and applying for the longest deal you're confident you'll qualify for.

Your next job is to open a top savings account that allows regular deposits.

To that end, we've teamed up with Raisin, a service that lets you easily open and manage various savings accounts in one place. You can view their top accounts here, or you can do your own research to find the account that best meets your needs. 

Once you have your new credit card and savings account, start spending on your plastic as often as possible and transfer the 'savings' into your earmarked account.

As we mentioned earlier, it's vital you remember to make the minimum payments on your credit card and to clear it in full before the interest-free period ends or you'll end up losing out.