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?
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.
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.
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.
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.
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.