A friend of mine told me about "stoozing". I found some information on the internet about the topic and think it sounds kind of fishy. Is stoozing illegal? My friend said he wanted to try it out and apply for one of those 0% credit cards. Should I be concerned?
Stoozing is the act of borrowing money at an interest rate of 0%, a rate typically offered by credit card companies as an incentive for new customers. The money is then placed in a high interest bank account to make a profit from the interest earned. The borrower (or "stoozer") then pays the money back before the 0% period ends. The borrower does not typically have a real debt to service, but instead uses the money loaned to them to earn interest. Stoozing can also be viewed as a form of arbitrage.
This thread suggests MNBA still offer them, though presumably subject to T&C.
There's nothing dodgy or illegal about it — it's common practice in other countries — but as always, read all the fine print very carefully, especially what happens at the end of the introductory offer period. Usually you go onto a very much higher APR, higher than the standard interest rate for the same card.
How would you go about borrowing the money at 0%? If you take it as a cash advance, then you typically pay on it immediately, regardless of the offer. Many of the offers are also only on transferred balances.
I applied for a £6000 Tesco Credit Card limit and transferred balances that I had run up on other cards rather than using cash. I had an interest free deal for 9 months during which time I had my cash in a tax free cash ISA.
At the end of the interest free period I closed the cash isa adding on the tax free interest and paid off the credit card in full. I think I made about £270 for free.
But the best part of the story was that I also was awarded Tesco Clubcard points for the balance transfer which I converted at a rate of 1 to 80 into Airmiles and flew to the USA for free.
So, there are deals out there to be exploited if you know where to look and take care over the terms and conditions.
However, in my experience in Ireland I have never been able to find such a good deal as the Tesco Balance transfer.
As an existing customer for many years, MBNA offered me 7.7k last December at 0% for 7 months. I stuck it on deposit for the 7 months and repaid the 7.7k in full less the monthly minimum payments I did. It made me about 100 euro or so, which is tiny of course, but all done online with minimum effort.