Stoozing

The Idea:
The card I chose - 15 months 0% interest plus reward points

The card I chose – 15 months 0% interest, plus reward points

Stoozing is the name given to the technique of using a 0% credit card for purchases, and putting the money usually used to pay off the card each month into a high interest savings account. It is essentially a way to minimise the cost of spending, and can be a fairly lucrative practice, especially for big spenders. It should be noted that it is not an excuse to spend more and worry about it later. It is simply a way to get the maximum return from what you already do. So for example, I have taken out a Natwest YourPoints World card, it has a 0% interest rate on purchases for 15 months. There are other similar cards available, one worth noting is the Tesco Credit card with 0% for 16 months. I chose the YourPoints card as it offers £12.50 worth of reward points each year just for having the card, and what equates to about 0.75% back in reward points on all spending. It’s not market leading but it’s certainly competitive. So I am getting something of a double reward from this scheme. I will attempt to put all spending feasible on the card and put the money I would be paying aside to be able to use it for investment, gaining reward points in the meantime. I would just like to point out to anyone considering doing the same thing – be careful and read up about it. Ensure you understand it fully, get it wrong and it will cost far more than you gain from it. One thing to be aware of is that you must pay the minimum monthly amount to avoid being hit with big fees (this is usually £5 or 2% of the monthly balance, but varies from card to card), and ensure you clear the whole balance before the 0% period ends!

Investment Required

There is no cost – assuming that I don’t fall foul of any of the rules and regulations. The beauty of it is that it doesn’t take any extra time either. It is just doing what I always do, but with a different card. It probably took about half an hour to apply for, and that is about the sum total of the investment.

Capital: £0

Time(hrs): 0.5

Return On Investment
The earnings stack up surprisingly fast for such a simple task

The earnings stack up surprisingly fast for such a simple task

This is where things get interesting. I’m going to make an assumption that I spend £1,000 a month (it’s a relatively high figure, but with certain projects there is bound to be big outlay, so I think over the course of the year this might be about right). If I was to take this each month and place it in a savings account at 2.5%, over the course of the remaining 11 months that would earn me around £125 (I won’t bore you with the maths this time as it’s a bit technical, but you can check it yourself if you’re that way inclined). It’s not bad for no real effort other than keeping an eye on bank accounts and making the occasional transfer. Another benefit that isn’t really measurable by figures is the help this will have for cashflow. As you can tell by a quick look at my balance sheet, a lot of the money I have earned is not yet in my possession as cash. Having this card available will help smooth out the gap between earning the money and having it in my possession.

Projected ROI:  ∞

ROI inc. labour: ∞ (based upon minimum wage of £6.19/hour)

Expected Return: £125 (With the point rewards, it is around an extra £50-ish on top of this over the year)

Skills/Resources Required

There is the obvious factor of being accepted for the card. I have cleared that hurdle, so now really it is just about having a firm grip on my finances  and controlling spending. Again to emphasise, the card is not an excuse to spend what I don’t have or can’t afford, but rather to maximise return on limited resources and diffuse the effects of cash flow issues.

Risk

A credit card always carries some degree of risk. There are few more expensive ways to borrow money, and getting into credit card debt can be one of the most hampering things one can do. When trying to play the system slightly, the risk naturally become a little higher, as it is impossible to predict every possible future outcome. However, by only spending what I have made, and using this money to invest rather than blow on expensive holidays or something equally frivolous, I am greatly reducing the risk – the money should always be there to pay off the card if unforeseen circumstances do arise. I have split the expenses column on my balance sheet into cash and credit to help keep track of this and illustrate how, as well as where, it is being used.

If a close watch is kept on it, this is an easy way of making a little extra

If a close watch is kept on it, this is an easy way of making a little extra money each year

Scalability

It’s pretty limited in this regard. No gain is made by spending more as it merely minimises the cost of spending rather than generating income in and of itself. The only sensible way to increase scale I can think of is to ensure all possible spending is done using the card.

Viability

Definitely worth having in my view. There is a small risk involved, but not enough to really concern me if I manage it properly. The gains from spending in this way are impressive, and it takes very little effort to do. In fact, it is almost money for nothing, it’s just a case of being savvy enough to realise the potential of schemes like this.

The Verdict

ThumbsUp

Enter your email address to subscribe to my blog and receive notifications of more great new content by email.

Comments

  1. What is the credit limit on the card?

Trackbacks

  1. […] be a great way to wind down once the kids have gone to bed and it does make sense to do a little stoozing here – registering with the most generous sites you can find, collecting the bonuses on offer and […]

  2. […] can be found … The Tesco credit card and other credit cards that indirectly earn Avios: Stoozing – The Shoestring Investor Apr 11, 2013 … The card I chose – 15 months 0% interest plus reward points … […]

Leave a Reply

%d bloggers like this: