Martin Lewis has shared a credit card tip which is making a comeback due to rising interest rates and could make you hundreds of pounds. Known as ‘stoozing’, it was shared in the recent MoneySavingExpert.com newsletter.
But it’s only advised for those who are “debt free and financially savvy”. It means that the trick may not be for you if you’re not top of your money, The Mirror reports.
He explained: "If you're not too on top of things, don't understand, don't have financial self-discipline, or have other credit card, overdraft or loan debt, this ISN'T for you, as mistakes cost. If in doubt, don't. Plus you'll also need a reasonable credit history to get a decent credit limit."
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For those who are interested in stoozing, it involves taking out a 0% spending credit card and using that card for normal everyday spending. Do all your normal spending on that card - you will need to keep making minimum repayments so you don't lose your 0% privilege.
Then each month, you put the money you’d normally use for your spending into a high-interest savings account, leaving it to build up. When the 0% deal on your credit card ends, you should pay off the balance using the money from the savings account.
Once the credit card balance is cleared completely, you should then be left with the interest you earned on the money borrowed from the credit card company. Martin also shared a clever way you can extend the so-called "stooze" period.
He added: " In the MONTH BEFORE THE 0% ENDS, either use the money in savings to clear the 0% debt before any interest is charged, or shift it to a 0% balance transfer, a fee-free one's best to maximise the gains.
"Yet even if you're aiming to do the balance transfer - don't let that tempt you to go for a longer savings fix, just in case you're not accepted.
"Of course, with a decent credit score and careful management, you can do this with more than one card and build your stooze-pot, so you're earning more."
Martin shared an example of where someone could make £400 by using this method . He wrote: "Imagine Sally Stoozer gets a 23mth credit card with a £5,000 limit. She usually spends £1,250 a month, and puts all that spending on the card, paying just the monthly minimum.
"She moves the money from her bank account to a 3.85% easy-access account each month.
"A little after four months she has the full £5,000 in there, which she transfers to an 18mth fixed-savings account at 5.15%. By the time it ends, she has £5,425 in there - so £425 profit."
The 'golden' rules of stoozing
Martin also highlighted some of the "golden safety rules" if you are considering giving "stoozing" a go.
These rules are:
Pay the monthly minimum (for safety by direct debit) and don't bust the credit limit, or you can lose the 0%.
Don't use these cards for anything else, such as cash withdrawals or shifting debt to them.
Clear the card or balance-transfer before the 0% ends, or the interest rates jump to 22-24% rep APR, killing any gain
Do not take risks with the stooze pot, or you could find the manufactured deliberate debt becomes real debt
Martin reiterated in his explanation that stoozing does build up "debt", which can impact your ability to get credit in the future. So if you plan to get a mortgage deal you need to be careful, as too much "debt" or "available credit" could impact that.
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