Stoozing: Create Free Money with Credit Cards

Information verified correct on October 28th, 2016
free money with credit cards

It sounds strange to try and use a credit card to make money, but that’s exactly what strategies like stoozing aim to do.

Stoozing is a way of using credit card introductory offers to try and make money. By taking advantage of balance transfer and purchase rate deals, savvy consumers can pocket interest earnings when they shift interest-free credit card finances to a high interest savings account. Here, we look at credit card stoozing and whether the “free money” is worth the effort.

How does stoozing work?

There are two ways to stooze. One option takes advantage of 0% balance transfer offers, and the other focuses on 0% purchase rate offers. We’ve outlined both strategies in detail below.

1. Transferring your credit card balance to a high interest savings account

This option uses a balance transfer offer as an interest-free cash advance. The credit card issuer transfers up to a percentage of your credit limit into a high interest savings account. Pay back the balance before the end of the balance transfer period and any interest you earn from the savings account (minus credit card fees) is a gain. This method would require the following steps.

  • Open a high interest savings account. Most of these savings accounts have no set-up, maintenance or withdrawal fees. They may also reward you with bonus interest for a limited period, or every month when you meet ongoing conditions. If you’re not going to make regular contributions to your savings account, an introductory rate product will be more rewarding. You can apply for a second and a third high interest savings account to keep getting the introductory rate for new customers.
  • Find a 0% balance transfer card. When you apply for a balance transfer credit card, you’re given space to enter the details of the account you want to transfer a balance from. Here, some financial institutions allow you to enter the details of a savings account. Alternatively, you can contact the credit card issuer over the phone to request a cheque.
  • Earn interest on the balance. When the balance transfer is processed and the payment is made to your nominated savings account, you’ll start earning interest on the balance.

Note that with this type of stoozing, the balance transfer transaction may be processed as a cash advance. In this case, a cash advance fee will apply and the transaction may not be eligible for the 0% balance transfer rate – making the whole process worthless.

2. The 0% purchase rate method of stoozing

The second method of stoozing is to use a 0% purchase credit card in conjunction with a savings account. This option is simpler than the balance transfer method but requires more discipline. The steps involved are:

  • Open a high interest savings account. If you don’t already have a savings account, open one so that you can start growing your balance and earning interest on your money.
  • Apply for a 0% purchase rate card. Keep in mind that the longer the 0% purchase rate period is, the greater the opportunity you’ll have to earn interest on your savings.
  • Use your credit card for all purchases. Instead of spending your own money, start using your card. Then put the money you would normally spend into the savings account so that it contributes to your interest earnings.
  • Make payments off the credit card. You’re required to make the minimum repayment each month, which is usually 2–3% of the balance. Your repayments will increase as you spend more, but so will the interest you earn on your savings.
  • Pay off the credit card. At the end of the purchase rate promotional period, you withdraw enough money from the savings account to pay the credit card in full. Anything left over is a bonus.

This type of credit card stoozing allows you to avoid cash advance fees, which can make balance transfer stoozing more trouble than it’s worth given current interest rates. But it still requires a solid budget and high level of discipline to avoid additional charges or credit card debt.

Pitfalls of stoozing

Stoozing can easily become a liability. If you’re thinking of trying out one of the credit card stoozing methods outlined here, make sure you also consider these common issues.

  • Cash advance transactions. Cash advance transactions attract cash advance fees and high rates of interest. They are usually not eligible for 0% balance transfer offers or any other interest-free promotions. Check with the credit card company about how transactions will be processed before taking action. If it’s a cash advance, the cash advance fee can put you in the red.
  • Transaction restrictions. Not all credit card companies allow transfers from a credit card to a savings account. You will need to contact the credit card issuer directly to confirm whether this is an option.
  • Eligible purchases. 0% purchase rate credit cards don’t cover all credit card purchases; for example, many consider utility and service provider payments as cash advances, which could unravel your stoozing strategy.
  • Variable interest rates. The standard interest rates available on a credit card or savings account are typically variable. This means they could fluctuate with market trends, and may not offer as much value as you predicted at the start of a stoozing strategy.
  • Credit card annual fees. Credit card annual fees can eat up the earnings you make from savings account interest payments. Compare credit cards to find a no annual fee credit card with a competitive deal on purchases or balance transfers if you want to go ahead with stoozing.
  • Late payment fees. If you miss the due date for your credit card payment this type of fee could eliminate any profits. Make sure you make the credit card minimum repayment by the statement due date to avoid late payment charges. You can set up auto-payments from a savings account to pay your credit card minimum repayment each month.

Other ways to get more value from a credit card

Stoozing is rarely worth it but there are other ways to get more value from a credit card. These include:

  • Rewards programs. Rewards credit cards give you points when you make eligible purchases. A no annual fee rewards credit card delivers value from the first dollar you spend. These cards usually only offer extra value when you pay your credit card balance in full by the statement due date.
  • Bonus points. Bonus rewards and frequent flyer points that may be offered when you sign-up for a new card can provide hundreds of dollars of value. Note that most of these offers require you spend an amount in the first three months you have the credit card to get the points.
  • Cashback. Cashback credit cards give you a percentage of your balance back at the end of the month or a one-off payment when you take up a deal. These cards typically don’t offer ongoing value, but may provide a greater benefit for less effort when compared to stoozing.
  • Complimentary extras. Benefits such as travel insurance, programs where you get first choice tickets to concerts and complimentary airport lounge passes are credit card perks that can also add value to the card you choose.

Credit card stoozing relies on savings account interest rates. The higher the rate the greater the gain. Keep an eye on the market to see the latest savings account interest rates. There are also long-term 0% purchase rate credit cards you can use to stooze with introductory periods lasting longer than a year. But even with strong offers, stoozing has more drawbacks than advantages.

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Credit Cards Comparison

Rates last updated October 28th, 2016
Purchase rate (p.a.) Balance transfer rate (p.a.) Annual fee
Virgin Australia Velocity Flyer Card - Balance Transfer Offer
Enjoy a 0% p.a. balance transfer offer for 18 months and also earn 2 bonus Velocity Points in the first 3 months on everyday spend.
20.74% p.a. 0% p.a. for 18 months $64 p.a. annual fee for the first year ($129 p.a. thereafter) Go to site More info
ME Bank frank Credit Card
Enjoy a low and consistent interest rate on purchases and cash advances, combined with no annual fee.
11.99% p.a. $0 p.a. Go to site More info
HSBC Platinum Credit Card
Receive a full annual fee refund and save $149 if you meet the $6,000 spend requirement. Enjoy a balance transfer offer and platinum card benefits such as complimentary insurances and concierge services.
19.99% p.a. 0% p.a. for 15 months $149 p.a. Go to site More info
NAB Low Rate Credit Card
The NAB Low Rate Card offers 0% p.a. on purchases and balance transfers for 15 months. This card also comes with a low annual fee.
0% p.a. for 15 months (reverts to 13.99% p.a.) 0% p.a. for 15 months with a one off 3% balance transfer fee $59 p.a. Go to site More info

* The credit card offers compared on this page are chosen from a range of credit cards has access to track details from and is not representative of all the products available in the market. Products are displayed in no particular order or ranking. The use of terms 'Best' and 'Top' are not product ratings and are subject to our disclaimer. You should consider seeking independent financial advice and consider your own personal financial circumstances when comparing cards.

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