Stoozing: Create Free Money with Credit Cards

Information verified correct on October 1st, 2016
free money with credit cards

Stoozing is the process whereby you take a 0% balance transfer credit card and make a little profit from it.

The theory is that, instead of transferring a balance to your new card, you request that the credit card issuer transfers the amount of your credit limit – or more likely 95% of it – into a high interest savings account. That way, you pay no interest on the loan, and yet you make some interest from turning it into savings.

The other method of stoozing is to find a credit card with a 0% interest rate on purchases for a period of time, then use that to make all the regular payments you would have made with cash.

You then deposit that cash in a high interest savings account until the time that your 0% deal expires and you have to pay off the amount outstanding, at which point you withdraw your cash, which will have grown with interest, and pay off your balance.

The first thing that may come to your mind when reading ‘free money’ is that no money comes ‘free’. Well, while this method does literally involve no financial expense, it does involve a bit of time and effort.

1. What is stoozing? Stoozing is taking advantage of an introductory interest rate on finance (typically credit cards), and then putting that money into a high interest savings account. Since the interest rate in the savings account is higher than the introductory interest rate, you can earn money from it.

2. Would it be a good idea to do this now? Yes and no.

Yes, since many people are strapped for cash and can benefit from any form of ‘free money’. The only cost that ‘stoozing’ involves is the time and effort.

No, because interest rates are dropping at the moment. Whereas introductory credit card offers also stay around 0-3%, high interest savings accounts tend to drop if the Reserve Bank makes cuts. You can still make money from stoozing, just not relatively as much as you could have when interest rates were higher.

3. How would you go about it? The first step is to open a high interest savings account. All of these accounts have no setup fees, maintenance or withdrawal fees. Try to go with an account that has the highest introductory rate possible. For the sake of this example, we’ll use the St.George ‘Direct Saver’ account, with a rate of 5.75% (current rate as of June 15th 2009 is 4.50% – old rate will be kept for sake of calculations below).

Next, You need a credit card with a low introductory cash advance rate on it. Typically, credit cards don’t offer introductory rates on cash advances, only purchases.

Citibank’s ‘ReadyCredit’ offers 19.99% p.a. on purchases AND 7.9% p.a. for 24 months on balance transfers, but unfortunately has become unavailable for online application from Citibank.
By using ReadyCredit as a case study, the next step is to withdraw the cash amount you wish to invest into your high interest savings account, let’s use $10,000.

  • Over 6 months, the $10,000 in your Direct Saver account will have increased to $10,287.50.
  • Over 6 months, the $10,000 you withdrew from ReadyCredit will have amassed to $10,145.
  • Therefore, after you’ve paid off the introductory ReadyCredit offer, you’ve earnt $142.50 for sitting back and watching your money grow!

As you can see, stoozing is fairly easy. Since interest rates aren’t too high at the moment, you’ll need to decide whether it’s worth the effort for your investment. You’ll also need the discipline not to go and spend your huge cash advance as well.

Stoozing Pitfalls

Credit card issuers are not stupid. They are aware of the practice of stoozing, and may view it as cheating the system – using their very generous 0% offer for slightly disingenuous purposes. For this reason, you need to make sure that any 0% deal you are checking will actually allow for a transfer of your credit to another account. Some will not. Others may do this for you, but charge a fee for doing so, effectively making it a pointless exercise.

The longer the 0% deal, the better. Unfortunately, in Australia, these 0% deals are usually for six months. That would clearly not give enough time to use a savings account that locks your cash away for a year for a higher return. Even higher returns don’t reward very well in this economic climate. You would also need to keep a close eye on the deadline for collecting your “winnings” and paying off the credit card loan.

The second option also has its issues. The last point above obviously applies, but you would also need to make sure that the regular spending on your credit card does not start to include irregular spending that pushes your balance into dangerous territory. For stoozing to work, you must be able to easily pay off your debt before the offer period expires.

Lest you forget, both of these stoozing methods still require that the minimum payment is made on your debt each month, or the 0% offer could be withdrawn.

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Credit Cards Comparison

Rates last updated October 1st, 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
St.George Vertigo Visa
Introductory offer of 0% p.a. for 18 months on balance transfers and 1% p.a. for 12 months on purchases, plus a low annual fee.
1% p.a. for 12 months (reverts to 13.24% p.a.) 0% p.a. for 18 months $55 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

* 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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