Master Your Card

OK, let me start by saying the English have a very funny sense of the English language. The term stoozer certainly isn’t one I’d pick, but then, neither is loo for a toilet, dog and bones for a phone, or take the mickey out of someone for teasing (though I’ve been known to use that one). But, this is a post about stoozing and not the English’s choice of slang words, so I’ll move on.

Stoozing isn’t really used much in the U.S. The more common name is credit card arbitrage – or, the act of taking advantage of an interest free period to make money. What typically happens is a stoozer will get a credit card at 0% for a period of time and then borrow up to their credit limit, taking that money and depositing it into a high-yield account.

Now that we have a general idea of what it is, let’s look at it step by step.

Step # 1 – Find a suitable 0% credit card

Most credit card companies are still offering these deals. You may have to have pristine credit to get it, but the deals are out there. You want to shop around for the card that offers 0% for the longest amount of time. Usually you can find a deal averaging six to 18 months. You don’t have to worry about the interest after the introductory period because you should have the card paid off before then. Remember, this works best when you don’t carry a balance after the 0% offer; otherwise, the interest you pay to the credit card company completely negates the interest you earn. Also consider what your credit limit will be as well. A higher limit will allow you to earn more money.

Now, here’s where you’re going to have to pay attention. Some 0% offers may not allow the promo rate on advances or transfers, only on purchases. You’ll want to avoid those in this case. The best case scenario is to find a card that allows free electronic transfer from your card to an account of your choosing, or that offers the 0% promo via checks.

Step # 2 – Find a high-interest savings account and deposit

You may already have one in place or you may need to open one; either way, the point is to find an account with the highest interest yield you can find. Check with the banks and credit unions in the area and get their rates, but don’t be afraid of brokerage houses and online savings. Sometimes the rates are higher online than in-store, so you just may get a better deal. Not to mention the convenience factor of being able to easily transfer money night and day from your accounts, all in the comfort of your own home. Once you’ve found yourself a nice savings account, transfer the entire limit amount from your credit card to the savings account.

Step # 3 – Paying off the credit card

You’ll need to time this just right when paying off your credit card. Of course you want to squeeze as many interest-earning days as possible out of the deal, but you also have to remember that the card must be paid in full before the offer expires. You need to account for transit and processing time, too. So, about a week or so before the promo expires, transfer the original credit limit back to the card to zero it out. The money that’s left over is your profit.

Here’s what I’ve done. I’ve kept the profit in the savings account and got myself another 0% card and started all over again. But, I’m building more each time because the original profit is still earning interest and increases the balance that I’m depositing from the new 0% promo card. And, I’m a rate shopper which means I look for the best rate. If the first account I had was no longer the best rate, I moved my money and opened a new account. If you’re going to milk the system, you might as well go for broke, right? However, I personally chose only to do one card at a time because I didn’t want to have dates to keep up with and accidentally forget to pay one off in time. That’s just me, though. Plenty of people stooze multiple cards at the same time.

Reminders and Bewares

First and foremost, this technique will work with any amount, so don’t think that you have to have a large balance to pull this off. If you continue to work the system, you’ll be compounding the amount of money you make out of it, which will eventually add up to a pretty penny. Just be realistic about your expectations going into this venture.

Second, there’s nothing to say that you can’t stooze multiple cards at once. However, be aware of the number of open accounts that you have “maxed out.” That can damage your credit score significantly. Just be cautious about your outstanding debt and you should be fine.

Third, remember to make your minimum payments on-time every month. If you don’t, you could lose your 0% interest and then your stoozing will be wasted. The best thing to do is to set up an automatic draft every month, either through your bank or through your online bill pay. This ensures that money is sent out and the only thing you have to worry about is making sure you have enough in the account when it comes time to pay the bill.

Fourth, don’t forget when the 0% ends. You need to pay the balance back before the expiration date so that you’re not paying interest. As I said, you negate your earnings if you pay interest.

Finally, be very cautious if you decide to invest this money in the stock market. You CAN lose money. I’ve written a post before about investing with a credit card. Technically, it’s not allowed, but there are ways around it. If you do go around it, just be careful about what you get yourself into because you have to pay that back when the promo runs out. You don’t want to be stuck with no profit and a maxed out credit card at $10,000. That will certainly affect your credit score, and I imagine your mood.

There you have it folks, stoozing 101. It’s an easy way to make money, that’s for sure. And, there’s an online community to offer tips, tricks, and tidbits on the best cards to use for this technique. So, if you’re new to stoozing and want to read what others have done, check out stoozing.com.

So, I’ll ask again. Are you a stoozer?