Tuesday, September 4, 2007

Stoozing is a slang term used to describe the act of borrowing money at 0% (typically on credit cards) and earning interest on the money and paying it back before the 0% period ends. Stoozing can also be viewed as a form of Arbitrage. The word "Stoozing" came into existence from posts on the Motley Fool UK discussion boards in early 2004.

There is fierce competition in the credit card industry so that many lenders have introductory periods of between 3 and 18 months during which they charge 0% interest on the card balance (commonly known as 0% interest Balance Transfers). This is done as a way of attracting customers. You can take advantage of the 0% introductory period by withdrawing the money to pay off your debt, as long as you ensure that you pay of the minimum monthly charge that the lender will charge you.

A 'stoozer' borrows money on a 0% interest-rate credit card, and then puts the cash in a high interest savings account. Once the 0% period is over, the 'stoozer' pays the original capital back and keeps the interest earned on the savings. Or better still, they roll the original loan over to a new 0% card, and keep accumulating interest. While the simplest form of stoozing will involve only a single debt-swap, with one account directly repaying another, successful stoozing relies on being able to muster several transferred balances at the same time in order to generate usefully large profits (or savings). Effective stoozing also relies on making effective applications for further credit.

The popularity of stoozing, deliberately taking advantage of cheap borrowing where there is technically no need to borrow, has increased steadily in the UK in recent years as the availability of 0% borrowing has itself gone from being almost unheard of before the year 2000 to becoming an established feature of almost every new credit card currently (as of 2006) offered in the UK. Online sites, such as Savings Agent.com, allow you to find and maximize the value of stoozing by transferring balance between credit cards.

If you are the sort of person who can't resist temptation, then stoozing is not for you