Balance Transfers and "stoozing" - What to Watch Out for

By: Andy Adams

Balance Transfer card are becoming more and more popular, mainly due to receiving positive press by the "stoozing" method (taking advantage of cheap borrowing when there is no real reason for borrowing), where people not only pay off credit debts, but earn money from them. This is done by transferring large sums to high interest earning accounts for the duration of 0% periods with credit card. Once the 0% period is up then the debt is repaid, whilst keeping the interest accrued for yourself.

The popularity of stoozing has risen from unknown in 2000 to being a commonplace feature of new cards in 2006, with 0% on balance transfers being a basic feature nowadays.

This is a risky money earning tactic and requires a lot of discipline and self control when it comes to spending money, considering the best way to do this is to transfer your entire credit limit to a high-yield savings account. If you are tempted to spend the large amount of money sitting in your account chances are you are not going to be able to wait out the time to earn money from the stoozing method.

The basic form of this practice is to perform a single debt-swap as mentioned above, but in order to earn a decent profit from this practice you should be able to manage multiple debt-swaps. Stoozed balances are constantly being eaten away due to monthly servicing repayments as well as needing to repay the total debt by the end of the introductory period.

Because this process relies on the introductory period of credit card companies it means that you need to keep applying for new cards, with credit checks being made each time it would make sense to not apply for multiple cards in a short space of time. When applying for new cards it means that you need to be thorough in your research of the new introductory offers as they can vary from one of the following:

Purchase Rate Offer
The transferred balance will be subject to the same rate as purchases.

Teaser Rate Offer
This is normally a very low rate, often 0% but only for a fixed time of normally 6 to 15 months. After this period the rate tends to follow purchases again.

Fixed Life of Loan Offer
This rate is normally best for if you are on time with your payments; the rate stays low until the transferred balance is paid in full. This is a great way to save interest without having to initiate another balance transfer after the teaser rate offer expires.

The one thing to remember with all transfers is they may be subject to a transaction fee, usually of 1% - 5% of the transferred debt. The popularity of stoozing has risen from unknown in 2000 to being a commonplace feature of new cards in 2006, with 0% on balance transfers being a basic feature nowadays.

An example of how stoozing works
When borrowing ?8000 over 12 months with 2% balance transfer fee and 2% monthly repayments averages at about 90%, the net profit is around ?288-160, as this shows that with just one balance transfer being run at once the earnings are small, this is why stoozing is a long-haul process where you need to make multiple credit cards work for you and to make a lot of applications for further cards over multiple years.

Whilst it's an effective way to earn money it is not without risk, many people have been tempted to dip into the money being held and so end up with real debts. Others have not kept on top of repayments or lost concentration by managing multiple cards. It does require a lot of concentration especially if you really go for it and manage multiple credit cards at once.

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