Make money from credit cards
Michael Clarke, This is Money
5 July 2005
RATE tarts reportedly cost credit card companies £1bn a year by regularly switching from one 0% deal to another. But self-styled 'stoozers' go one step further by actually making money out of the card companies by exploiting balance transfer loopholes.
The practice, where a customer draws the maximum amount on a 0% card to either put in a high interest account or to offset a mortgage, has been popular with sophisticated card users since 0% deals first became popular in early 2000.
At the end of the 0% introductory period, stoozers either withdraw the money from where it has been invested and use it to pay off the full credit card balance, or switch to a new 0% deal.
However, where card providers have been targeting the rate tarts by introducing an array of fees on balance transfers, they are now turning their attention to the army of stoozers - taken from the nickname of an anonymous borrower who gave publicity to credit card loopholes.
Richard Mason, 41, has been stoozing for three years and saves around £300 a month on his mortgage payments by offsetting his Abbey mortgage with money borrowed from credit cards.
He says: 'It is still certainly possible to do it but the card companies have wised up a little and you won't be able to make as much money as you used to. However, it is still relatively easy to take advantage of the deals as long as you are disciplined.'
One way card providers are stopping customers doing this is by preventing them from transferring money into current or savings accounts. While it is still possible to transfer balances between credit cards, most card providers can now recognise bank account numbers and stop transfers to current accounts.
Currently, only cards offered by Egg, MBNA, Alliance & Leicester, Abbey and Virgin allow customers to pay money directly into a bank account. Egg and Abbey have started to limit customers to 95% of their credit allowance.
The other area for attack is balance transfer fees which are eating into any potential profits from stoozing. Most of the cards that allow balance transfers straight into current accounts now charge fees of either 2% or up to £50, whichever is smaller.
In addition, the number of cards that allow free balance transfers from a rival lender has diminished. And there are other catches. If you drew the money out on the card instead of transferring the balance, you'd be charged cash withdrawal fees of up to 2% and the 0% offers can exclude cash withdrawals.
Mason, director of financial comparison website moneysupermarket.com, currently has £45,000 offset against his mortgage but at one stage had up to £70,000 in savings, cutting the interest he was charged.
He has three 'golden rules' which he strictly follows. The first is to establish direct debits to pay the minimum monthly payments on card balances so he doesn't miss a payment and lose the introductory offer deal.
The second is to set up a money management service with a provider such as Egg to keep an eye on when the 0% balance deals are coming to an end. And the third is to apply for a new card one month before an old offer is coming to an end.
It is not advisable to attempt stoozing if you are already in debt or have a lax attitude towards managing your finances.
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IMO, it should be illegal to sell product below cost --- why the heck there are no anti-dumping laws in the UK?
Michael Clarke, This is Money
5 July 2005
RATE tarts reportedly cost credit card companies £1bn a year by regularly switching from one 0% deal to another. But self-styled 'stoozers' go one step further by actually making money out of the card companies by exploiting balance transfer loopholes.
The practice, where a customer draws the maximum amount on a 0% card to either put in a high interest account or to offset a mortgage, has been popular with sophisticated card users since 0% deals first became popular in early 2000.
At the end of the 0% introductory period, stoozers either withdraw the money from where it has been invested and use it to pay off the full credit card balance, or switch to a new 0% deal.
However, where card providers have been targeting the rate tarts by introducing an array of fees on balance transfers, they are now turning their attention to the army of stoozers - taken from the nickname of an anonymous borrower who gave publicity to credit card loopholes.
Richard Mason, 41, has been stoozing for three years and saves around £300 a month on his mortgage payments by offsetting his Abbey mortgage with money borrowed from credit cards.
He says: 'It is still certainly possible to do it but the card companies have wised up a little and you won't be able to make as much money as you used to. However, it is still relatively easy to take advantage of the deals as long as you are disciplined.'
One way card providers are stopping customers doing this is by preventing them from transferring money into current or savings accounts. While it is still possible to transfer balances between credit cards, most card providers can now recognise bank account numbers and stop transfers to current accounts.
Currently, only cards offered by Egg, MBNA, Alliance & Leicester, Abbey and Virgin allow customers to pay money directly into a bank account. Egg and Abbey have started to limit customers to 95% of their credit allowance.
The other area for attack is balance transfer fees which are eating into any potential profits from stoozing. Most of the cards that allow balance transfers straight into current accounts now charge fees of either 2% or up to £50, whichever is smaller.
In addition, the number of cards that allow free balance transfers from a rival lender has diminished. And there are other catches. If you drew the money out on the card instead of transferring the balance, you'd be charged cash withdrawal fees of up to 2% and the 0% offers can exclude cash withdrawals.
Mason, director of financial comparison website moneysupermarket.com, currently has £45,000 offset against his mortgage but at one stage had up to £70,000 in savings, cutting the interest he was charged.
He has three 'golden rules' which he strictly follows. The first is to establish direct debits to pay the minimum monthly payments on card balances so he doesn't miss a payment and lose the introductory offer deal.
The second is to set up a money management service with a provider such as Egg to keep an eye on when the 0% balance deals are coming to an end. And the third is to apply for a new card one month before an old offer is coming to an end.
It is not advisable to attempt stoozing if you are already in debt or have a lax attitude towards managing your finances.
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IMO, it should be illegal to sell product below cost --- why the heck there are no anti-dumping laws in the UK?
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