Is stoozing worth the hassle? We do the maths

Putting money into an Isa is more lucrative than it used to be thanks to higher rates in cash accounts. With top easy-access products offering 3%, someone with the maximum £20,000 allowance could make £500 tax-free in a year.

But this limit works on the ‘use it or lose it’ principle – so if you don’t deposit the full £20,000 in one year, you cannot carry any of it forward to the next. For many of us, though, finding the spare cash to fill an Isa pot can be tricky, particularly given the rising costs of everyday items.

One solution, says Andrew Prosser, head of investments at platform InvestEngine, is to apply for an interest-free credit card with a long life and use that for day-to-day spending so you can fill your Isa pot with the rest of your cash.

This approach, known as ‘stoozing’ could net some brave savers an annual profit of hundreds of pounds. ‘Using your money saved from stoozing to max out savings pots and Isa allowances instead of day-to-day spending can be an effective way to make the most out of interest-free credit,’ says Prosser.

‘It is completely legal and 
potentially profitable for those who are financially savvy.’

However, he warns that it can come with a sting in the tail. For a start, only those with excellent credit ratings can apply for 0% cards and if you forget to pay it off before the interest-free period is up, you will be left in debt.

‘Mistakes can be costly, even more so for those who have struggled with debt in the past,’ says Prosser.

Stoozing to fill your Isa is, therefore, a personal decision.

Whether it stacks up will depend on how well you manage your finances, as well as your credit score and appetite for financial administration.

How stoozing can stack up

If you are deciding whether stoozing can make you cash, the first step is to check whether you can fill up your Isa by other means, such as from other savings accounts you may have.

While everyone can earn £500 from savings interest without paying tax on it (and basic-rate taxpayers can earn £1,000) the interest you receive can stack up over time in a higher interest rate environment, so it makes sense to move it into Isas.

Choose from instant-access Isa products at around 3% interest, or lock your savings away for a year or more for rates of more than 4%.

If you want to stooze to fill your Isa further this tax year or to plan for next year, you will also need to check whether you are eligible for interest-free credit cards.

At present, some have purchase periods of up to 22 months before you’re liable for any interest, although only those with the highest credit ratings would qualify.

If you are eligible, you will also be given a limit of the amount you can spend on the card. Usually this will be between £3,000 and £4,000, but it can be as high as £10,000, depending on your earnings and financial situation.

Putting all of your everyday spending on this card – from the supermarket shop to meals out and leisure – could leave you with cash for your Isa.

The average monthly credit card spend is just over £800, so you could max out one of these cards in five months and put £4,000 away into an Isa to earn you £162 
a year in free money.

Repeat the process with another card, or with the same one if you have a higher spending limit, and you could end up with much more.

A slippery slope

While stoozing can get you money for nothing, there are many who counsel against it, and those who choose to do it must obey stringent rules if they are not to suffer losses.

Philly Ponniah, financial coach at phillyfinancial.co.uk, says using 0% credit cards can be a ‘bit of a slippery slope’ as people can end up spending money they haven’t got. ‘It doesn’t set a good precedent,’ she says.

If you use a zero-per-cent credit card, you must make a minimum payment every month – usually about 2.5% of the balance. If you don’t, you will ruin your credit rating and so won’t be able to get further borrowing. You may lose the interest-free aspect of your card as well.

You must also ensure that you put the amount of money you owe on the card away in a savings account, rather than getting used to having that amount to spend, so that you can pay it off at the end.

Do not ever use the card to withdraw cash, as this will cost you a huge sum.

At the end of the interest-free period, pay off the card immediately, as rates rise straight away.

‘Late-payment penalties could outweigh any potential interest earned, not to mention the knock-on effect on credit scores and the ability to borrow in the future,’ says InvestEngine’s Prosser.

While many people could take out several credit cards of this type without penalty, if you have a big purchase coming up – such as a car or a mortgage – for which you’ll need a credit check, it is worth holding off to ensure you are able to get the money you need.

If you do not decide to stooze given the dangers, Ponniah says it is worth exploring other avenues to help make spare money for savings.

‘Use rounding-up features on your banking app,’ she says. ‘When you spend, it rounds up to the nearest pound and you can choose to multiply this.

‘And take your bank details off apps such as Uber Eats, eBay and Amazon so that you have to get your card to input the details. This cuts easy spending.’