As of today, we are officially totally debt free after paying off a £5k stooze card. Debt-free is a great feeling.
Ok – we still have our £136k mortgage to pay-off but the way house prices are going round here, our LTV is below 50% by now! But no credit card debt is nice.
Still, it’s good to finally have the money paid back. I borrowed around £7,500 back in November 2019 for a 0% balance transfer fee and 20 months at 0% APR. With a deal like that, it’s hard to say no isn’t it?
In part the money was to pay-off higher than usual spending including a ski trip [LINK], car insurance/servicing/tyres, a family holiday to Italy, home costs and a couple hundred pounds on good Belgian beer. We also managed to put some company expenses onto the credit card bill, have them repaid to our current account – boosting our cash flow.
For those who don’t know, Stoozing is where you borrow money at a low rate (often on a 0% balance transfer) and use the money to safely make money, perhaps by putting the money in a savings account).
The downside of Stoozing is threefold:
- You need to repay the money – this should not be a surprise to anyone other than a complete idiot. But more practically, you need to have the money to repay when its due
- You need to may monthly repayments – in my case 2.25%. This ends up being a constant reminder that you have a debt and a monthly drip, drip of money out of your account
- Your credit score gets trashed – whilst for Financial Independence credit ratings are a bit funny, having thousands of pounds of unsecured personal debt is a red flag for lenders.
I had a bit of trouble with number 1. We’ve got money but with LISA/ISA top-ups in April and other things financial, having £5,000 lying around to make payment on the 18th of June isn’t that simple. Miss the deadline and the 20.9% interest kicks in which is about £3 a day – enough to give me mild heart palpitations.
Number 2 was not a big problem – but I don’t like being reminded of my stooze fetish.
For my credit score, twice I needed to take out a personal loan in the last 20 months. Both times it was for a short term (days or weeks) and in each case I made investments which paid-off. But still, I was insulted that the Nationwide (whom I have banked with for 20 years) would offer me a loan at 8.9% APR when their own marketing suggests 2.9%. That 6% surcharge could add up to £1,500 a year for a 25,000 loan – or in my case, £41.37 and £16.28 on the two loans. Ok – not life changing amounts of money but still, money I’d rather keep to myself.
Debt Free but Tempted to Stooze Again?
I’m in two minds about ever stoozing again. It’s getting to the point in our financial lifecycle where we’ll have a surplus of money – I’m selling down VCTs, nursery costs are coming down, the side hustle is generating good cash flow, our incomes cover outgoings (more or less) – why would we want more money?
Of course, if we had to buy a new car or ski trip (hopefully not and would be nice respectively) then a balance transfer would help our finances.
Of course, there’s the idea that if you borrow money (and that’s what Stoozing is) and invest it, you can make better returns – and on this money we did alright. But taking out a £10,000 stooze card will only mean about <1% leverage – not enough to make a huge difference to returns. Also, that extra £10,000 comes at a higher tax rate than other money – meaning returns aren’t as good and also the cost of Stoozing isn’t as good as it used to be.
Ahhh… Back in the Good Old Days
Back 13 years ago I had at one point over £40,000 in stooze cards and it was (mostly) stuffed into my offset mortgage at 5.25% (a good rate at the time). This made me around £2,000 a year after fees. Easy money! I kept that up for a few years and being financially literate and flexible, it was never a problem to have that money. Back then, you could get transfer a balance onto a credit card, pay 0% fees and 0% interest for 30 months – free money! Of course, the company hopes that you fall foul of their many pitfalls and they start charging you. But I (and many others) didn’t lose a penny.
Now of course, times have changed. The stooze cards are not as generous and they generally end up costing you. Given that our mortgage is at 1.79% fixed and it is our only debt now, this is our WACC figure. You can’t beat 1.79% with a 3% transfer fee, 0% APR and 2.25% monthly repayment – you’d need the interest free deal to last for 27 months or longer and even then, I’m not making much money on the arbitrage.
Looking to the Future
Our current mortgage is up in 2 ½ years. I foolishly fixed for 5 years at 1.79% with the Nationwide and if it was a variable rate we could swap for a lower rate and rates right now are rock bottom! Now that we have no debt, I’d like to see if I can build up our credit rating to ensure that we can get a great mortgage in 2 ½ years – possibly offset. If there was a 20 year offset mortgage available at 1% I’d get it – interest only for 20 years and paying hardly anything for it. Things might be like that in 2024 – who knows. In the meantime, I think that’s the end of my stoozing days, I’m not Debt Free and happy (except for the mortgage of course).