I received a letter from one of my stoozing credit cards offering my a 0% Balance Transfer Offer for 24 months. If I don’t need the money, but should I take it anyway?
I’ve stoozed before over the years and it’s always worked out for me – I get the cash now to invest elsewhere, I make the monthly payments and when the time comes for the remaining balance to be repaid, I either pay for it out of cash. It’s a simple way to make some free money, risk free*.
Quick Recap – What is Stoozing?
Stoozing is where you borrow money cheaply that you don’t really need and use it to earn a better return elsewhere. In the past, I took out 0% APR deals and pumped the money into my offset mortgage at 5.25%. On £10,000 that’s £525 a year in savings. You could also invest that money in the stock market if you like risk and sell your investments to make the payment at the end.
There’s often a balance transfer fee (in my case 2.9%) which needs to be factored in but it’s fairly easy to construct a calculation of what the cost is and the value of that money.
Risk Free Return
To calculate the value of the money, it’s good to know where will the money end up. In the old days my mortgage was 5.25%, so a 2.9% fee breaks even within a year. Beyond a year you are in the money. My mortgage is the only permanent debt that I have and at 1.79% it’s not that high. In fact, with the 2.9% balance transfer fee and using that money to overpay my mortgage works out at around the value as my mortgage (2.7% saving vs. 2.9% fee). This means if I did stooze it would end up costing me money (based on the RFR of 1.79%).
0.2% – My 2 Red Cents
On £10,000 this works out as £20 – a trivial sum in the scheme of things. But what is the real value of having that easing of cash flow? I feel that I could, with a bit of extra cash, invest the money and do better than 1.79%. I’ve even been a bit naughty recently and used my arranged overdraft at usurious rates of 39.9% – always only for a few days and also cost benefit analysed (money invested in side-hustle) – but the fees have ended up costing me a few quid. Stoozing would also be cheaper than the personal loans I’ve taken recently which were at 2.9% and 8.9% APR – so this is a cheaper money.
Another thing to consider is that I want to re-mortgage my £130,000 mortgage in 2 years and I need a squeaky clean credit record to get what I want which is an offset mortgage at 0% APR for £260,000. I can then use this extra money to invest and become even richer! (That’s the dream anyway but the truth is that I’d like to get a good rate, offset if possible, maybe increase the mortgage size and save money overall). Will stoozing affect my chances?** The truth is; it’ll probably only help as it shows that I’m a responsible debtor.
So Should I Stooze Again?
I did say recently that I have a very strong cash flow position at the moment but, there’s always ways to invest your money. I’m also considering buying an electric car with company cash and the money might soften the blow. I’d be interested in other people’s opinions on this. I was considering stepping away from the precarious life of a monetary bulimic who as soon as he has money in his current account is splurging it on investments here there and everywhere.
So what do you think? Stooze again or just not bother?
*It’s not exactly free, and it’s not exactly risk-free – especially if you get into the spending habit and end up deeper in debt.
**Credit checking agencies don’t give a toss about how much wealth you have – just how much debt you have and how likely you are to pay them back. They will care more about unpaid parking tickets than you having a million pound ISA portfolio.