Have you ever been a few days late for a payment to a creditor? Did you open the next month’s bill to find that they increased your interest rate to 29.99%? Ouch. It has happened to me on a few occasions, and sent me scrambling to another company with a lower rate to transfer balances. Well I’m going to show you how you can legally take revenge. In fact, you’ll be using the credit card company’s own marketing strategies against them and it couldn’t be simpler.
Disclaimer: The Associated Pest and its staff is not offering any financial guarantee. This article is for information purposes only. You must be in good financial standing to use this method. DO NOT try this if you already have outstanding credit debt. Pay off those balances first, then try it out if you wish.
These days your mailbox is probably stuffed full of credit card offers. I get about 10 a week personally. Some credit card companies will expend $200 and up per person in advertising/marketing costs just to get your business. Why? Because they know most people will carry a balance from month to month and they will earn interest off those people. Enough over the lifetime of the card to easily recoup their measly $200 investment.
If you receive these offers on a regular basis you are aware of all the introductory interest rates and balance transfer promotions they always offer. This is what “Stoozing” uses to turn a modest profit. You won’t get rich, but you can definitely make a little pocket money, and it’s a relatively simple and hassle-free method. All you need is a little discipline. It’s about time you were rewarded for that good credit score!
The first thing you’ll need to do is to find a credit card that offers preferably a 0% introductory interest rate. If you can’t find that, find something very low, like 1.9%. The lower the better. So stop throwing out those pre-screened offers in your mailbox and open a few. If you’re not getting any in your mail, do a web search and you will find some. Make sure the low rate you get applies to cash advances as well. Sometimes a card will give you 0% on balance transfers and purchases, but charge you for cash advances.
To effectively stooze, you’ll also want an offer for the longest period of time. There are cards out there that will give you an introductory rate for 1 year or more. Some are 6 months, and some are 3 months. The longer you can get the rate, the more money you can earn.
The third key is the credit limit you will receive. The higher limit they give you the better. This translates into more of their money you can use and invest to make your own. This is dependent on your credit, so hopefully you have maintained decent credit standing.
Once you have chosen, applied, and received your card make a cash advance for the highest amount possible. Some cards won’t let you draw out your full line of credit, others may. Again, do some good research before you choose the card. One thing to be careful about is that first payment. Don’t take a cash advance on the entire limit of the card, or you will be over your limit once the first payment is due (The credit card will add the payment amount to your existing balance and it could put you over your limit, the fees ensue, and the offer may be canceled.) So don’t take out the full amount! Calculate what that first payment will be and subtract that from the amount you will take a cash advance on. You will need to read the credit agreement of the card to do your calculations. (Example: If you get a credit line of $5,000 and your first payment will be $100, take a cash advance of $4900 or less to stooze with.)
Once you have the cold hard cash in hand, you’ll need to find a place to invest it. Now, I know you gamblers and Southsnake readers might think the roulette wheel and the dog track is a “good investment”, but it’s not! The stock market is also a bad place when stoozing. What you want is something secure. A money market account, CD, or short term bond is the right investment vehicle. Money market funds are the preferred mode of stoozing because they yield good interest with maximum liquidity. I’ve seen money market accounts yield as much as 6%.
Making money from stoozing is simple. It’s the difference between what you are earning from your investment subtracted from what you are paying in interest to the credit card. So if you are making 5% from a money market account, and paying 0% to the credit card, you are earning 5% on that money. If you are making 4% interest, and paying 1.9% to the credit card you are making 2.1%.
Now again, don’t forget you’ll have to pay the minimum payment each month on your outstanding balance. Just because it is 0% interest doesn’t mean there’s no monthly payment. If you have a money market account you can simply pay the card each month from that account. If you have chosen a CD or bond, make sure you do not put all of your cash advance into the CD or bond. Calculate what the minimum payment for the months you are stoozing will be and hold that money back. Put that in your checking account to pay the credit card each month.
The last, and most important, step is paying the card off before the last day of the billing cycle on the month the introductory rate expires. MAKE SURE YOU NOTE THIS DAY. If you don’t pay this you will lose all that not-so-hard-earned stoozing profit. The creditor will charge their regular interest rate on the balance remaining if it is not payed, so make sure you pay it before this day. Also, make sure to note the processing times of closing your CDs, bonds, or withdrawing your money market funds. You need to get that money liquid in time to pay the credit card off.
To recap: Find a card with no or very very low interest. Take a cash advance. Earn more money in interest FOR YOU than the creditor is charging you. Make sure to make that minimum payment each month. Pay the card off before your last day of the introductory rate. Make a modest profit. You won’t get rich, but you’ll make a few extra bucks, and feel good doing it.
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5 responses so far ↓
1 hoshofburden // Oct 23, 2007 at 11:15 am
Liquidity is definitely the key. If it’s too hard to get your money liquid to pay off your monthly payment, it will be a big hassle. Also something important to remember: most banks give annual rates of interest (APY) and credit cards often talk in monthly interest amounts. Do some arithmetic and make sure you’re actually making money. A good idea is actually finding an online savings account (I recommend HSBC) that yields something decent. That way, online transfers are possible and everything stays liquid.
2 G-man // Oct 23, 2007 at 12:19 pm
good comment hosh, that is why it’s best to get a card with 0% interest. That way you are assured of making money and don’t need to do any math.
3 henkelnz // Nov 1, 2007 at 9:16 am
Two really important things to note about this:
1. It will temporarily lower your credit score, as it will increase the number of inquiries on your report. Do this a lot, and the effect could be significant. The takeaway is, don’t do this if you are planning on taking on a long term loan (mortgage, home equity, car) in the near future.
2. In your calculations, you need to reduce the interest on your investment by your tax rate. The interest you are earning is taxable, and credit card interest is not tax deductible. For example, if your money market account pays 5% APR, and the credit card interest is 1.9%, and your TAX rate is 25%, you should calculate your profit as follows: 5 - ( 5 * 0.25 ) - 1.9 = 1.85% APR, or 0.154% per month. That’s what you’re really earning, assuming that this doesn’t push you into a higher tax bracket. Also, as hosh pointed out, most savings accounts advertise their APY, not APR, so you may have to dig to find it, or calculate it yourself.
Assuming a 6-month period in which to earn, and a 10,000 limit, you’ll be making, at most, about $90, or $15 a month. If the interest on the card is 0%, it’ll be twice that–$30 a month.
For me, a dollar a day isn’t worth this much headache, or the detriment to my credit score.
4 G-man // Nov 1, 2007 at 11:36 am
Thanks for your comment henkelnz. I appreciate them a lot. I have read a few articles that say it actually has helped people’s credit score. I’ve tried all morning to find a link to a great article I read on the subject but lost it. As soon as I find it I will post it on here. Technically, the way credit scores are calculated, as long as you are not carrying balances over 30% of your total credit, this should actually help. Credit score is a combo of balance outstanding to available credit as well as how long you’ve kept cards. If you still have cards you are carrying with no balance, that you have had for a few years as well as your stoozing cards, then stoozing shouldn’t be deterimental. It would actually be more detrimental to cancel a card you’ve had for a long time, rather than a card you’ve used to stooze for 6-12 months.
5 RiTT da ReDD // Nov 3, 2007 at 12:00 pm
I just wanted to throw something in here somewhere between the money markets and the dog track. By taking a little risk you can do a little better that 6%. Especially if you don’t mind screwing you credit up a bit on multiple transfers to buy you time. You can get pretty secure US blue chips giving you between 12 and 20% or if you’re in the mood to double down Chinese emerging market funds have gone up almost 100% over the last year and show no signs of slowing down before the olympics.
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