The Article of Education Loans

Most people are well aware of the old credit card game of exploiting 0% balance transfer deals to avoid paying interest on their debt, shifting the balance from card to card, always moving the debt along before the end of the introductory period to avoid interest charges almost indefinitely. While this still works well enough, the introduction of balance transfer fees has somewhat cooled many people's enthusiasm for this activity. Although you can still save money by doing this, it is no longer completely free, and in any case the tightening of the credit market means that it can be more difficult to get a credit card these days, especially if you have debts or a less than perfect credit rating. It is fast approaching the time for a lot of people that serious thought needs to be put into finally trying to clear those debts rather than moving them onto yet another card.

There is a more subtle approach to making 0% deals work in your favour though, and as it only applies to people with no debts and good credit ratings, the introduction of the balance transfer fee, although still unwelcome, has not had as profound an impact. We are talking about the activity informally known as 'stoozing'.

This practice requires a balance transfer credit card that allows the facility to be used to pay off bank account overdrafts, as well as debts held on other cards. Not all cards will allow this, so check the small print before applying.

The basic technique is to acquire a suitable credit card with a high credit limit (hence the need for a good credit rating) and use it to pay off an 'overdraft' in your current account. In reality, this overdraft doesn't exist, but your credit card issuer is not to know this so long as you don't choose a card issued by your own bank!

If you transfer your entire credit limit into your current account, you can then transfer the funds into a high interest savings account where it can sit for the length of the introductory period, steadily earning you money in interest payments, before transferring it back on to the credit card to clear the debt before interest begins to be charged. But how effective can this really be? Let's look at some figures.

For a simple example, suppose a credit limit of $10,000 was transferred for a period of 12 months. This would earn you $600 over the year if you put it into one of the best buy accounts earning 6% or more in interest. Of course, these days a balance transfer fee will probably apply, which at a rate of 3% would cost you $300, leaving you $300 in profit.

This equates to a 3% return on the deposit of $10,000 which isn't perhaps that impressive - until you remember that the original investment wasn't made from your own money, but from the credit card issuer's funds, so it really is money for nothing.

Of course, the amount you can make with this technique will vary according to the various rates and charges of the individual credit cards and savings accounts you use, and in most cases tax will also be due, but the maths is simple to see if you will come out ahead. And, even if the actual profit involved isn't huge now that balance transfer fees are here to stay, there's at least a little satisfaction to be gained from profiting at the expense of huge financial corporations!