Stoozing involves borrowing money at 0% interest and investing it to earn a profit, often using introductory credit card offers. However, changes in banking practices and regulations have made it less profitable. Stoozers must have discipline and select safe investments. Related practices include rate pie, which reduces debt service rate, and rate tarting, which credit issuers view with disdain. Good credit is necessary, and timely payments are crucial.
Stoozing is the practice of borrowing money at a 0% interest rate and investing it to earn money. Usually used in conjunction with introductory credit card offers, the cloak and its variations are employed to earn relatively small amounts of money. Changes in banking practices and in government regulations that control banking and credit have made it more difficult and less profitable to “go on strike.”
In the latter part of the 20th century, the United States banking industry was largely deregulated, and competition for business intensified. Many banks began offering special incentives to entice consumers to apply for their credit cards. One of the most popular was an introductory period, typically between three and 18 months, during which interest would be waived on purchases and balance transfers from other credit accounts. The Stoozers would apply for these cards and then collect a cash advance onto the new card, depositing the cash into a high-interest savings account or short-term certificate of deposit (CD). At the end of the period, the money would be withdrawn and the principal returned to the credit card account, leaving the crank with a small profit.
Most of the consumers who opened these new accounts took moderate advantage of the introductory offers, transferred existing balances from high-rate accounts and benefited during the few months of the incentive. Some consumers, however, saw the potential. Among these users is said to be a man in the UK named Stooz, for whom the practice is named. Apocryphal stories abound of people who have made thousands of dollars in lockdown.
Stoozing requires a certain amount of discipline. During the 0% interest period, for example, even though the interest rate charged is 0%, payments are still due on the account every month. A single late payment will result in late fees and penalties that could be greater than the anticipated earnings; late payments may also negate the 0% interest incentive entirely. Stoozers must also select absolutely safe investments, such as savings accounts, otherwise they may not have the principal to pay back to the credit issuer at the end of the 0% interest period.
The profits made by stokers may be small, but some credit card issuers have taken steps that have had the effect of discouraging cover-up. For example, most balance transfers and cash advances may still carry 0% interest rates during introductory periods, but will incur a fee, typically 2% of the total amount transferred or collected. When interest rates on savings accounts and short-term certificates of deposit are low, this is usually enough to eliminate the possibility of stopping.
A practice related to stoozing is rate pie, which involves applying for a credit card that offers a low introductory interest rate and transferring balances from existing, higher-rate cards. The rate pie usually does not offer the opportunity to make a profit, but it does reduce the borrower’s debt service rate. Credit issuers don’t like rate pies because they, the lenders, expect to earn money from credit account balances after the introductory rates have expired. Rate tables, as the name implies, don’t show loyalty to one lending institution, but work to move your outstanding balances to accounts that offer the lowest rates.
Stuttering and rate tarting are legal practices, but the credit industry tends to view wads and rate tarting with disdain. To be successful, both stokers and rate tarts must have good credit, without which they would have a harder time qualifying for the credit accounts they seek to exploit. The stricter credit practices adopted after the great recession of the early 21st century, for example, make it more difficult to qualify for any credit account that could be stolen. Credit issuers will only offer these incentives to the most creditworthy consumers.
Similarly, cranks must be scrupulous about timely payment, not just on the accounts they are exploiting, but on all accounts. Some US credit card agreements require punitive action, including revocation of any incentive program, if the consumer is late with other credit obligations. Therefore, stokers and rate boards should read credit agreements carefully, taking special note of the different punitive actions the credit issuer can take and what triggers such action.
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