How to earn £400 in two years without using any of your own money

Fancy making £400 in “free” money? Well, it turns out you can with a saving hack known as “stoozing”.

This nifty little trick, popularised by MoneySavingExpert’s Martin Lewis, involves using a credit card with 0pc interest on purchases to free you up to earn interest on the rest of your cash. 

After a set amount of time, you repay the debt with the money you’ve saved – and any interest you’ve earned belongs to yours truly.

If you’re up for putting the work in, you can make a decent bit of free cash out of stoozing. 

Here, Telegraph Money explains how it’s done – take note, this is only for the financially savvy who are prepared to follow the rules to the letter.

What exactly is stoozing?

Stoozing is the art of earning interest on cash that credit cards lend you at 0pc interest. 

It had its heyday around two decades ago when credit card deals were plentiful and savings interest rates were high, but hasn’t been worth the legwork for the last few years, since savings rates have been in the doldrums. However, now that we’re seeing higher rates – with several savings accounts paying 5pc – stoozing is beginning to look a lot more lucrative. 

The first step involves you taking out a 0pc purchase credit card and using this for your everyday spending.

As a result, cash can accumulate in your current account – you should pay this into a savings account to earn interest. Look for a savings account with the highest rate possible. 

When you reach the end of the interest-free purchase period on the credit card – some borrowers can get deals lasting up to 23 months – you can use your savings to clear the debt. The savings you’ve earned in that time are your reward for going to this effort.

There’s also the option here to transfer the balance to another 0pc card to keep the stooze going. Be sure to find one that doesn’t charge a balance transfer fee or interest.

While stoozing works, it takes discipline, and is only for the debt-free and financially savvy.

Hannah McEwen at MoneySavingExpert, said: “If you’re not financially on top of things, don’t understand, don’t have financial self-discipline – or have other credit card or loan debt – it’s too risky, so steer clear.”

How much could you potentially make?

We asked MoneySavingExpert to talk us through how this could potentially work in practice for someone who backs themselves to follow the rules unwaveringly. Note that this is an illustrative example only. Rates can, and are, changing. Amounts you can make will also depend on the products you are eligible for.

Say Sally Stoozer gets a 23-month credit card with a £5,000 limit. She usually spends £1,250 a month from her bank account, but now she puts all that spending on the card. 

Each month, she uses the cash in her bank account to make the minimum payment on the card, and transfers the rest to an easy-access savings account, which pays 3.6pc.

After four months, she has around £4,913 in savings. She transfers this to an 18-month fixed-term account with an interest rate of 4.9pc.

At the end of the term, she has around £5,281 in savings. The account matures in time for her to clear the remaining balance on the credit card before her 0pc deal ends, and she has £405 leftover that’s hers to keep.

When stoozing goes wrong

If done badly, stoozing can land you in all sorts of trouble. Ms McEwen said: “It can lead to you losing money and it could also significantly lower your credit score.”

If you’re considering it, you must be sure you can make the credit card’s minimum payment each month. You also need to be certain you will be able to clear the full balance before the 0pc period ends, otherwise interest can quickly rack up.

You’ll also need to hold off on cash withdrawals, as it’s not included in the 0pc deal and can incur a lot of interest. What’s more, in some cases using your credit card to get cash can affect your credit score, as it can signal to lenders that you aren’t able to budget effectively. 

Remember that if you decide to move the money you want to save into a fixed-term account, you won’t be able to access your cash during that time – early withdrawals, if they’re permitted, can come with hefty interest penalties, which defeats the object of stoozing. 

It’s a good idea to have some savings set aside in a separate easy-access account to cover any emergencies (three months’ spending is the usual rule of thumb) before you consider stoozing – otherwise something like a broken boiler could quickly disrupt your plans. 

Things to watch out for

Consider your credit record

In order to earn a generous profit with stoozing, you will need to secure a high spending limit on whichever credit card you use – but lenders will usually only be willing to lend significant sums to those with exemplary credit records.

Damien Fahy from Moneytothemasses.com, said: “A higher credit limit is not always guaranteed, as it is based on your individual credit report.”

If you do secure this higher limit, make sure you don’t use it to overspend; you’ll only have your usual income to pay it off when you come to the end of the 0pc purchase period. 

Trying to get a mortgage? Give it a wide berth 

Mr Fahy added that as stoozing basically requires you getting into debt – even if you have a plan for how to pay it off – it’s not a good idea for mortgage applicants. 

Potential lenders may get a warped view of your spending habits if they see almost all of your income disappearing every month and increasingly large balances on your credit card, which can affect their affordability checks.

Don’t opt for a ‘money transfer’ or you’ll face a fee

While you might think that a simpler way to ‘stooze’ would be by transferring money from a 0pc credit card to a savings account, this comes at a cost as it is classed as a ‘money transfer’. This means you’d have to pay a fee of the money transferred – typically around 4pc – which would soon wipe out a big chunk of potential savings interest.

Alternatives to stoozing

While stoozing could get you just under £200 a year – assuming you take all the right steps in the right order – there may be easier ways to make money.

Mr Fahy said: “You can earn £200 simply by switching your bank current account to NatWest [or RBS]. Or, with app-only bank account, Chase Bank, you can earn up to £180 on everyday debit card and contactless spending for your first year, and there is no hard credit check to apply.”

First Direct also has a £175 switching bonus, while you can get £150 for switching to a Club Lloyds account – plus an extra reward, including a year’s Disney+ subscription or Gourmet Society subscription.

You may also be able to earn more money by using a cashback credit card that pays you money as you spend on it. American Express credit cards currently offer some of the best cashback deals, where new customers can earn up to £100 in cashback during the first three months alone.