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Introduction To Credit Cards
It may surprise you to hear this, but by spending money on a credit card you could actually be making yourself money. We were all taught from a young age that credit card are evil, and that by using one you will simply amass large sums of debt that you will struggle to pay off for the rest of your lives. This is not quite true. Obviously if you aren't sensible about it you will find yourself in a dangerous situation regarding large unplayable debts, but if you are sensible and are clever about your spending then you will actually be able to earn money from using a credit card.
A credit card is basically a plastic card provided by a bank or financial institute of some kind that allows credit to be used for transactions. This credit is then paid off in full or in installments by the credit card user, as to the terms agreed with the credit card provider. By using a credit card you can pay for items using credit which you might not have previously been able to afford, and can then pay back the credit card company at a later date, when you are able to. Some credit cards have high rates of interest on purchases, so if you spend money one day you might have a high amount of interest to pay on this amount of money, until it has been paid off in full. Credit cards can be dangerous because people tend to spend more often than they would if they were using cash or a debit card. They can also be dangerous if you fail to meet the repayments to the credit card company, and instead will have large amounts of interest charged to you by the credit card issuer.
The process of making money using your credit card is called 'stoozing', and has been around since the days of '0% interest on purchases' credit cards. Stoozing involves using a credit card that has an introductory period of 0% interest on purchases, making all of your usual day-to-day transactions (where possible) on the credit card. Now, you will offset all this spending by putting the cash that you would have paid with into an ISA account, or any other account that offers a good rate of interest on your savings. You keep this up until the period of 0% interest on purchases has worn off, and then pay off the credit card bill in full (or, you continue stoozing by transferring this credit card balance to another 0% interest on purchases card, and repeat the above process). After you have completed using up the available 0% interest on the card, you will have made money on your savings by way of interest. The more money you spend on the credit card, the more money you will be receiving on interest at your savings account. Obviously there is no point spending more money with the card than necessary, because you will still have to pay off the credit card bill in full whenever required. But this money spend on credit is mirrored by money put into a savings account, hopefully earning a nice amount of interest.
The amount of money you can expect to earn by stoozing on credit cards is dependant on a few different factors. It depends on the length of time that you are spending on the credit card, which can also be extended if you were to apply to other credit cards and transfer your balance across to the new card. The amount of money you will earn will also depend on the amount of money that you have spent on that credit card. If you were to buy many high priced items, you will have earned far more money through your savings than if you had only been making small purchases on the card. Again, there is no point spending for the sake of it, as you will still be paying the bill for the credit card. The final factor depending on the amount of money you can earn from using credit cards is the type of savings account that you have. If you have an excellent ISA account (tax-free savings account) with a great rate of interest, you will be earning more money than the person with a standard bank savings account, with a poor rate of interest, which earnings by way of interest are also taxable.
A typical credit card stoozer could probably expect to earn around '300 from 12 months of stoozing, and thats when spending an average amount of '1000 per month, and with a 5% AER savings account. Obviously if you have a better savings account, such as an ISA, you will be able to earn more money, and if you were spending more money then you would also be able to earn more money.
Once you have used up the introductory period of 0% interest on a credit card you will then have to move on to a different credit card. Again, the new credit card will need to have 0% interest on purchases, else you wont be able to make money from that credit card.
There are usually several different credit cards available which offer introductory rates of 0% interest, this is because many of the credit card companies see this as a good way of introducing new customers to their company. People are always looking to save money and not have to pay interest on their purchases, so cards which offer 0% on purchases are always an attractive option, which is why many credit card companies are often offering these deals.
Once you have found a card with %0 interest available, it is worth finding out if they have %0 interest on balance transfers as well. This is because you would simply be able to transfer the balance of your previous credit card on to the next one. To some people this may look like building up your debt, but as long as you are offsetting your spending by using a savings account, and as long as you are paying off your credit card bills in full as and when required, you will be completely safe.
If you find a card which has %0 interest on balance transfers you will simply transfer the old card across, and will continue with the process of spending on your card, and putting the amount of spending in your savings account. You can continue this process for as long as possible, continuing to transfer the debts between different credit cards. This will earn you a lot more money than you would otherwise earn from simply applying to different 0% interest on purchases cards that don't have deals on balance transfers. This is because your savings account amount will be accumulating the longer you are 'in debt' with the credit cards, meaning you will be earning far more interest. If you aren't able to shift your debt onto your card you will have to withdraw your savings to pay off the full debit card debt, which means you will lose out on interest. If you do get a card with a good deal with balance transfers, you will simply be able to keep adding to your savings account without having to withdraw any money. This is even more important if you have an ISA savings account that you are using, because usually if you withdraw savings from an ISA you might have to pay a small fee, or might lose interest for that period.
If you can't find a card with 0% on balance transfers you can simply pay off your old credit card debt and then apply to a new one, and start the process up all over again. This can be done many times, but you will probably eventually run out of credit cards to take advantage of, especially as in recent times the credit card companies have tried to crackdown on people stoozing on their credit cards.
Credit card stoozing will not be suited for everyone. If you find it hard keeping up with your current payments, or find it awkward keeping track of your expenditure, you will probably not be the best person to use this method of earning from credit cards. To be able to do this you will need to be able to keep track of your spending and keep on top of your credit card payments. You will also need patience and will have to set up monthly payments into your savings accounts and such, so you will need to be willing to spend a few hours of every month just making any payments and sorting out any of your savings. However, credit card stoozing can be a great way of making money from spending money, and pretty much anyone is eligible, as long as they are willing to spend some time setting it all up, and keeping tabs on it now and then.