High-interest savings accounts are once again offering opportunities to earn significant returns, with a particular strategy known as 'stoozing' making a comeback. This method involves using 0% interest credit cards for purchases and placing the equivalent amount of cash into a high-yield savings account. The practice, which was popular before the 2008 financial crisis, had faded due to historically low interest rates but is now viable again due to rising savings rates and the availability of long-term 0% purchase credit cards.

Adam French of Moneyfacts described stoozing as a "relatively easy way to make a few extra quid if you’re organised and disciplined." However, he cautioned that missing a single payment could negate all gains, emphasizing the need for strict adherence to rules.

Six Steps to Successful Stoozing

Step One: Find a Suitable Savings Account

The first step is to open a savings account that offers a competitive interest rate. For individuals in higher tax brackets, a cash Isa is recommended to avoid paying tax on earnings. Top easy-access cash Isa deals currently include rates around 4.57% to 4.61%, often with introductory bonuses. For savings outside of an Isa, higher-rate taxpayers are limited to £500 of tax-free interest annually, while basic-rate taxpayers have a £1,000 allowance. Good standard easy-access accounts are also available, offering rates of around 5% on certain balances.

Step Two: Secure a 0% Purchase Credit Card

The key to stoozing is obtaining a credit card with a 0% interest rate on purchases for an extended period. These cards allow spending up to the credit limit without accruing interest, provided minimum monthly payments are made. Direct debiting the minimum payment is advisable to avoid inadvertently losing the interest-free period. The borrowing limit and duration of the 0% period depend on an individual's credit rating. Major banks offer cards with up to 26 months of 0% interest on purchases, with varying credit limits. Some cards, like the TSB Platinum Purchase Card, have a lower minimum monthly payment requirement (1% of the balance) compared to others (2.5%), which can maximize profit.

Step Three: Use the Credit Card for Spending

Everyday expenses should be put on the new 0% credit card, up to its limit. Crucially, the full balance should not be paid off at the end of each month. Instead, only the minimum payment should be made, allowing the balance to grow.

Step Four: Transfer Funds to Savings

As spending increases on the credit card, the equivalent amount from your current account should be transferred into the high-interest savings account or Isa. This effectively means you are earning interest on money you are temporarily borrowing interest-free.

Step Five: Consider a Second Card

Once the limit on the first card is reached, and savings are accumulating, applying for a second 0% credit card can further increase potential earnings. It is important to use 'soft search' applications, which do not harm your credit rating if you are rejected, and to space out applications to maintain a good credit score. The process is then repeated with the new card.

Step Six: Repay or Roll Over Debt

It is imperative to use the accumulated savings to pay off the credit card balance in full before the 0% interest period expires to avoid high penalty interest rates. Setting a diary reminder is essential. For those wishing to continue stoozing, transferring the debt to a 0% balance transfer card is an option, though this often involves a transfer fee that reduces overall profits.

Potential Earnings and Risks

With strategic use of multiple credit cards, it's possible to generate substantial interest. For example, using three cards with £3,000 limits each could allow borrowing a total of £9,000. By stashing this in a 5% interest savings account and managing payments correctly over the 26-month interest-free periods, individuals could potentially earn around £750 in profit. However, risks include the temptation to overspend, which could lead to debt, and potential negative impacts on mortgage applications if lenders perceive high credit utilization. Financial experts recommend having an emergency savings fund in place before attempting stoozing.