Credit Cards

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Wednesday, August 17, 2005

MBNA Cracks Down On Credit Card Balance Transfer "Stoozing"

Credit Card Balance Transfer
Credit Card Balance Transfer
Yup, that's right: here's yet another term used in Europe and elsewhere to describe people who take advantage of 0% balance transfer offers: Balance Transfer "stoozers". What is stoozing? Here's how it works: The stoozer applies for a credit card with the best possible 0% introductory Annual Percentage Rate (intro APR) balance transfer offer, e.g. 0% intro APR on balances transferred and cash advances for 12 months. The stoozer then borrows the maximum amount of cash from the new credit card account at 0% APR (e.g. $3,000 via a 0% balance transfer convenience check.) This cash is then transferred to an interest-bearing savings account, mortgage account, Certificate of Deposit (CD), or some other short term financial instrument that can earn money for the stoozer. The stoozing process ends when the 0% introductory APR period on the credit card terminates, at which point the stoozer returns the $3,000 back to the credit card account.

The practice of stoozing seems to be quite common in the UK, and now MBNA is cracking down on the balance transfer stoozer by implementing a policy change, charging both a 2% fee and interest on any money borrowed stoozer-style. In other words, MBNA (in the UK anyway) will no longer treat the borrowing of cash in this manner as a balance transfer, but instead as a typical credit card cash advance.

Using MBNA for stoozing may no longer be an option for UK's balance transfer stoozers, but other banks/credit card companies like Egg, Virgin Money and Abbey still permit the practice.

I have just one more thing to ad here. UK balance transfer stoozers: keep on stoozin'!

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