No annual fee credit cards and introductory interest rates

One of the advantages of no annual fee credit cards that are rarely commented on is that they can make the practice of “stoozing” or going around among zero per cent credit cards, far more easily than cards with annual fees.
Zero per cent introductory interest rates are a way of attracting new customers.  They usually apply to balance transfers from other credit cards and apply for a limited period.  This has proven to be an effective way to replace credit card marketing costs and pass some of the money back to the credit card user.

There has been a growth of a practice called “stoozing”.  This is using zero per cent credit cards to essentially borrow money for free.  The way it works is to take out zero interest rate credit cards and when the term is running out to transfer on to another zero per cent credit card.  This requires a lot of discipline, particularly in ensuring that the balance is transferred before the credit card defaults to its normal interest rate.  It also means that the card holder should not spend on the card and should save the money in a separate savings account.  However if it is done in this way it can get quite a large interest rate saving.

No annual fee cards help in this process because annual fees can be a large cost that many people who use this approach do not take into consideration.  Many no annual fee credit cards also offer balance transfer deals, although these tend to be shorter.  If they are used then a major cost in stoozing is avoided.

However finding a no annual fee credit card with an introductory offer can limit the field of credit cards quite considerably.  There may be times when an annual fee has to be accepted as the credit card interest rate saving is so large.

Balance transfer fees can be another unexpected fee that can trap credit card users who wish to take advantage of the low rate credit cards.  These are a percentage of the balance that is transferred, but the most important thing to look for is not the percentage fee but any cap.  If the cap is fairly low in monetary terms then the fee will be a small percentage of the saving that the credit card makes through the low interest rate.