One of the first articles I wrote when I started Broke Grad Student was an explanation of why I use credit cards. Thanks to Pinyo at Moolanomy, who featured my article as an Editor’s Pick in the Carnival of Personal Finance that week, there was quite a bit of discussion in the comments. While I shared my theory that there are two groups of people: those who can handle credit cards and those who can’t, others disagreed. Among the dissenters was a self-proclaimed “Poor Student”, and here’s what he had to say:
I think I belong to a different group: I’m in debt, a lot of debt, more than $30000 in credit card debt!
But, hear me out, I’m milking the credit card companies, for a change. I max out all the cards I have while they’re offering 0% or under 3% APR balance transfer, then I wrote myself big fat checks (making sure I read the fine print of course). Then I turned around and invested the money. I am betting that my investment returns will be greater than 3% or so. I could lose money, but I think it’s a bet worth placing. Yes, I paid transaction fees, but all financial undertaking has to start with some capital, and you pay for the privilege to use that capital.
Otherwise, I have been building a good credit (over 710 points). Until I started to milk these companies for investment capital, I always paid the full balance on time without fail. I buy most things with my cards. I won’t advise most people to do what I’m doing, however (I wouldn’t even let my brother know because it could backfire).
Unless you’ve been stuck under a rock lately, you probably know that the stock market hasn’t been faring so well with the current state of the economy. The fact that “Poor Student” used the word “betting” to justify his decision immediately sets off alarms in my head. Betting is gambling, which means he gambled with over $30,000 that he never had in the first place. The only thing worse than gambling is gambling with money that isn’t yours. “Poor Student” returned a few days ago to give this update:
I’m the same “Poor Student” who wrote above a few months ago. I just want to give you guys an update. I don’t want to go into details, but take my word for it: do NOT borrow money to invest in the stock market under any circumstances. It’s a bad idea. Do it at your peril.
While it looks like “Poor Student” has learned his lesson, I can only imagine how much time it will take to repair the damage. I wish him the best of luck and hope that sharing his story will encourage others to think twice before making the same mistake. I also stand by my theory that there are only two groups: people who can handle credit cards and people who can’t.
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{ 4 comments… read them below or add one }
I sure hope Poor Student didn’t lose too much money.
I feel for the guy, but then again, he knew exactly what he was getting into–he took a calculated risk, and it blew up in his face. Ouch.
I wish him the best of luck in getting back on his feet.
OUCH! I don’t know how that made sense to invest so much money, especially in a shakey economy with money that isn’t yours. Lesson learned! I like to learn from others, I don’t have time to make all the mistakes on my own.
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I have to say, he could have done better. I have a term deposit at the bank earning >3%. I am, however, investing my own hard earned money, and would never consider investing money that wasn’t mine to start with. He’s a moron to have done that in the stock market. Apparently he learned from the experience, and hopefully he didn’t loose much money. Oh well. Live and learn.