Why I Stopped Borrowing Money at 0% Interest

As I have outlined in my most recent Net Worth Update, I changed my mind about taking out low interest credit card debt to invest.  Instead, I'm in the process of actively paying off all my non-student loan debt.  A reader asked me why I had this change of heart.  Let me explain.  

What I Used to Do

I used to leverage my credit to the max.  Take out the maximum amount of balance transfer allowed at 0% APR and $0 fee, use that money to invest, sit back, relax and laugh all the way to the bank.  It seemed logical - if the average stock market returns 9.6% per year and I can borrow money for FREE, why not?  In addition to the benefit of free money, credit card companies are increasingly offering larger and larger sign-up bonuses.  It became a game for me to spend just enough money to get the bonus (see manufactured spending).  I never considered myself a churner as I almost always kept my cards open unless there was a hefty annual fee, but I sure enjoyed playing.

What led me to change

Well you've seen my writing, so you know bullets are coming.  Here are the reasons why I decided it's no longer worthwhile for me to borrow to invest.

  • Turns out the average return of something is exactly that - an average.  The day-to-day performance of your investments may vary drastically from what that "average" is.  I learned my lesson the hard way - see I Quit
  • I've become a big fan of financial guru Dave Ramsey and his brand of "tough grandpa" money tips.  This is what Dave thinks of credit cards and I respect Dave's opinion.
  • Borrowing money free for 1 year (sometimes up to 15 months if you're lucky) is by definition "short term".  I am trying to get myself into the habit of long term thinking.
  • As credit card companies increasingly offer bigger and bigger sign-up bonuses, I have become harder and harder to impress.  Don't get me wrong, when a great card bonus offer comes along like the Chase Sapphire Reserve Card, I'm all over it.  But the average credit card offer just doesn't get me excited anymore.
  • Here is the biggest reason - I don't WANT to.  Between income from residency, moonlighting and Future Proof, MD, I have enough to live the lifestyle I want (not that extravagant) and invest to my heart's content.  And I don't know if it's the Chinese in me, I simply hate the idea of owing - see Chinese Grandma vs. American Grandma, Which One Are You? 

Bottom line: 

I will continue to use my credit cards for daily purchases, but I no longer care to borrow against them for the purpose of investing.


Future Proof, MD

Dr. Bo Liu is an aspiring radiologist-in-training and the founder and editor of the White Coat Money Blog.  He has an interest in interventional radiology and helping his medical colleagues get ahead in this mad world of medicine and money.  When he's not crushing the list at the PACS station or typing up your next favorite blog post, you can usually find him at the local badminton club, movie theater or the most recently opened restaurant.