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How to finance an engagement ring

Bending the knee? Popping the question? Great, but don't break the bank

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How to finance a wedding or an engagement ring

 

How to finance a wedding or an engagement ring

 

You, sir. You with the love-struck look. I know you've found the perfect occasion to spring that diamond ring and pop the big question.

More than 2 million Americans get married each year, according to the National Center for Health Statistics – and 10.1 percent of consumers report they’ll be shopping for their loved ones at jewelry stores, according to 2017 figures from the National Retail Federation this Valentine’s Day.

Regardless of when you plan on getting down on one knee, you've no doubt seen the diamond ring promotions aimed like Cupid's arrow at your highly emotional state of mind. "Hey buddy, this platinum solitaire here will only set you back six months' pay and we're currently offering 0 percent financing for a year! Here's where you sign ..."

Not so fast, Romeo. If you want her to marry you for richer and not poorer, you'll study the fine print first to make sure that bauble on her finger doesn't turn into a ball and chain on your newlywed finances.

While men say an average of $1,991 is an appropriate amount to spend on an engagement ring, women say $2,731 is more appropriate, American Express reports. According to wedding website The Knot, though, the average engagement ring costs a whopping $5,978.

Of course, practicing restraint and saving enough to pay in cash to avoid going into debt is best, it isn’t an option for everyone. Before you decide to finance an engagement ring, it’s important to know what you’re signing up for and some creative alternatives for cash-poor romantics.

Few favorable terms from jewelers
Chances are, you'll shop locally for an engagement or wedding ring, but if shopping from the comfort of your couch is more your style, that can work, too. Shopping for jewelry online is becoming increasing popular, thanks to websites such as Blue Nile, James Allen or even Costco. Global sales of online fine jewelry are expected to capture 10 percent of the market by 2020, according to Research and Markets.

In addition to taking most major credit cards, both brick-and-mortar and online jewelers often offer dedicated private-label credit cards. However, the terms of these retail cards tend to make the majors look like a bargain. Although jewelry sales abound as Valentine's Day approaches, regardless of when you buy it, you'll generally realize savings through a jeweler's card only if you pay off the ring before any 0 percent promotional period expires.

For example, as of February 2017, Kay Jewelers offers a one-year, interest-free financing plan on its no-annual-fee card, provided you put 20 percent down on a $500 minimum purchase. Once the promotional period expires, the APR rises anywhere from 17 to 26.99 percent (depending on where you live as some states set a maximum APR). The Zales credit card features four interest-free payment plans, depending on how much you want to finance and the amount of your minimum purchase. For example, interest is waived for 12 months if you spend at least $750, and for 36 months for a minimum purchase of $1,500. Once that interest-free period is over, the APR range can jump to a dangerous 29.49 percent.

I would be shocked today if a merchant did not take back a piece of jewelry.

-- Regina Leadem
Former VP, GE Money Luxury Card

And if you don't pay off the balance during the interest-free promotional period, any remaining balance will be subject to interest.

If you are looking to shop from the comfort of your home, comparable offers are available with online jewelers, but again, read the fine print. Blue Nile offers a credit card touting deferred-interest promotional plans, but a consumer won’t know if he will be offered such a plan until checkout. And, perhaps even more ominous, if you do not pay off the balance in full before the promotional period expires, the buyer will be subject to accrued interest from the date of purchase. And at 27.49 percent, that APR will most certainly add a substantial sum to your original purchase price.

Rack up rewards, or open a new balance transfer card
If you already have a card with a low interest rate and plenty of available credit (meaning the card is nowhere near being maxed out), that’s could be your best bet. Even better: charging the ring on a rewards card, rack up any points, miles or cash back, and then apply for a 0 percent balance transfer card with a generous promotion period, such as 12 to 15 months. Again, you’ll have to make sure you pay off the balance during the 0 percent APR or else you’ll socked with interest on the rest of the balance.

What if she says no?
A jeweler's return policy is another important factor to consider before buying a ring.

The Federal Trade Commission recommends you read the jeweler's return and refund policies carefully before you buy; ask for one if it's not provided. When ordering online, keep printouts of the site's return policy as well as details of the transaction in the event you're not satisfied with your purchase.

Most major jewelers will refund or exchange a ring in unused condition for 30 days. They may deduct shipping and handling from your refund and charge a restocking fee. Exceptions are usually made if you received the wrong item or it was damaged in shipment.

Regina Leadem, former industry vice president of sales for GE Money Luxury Card (now Synchrony Financial Luxury card), says jewelry returns are rare and usually hassle-free.

"I would be shocked today if a merchant did not take back a piece of jewelry," she says. "They're in it for the long haul; their lifeblood is in these small customers. I really don't know any merchant that wouldn’t do that."

But should you happen upon an uncooperative jeweler, don't abandon hope: Your major credit card companies have your back, sort of. Some cards offer return protection if you run into difficulty with the vendor – just call the number on the back of your card before you make the purchase to verify whether coverage for jewelry is available. Know that some cards expressly exclude jewelry from return protection.

Share the love -- try social financing or a personal loan
Can't make the math work with traditional financing? You might want to consider looking into the world of peer-to-peer lending.

Sites such as Prosper.com and Zopa.com directly connect individual borrowers and investors. Those looking for a loan complete a profile using their basic information and loan desires, which are then posted for review by potential investors. Through Prosper, investors set the interest rates they would like borrowers to pay, typically starting at 5.99 percent for the best borrowers but can reach up to 36 percent for first-time borrowers.

Peer-to-peer lending has the potential to be fairly user-friendly, just keep an eye on the interest rates offered by the assortment of lenders. This method can also help you avoid the awkwardness of borrowing from family and friends.

Another option is talking to your bank or credit union about getting a personal loan. Interest rates vary, but if you have a good relationship with your financial institution, getting a short-term loan with a fixed payment amount for a set period of time could save you from the pitfalls of retailer financing.

Make the move
Once you have the financing secured and the ring in hand, it's time to figure out how to pop the question. Yes, more planning is required.

However, your proposal doesn't have to be as elaborate (or expensive) as you may think. While many couples (22 percent) are more inclined to propose while on vacation, American Express found that 16 percent set up a romantic at-home proposal or pop the question over a special meal (7 percent). Use the money saved from staying in and pay off a little more of that ring right away and interest-free.

See related: Purchase Protection Survey 2016: Which cards offer them?, 6 steps to getting a credit card chargeback

Updated: February 6, 2017

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Updated: 02-27-2017

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