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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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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.

About 2 million Americans get married each year, according to the National Center for Health Statistics -- and Valentine's Day alone spurs an estimated 6 million couples to take their relationships to the next level. 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 ..."

How to finance a wedding or an engagement ring

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. Couples say spending an average of $2,311 on an engagement ring is an appropriate amount, with some aiming as high as nearly $5,000 and others less than $1,000, American Express reports.

Before you buy an engagement ring, let's take a closer look at jewelry store credit terms, return policies 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 and Ice.com. The online jewelry sales market in the United States has seen 2.9 percent annual growth since 2008 according to a 2013 IBISWorld industry report and online transactions accounted for 9.8 percent of overall jewelry sales in 2013.

In addition to taking most major plastic, both brick-and-mortar and online jewelers offer dedicated private-label revolving credit cards. Unfortunately, their terms 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 2014, the Kay Jewelers card offers one year interest-free with 20 percent down on a $500 minimum purchase. Once the promotional period expires, the APR rises to 18-24.99 percent (17 percent in Arkansas) and no annual fee. 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 $1,000 and put 15 percent down. Once that interest-free period is over, the APR range jumps from 23.73 percent to 28.99 percent.

And note the Zales promotional deals' fine print: If you don't pay up by the end of whichever interest-free promotional period you choose (or if you make a late payment), interest will be retroactively charged from the date of purchase.

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 with three financing options: standard minimum monthly payments with an APR of 26.99 percent, no interest if paid in full within a selected six or 12 month window and a 9.99 percent APR option if the purchase is paid off by the end of the selected term. However, to get that low 9.99 percent interest rate, your minimum spend has to be $2,000.

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

-- Regina Leadem
GE Money Luxury Card

Ice.com doesn't offer financing, but works with PayPal's Bill Me Later option to offer no payment and no interest if paid in full in six months through the online payment system.

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, and some refund or exchange as far out as 90 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, industry vice president of sales for GE Money Luxury Card, one of the major private-label credit card processors in the jewelry sector, 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 would do that."

But should you happen upon an uncooperative jeweler, don't abandon hope: Your major credit card companies have your back, sort of.

Help with diamond refund
If you're unhappy with the results trying to return your purchase, there is an additional line of defense you can turn to. Discover: MasterCard, American Express and Visa all have return assistance policies.

If you make your purchase with a MasterCard, you'll have 60 days to request a refund of up to $250. Visa cardholders may also be eligible for a $250 refund, but will have 90 days to make a refund request. Discover cardholders may be eligible for a refund up to $500 of the purchase price, per the specific card's policy.

However, keep in mind that refund assistance policies are limited and vary, so check with your card issuer for more specific guidelines.

If you are hesitant about your big purchase, avoid charging it to an American Express card if you can because there will be no turning to them if you do. AmEx's return policy specifically states that jewelry is not eligible.

Share the love -- try social financing
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 without using a middleman. 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 lenders to pay, typically starting at 6.73 percent for the best borrowers but can reach up to 35.36 percent.

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.

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 men (31 percent) are more inclined to propose while on vacation, American Express found that women (27 percent) may actually prefer a romantic at-home proposal. Use the money saved from staying in and pay off a little more of that ring right away and interest-free.

See related: Know your credit card purchase protection plan, How to win a credit card charge-back dispute

Updated: February 11, 2014



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