Marriage is an expensive business and it all begins with the engagement ring. According to an XO Group Inc. survey, the average engagement ring cost $5,200 in 2011 and about 12% of couples spent more than $8,000 for the engagement ring.
Read more about how much you should spend on an engagement ring.
Most people don’t have that much saved up by the time their ready to pop the question. And that’s okay – there are other options. Let’s go over a few of them.
The worst option: Putting the engagement ring on a credit card
Ah, the credit card. Makes everything so easy, doesn’t it? All you have to is whip it out and mentally resolve to make a payment every month. The only problem is that you end up spending a whole lot more than you bargained for.
Let’s say you’re planning to spend $5,200 – the average spent in 2011 according to XO Group’s Inc.’s survey – and that your credit card has an interest rate of 15%. According to the Federal Reserve’s Credit Card Repayment Calculator, the minimum monthly payment you’ll have to make each month is $104. Not bad, huh?
However, paying off the minimum every month would take 25 years to pay off the cost of the whole ring. And the worst part…you’d be paying an extra $7,580 in interest charges alone, bringing the total cost of the engagement ring to $12,780.
A better option: Getting interest-free financing from the jewelry store
Pretty much all the major jewelry stores offer financing options and many of them offer interest-free financing for 6 to 12 months.
Sounds great, but there’s a little catch. If you miss a payment or fail to pay off the balance within the 6 to 12 months, you’ll end up paying a lot, lot more.
According to MSN Money, here are a few of the major jewelry stores and the financing options they offer:
- Jared: 0% interest if paid in full within 12 months; up to 24.99%.
- Kay Jewelers: 0% interest if paid in full within 12 months; up to 24.99%.
- Shane and Co.: 0% interest if paid in full in six months; 27.99%.
- Zales: 0% interest if paid in full in six months; 23.73% to 28.99%.
The 0% financing is a great option – but only if you are positive you can pay in the next 6 or 12 months. With all of these financing plans above, if you make one late payment or fail to pay the balance in full, the super high interest rates shown above is charged from the date of purchase, NOT from the date the promotional period ends.
That comes to a price tag even heftier than you’d pay if you bought with the credit card. Take advantage of 0% financing ONLY if you know you can pay it off within 6 months.
The best option: Wait and save or Buy for less
The best way to buy an engagement ring is to pay for it with money that you already have. If you can wait a little longer, why not save toward the engagement ring so you can buy it with cold, hard cash?
If you really can’t wait, another option is to simply buy the engagement for less. Click here for tips on how to save big on buying the engagement ring.