If you are one of the many people in the U.S. planning to pop the big question this year, you might be wondering how you will pay for the engagement ring. According to The Knot, a wedding website, the average amount spent on an engagement ring is close to $6,000.
You may not spend that much, but even if it is somewhere between $2,000 and $4,000, it will still be a major purchase. If you’re like most people who don’t have that kind of cash lying around, you will probably use a credit card. While that is not ideal, you can make it work to your advantage if you use the right credit card and the right strategy. Short of that, you could end up paying much more for the engagement ring than you wanted.
Here’s how to determine whether you should use a credit card for an engagement ring.
Be Careful Not to Max Out Your Available Credit
If charging a $4,000 engagement ring to your credit card account is going to max out your credit utilization, you could be hurting your credit score for a while. If your total available credit is $8,000 and you charge $4,000, your credit utilization will be 50 percent. Anything above 30 percent will negatively impact your credit score. Ideally, you have plenty of available credit or you can qualify for a new credit card which would increase your available credit.
Look for a Zero Percent Balance Transfer Card
If you have good credit then you may be able to qualify for a zero percent balance transfer card. If you can qualify for one with a 12-month or longer introductory period, you could finance the ring with zero interest. Of course, this would only work if you have the means to pay the balance in full before the end of the promotional period; otherwise, you will end up paying the default interest rate retroactively on the entire balance.
To accomplish this, you would first charge the engagement ring on another credit card and then transfer the balance to a new zero percent balance transfer card. However, if your credit is less than ideal you could end up with a balance transfer card with a higher interest rate. This is a good time to double check your credit score. A score less than 700 may not even qualify for zero percent interest.
Get a Rewards Credit Card
You can boost your rewards points quickly with this purchase. However, a jewelry purchase may not be among the categories that earn the best rewards on your card. Some credit cards have their own shopping malls where you can purchase a ring to earn bonus points.
This would also be a great opportunity to take advantage of a bonus offer that awards thousands of points for a minimum amount spent on your new card within the first few months. Those points could help offset some honeymoon expenses. The one caveat is, unless the rewards card comes with a zero percent introductory offer, you could expect to pay relatively higher interest costs. If you can’t pay the balance off quickly, the interest costs could negate the value of your points.
Store Branded Credit Cards
You may have seen commercials from some of the top-brand jewelers offering interest-free financing. A typical offer includes one year of interest-free financing after a 20 percent down payment. Another offer you might see waives interest for a certain number of months based on the purchase amount.
These can generate big savings, but you have to be very careful to study the fine print. Like regular zero percent credit cards, the entire balance has to be paid before the end of the promotional period or your interest rate will skyrocket and you will be responsible for paying the accrued interest from the purchase date. The other downside is you end up with a credit card you may never use again. These are essentially retail credit cards that don’t do much to help your credit score by holding on to them.
Let’s say you can afford to pay off the engagement ring before to the promotional APR expires. Is opening a jewelry store credit account still the right move? At best, you’ll pay the ring off and may never use the account again. However, you could end up spending more than necessary with the account in the future.
The best advice is not to consider a jeweler credit card or financing offer unless you’re certain you can pay the balance in full before the promotional period expires.
Using a credit card can be a good way to pay for an engagement ring – it’s convenient and, with the right card, you can rack up some rewards points while financing it for free. Some credit cards provide protections such as dispute recourse if you have a problem with your purchase. Some cards even offer theft and loss protection. However, if you don’t think you can pay the balance in full within the introductory period, you could be dragging down your marital finances before you even say, “I do.”
It’s important to know that there are other financing options available. If you want to compare other options, check out our guide to jewelry and engagement ring financing.