The Problem With Financing Engagement Rings


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Are you willing to go into debt for love? If you are ready to pop the question, but haven’t saved for the ring you want to buy, you may be tempted to finance the purchase.

But do that, and you may find that already pricey engagement ring costs a lot more than you planned.

The average engagement ring cost $5,200 and about 12% of couples spent more than $8,000 for an engagement ring, according to the XO Group Inc. 2011 Engagement Engagement & Jewelry Survey. The average ring was 1 carat for the center stone, and 1.4 carats total stones.

If you haven’t socked that much away, don’t worry. All of the major jewelry stores offer financing, with many of them promoting interest-free financing for six to 12 months. (No interest, no payments is no longer allowed thanks to the CARD Act). But there’s a catch: miss a payment or fail to pay off the balance and you’ll pay a lot more.

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For example, here is what some of the major jewelry stores are currently advertising*. With all of these plans, if you make one late payment or fail to pay the balance in full during the promotional period, interest will be charged from the date of purchase — not from the date the promotional period ends.

  • 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 Company: 0% interest if paid in full in 6 months; 27.99%
  • Zales: 0% interest if paid in full in 6 months; 23.73% to 28.99%

While interest-free financing may work out fine if you are able to pay off the balance, it is risky if you aren’t able to come up with the cash to pay it off.

One more potential trap: Applying for one of the accounts will create an inquiry on your credit reports. Plus, if you accept the financing, you’ll have a new account with a balance listed on your credit reports, and that could potentially have a negative effect on your credit scores. That’s something to keep in mind if you hope to buy a home together soon, for example.

[Related Article: How to Keep Your Wedding on Budget]