Best ways to buy an engagement ring

This post comes from Gerri Detweiler at partner site Credit.com.

 

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. Do that, though, and you may find that an already pricey engagement ring costs a lot more than you planned.

 

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

 

If you haven't socked away that much, 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 Credit CARD Act). But there's a catch: Miss a payment or fail to pay off the balance and you'll pay a lot more.

 

For example, here is what some of the major jewelry stores are currently advertising. (This information could have changed since we looked.) 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 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%.

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

 

One more potential trap: Applying for financing 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.

 

Avoiding engagement ring debt

If you don't want to wait much longer, you may want to consider more-affordable options:

• Buy a less expensive ring and start saving for an upgrade on, say, your fifth or 10th wedding anniversary.
• Use interest-free financing for the initial purchase, then use a low-rate balance transfer to pay off the balance before the 0% store financing ends. I am not recommending this, since you can run into traps here too, but if you pull it off, it's better than paying 25% or more for long-term store financing.
• Get a part-time job in a jewelry store and save substantially on your purchase. Put all of your earnings toward a ring.

And when you do choose a ring, shop carefully to make sure you are getting the best deal. Jennie Ma, TheKnot.com  fashion editor, offers these tips:

 

Buy shy and save. Shop for diamonds that weigh just under certain weight thresholds. For example, if you want a 1.0 carat diamond, you can buy a 0.90 carat diamond and save more than $1,000. And buying shy will hardly affect the diamond's outward appearance. (The diameter of a 1.0 carat diamond is 6.5 millimeters, whereas the diameter of a 0.90 shy carat stone is 6.3 mm. The difference is the thickness of a piece of paper.) The price difference between a 1.90 carat diamond and a 2.0 carat diamond can be as much as $5,000.

 

Hit the Internet. You can find some great deals on the Internet. For instance, BlueNile and Union Diamond allow you to compare the going rate of loose diamonds and ring settings based on their grades and styles.

 

Buy loose diamonds. Don't be dazzled by the pretty setting, the fancy box or the clever advertisements. Most jewelry ads are selling you on settings, not diamonds, even though the stone is a whopping 90% of a ring's cost. It's important to buy the stone loose, not mounted, so you can inspect the entire stone.

 

Don't be afraid to negotiate. There's always room for negotiation, so don't be afraid to go after a deal. Never settle on the sticker price unless you've shopped around and you know it's already a fair price.

 

Keep one more thing in mind before going into debt for an engagement ring: You've got a much bigger expense coming up soon -- a wedding.

 

More on Credit.com and MSN Money:

• Getting married? Here are some credit tips
• When financial opposites attract
• How to merge your money with your partner's
• 10 marriage-busting money mistakes
• A grand-slam wedding at Denny's?
• Is recession good for marriage?