You found THE one and you can't wait to pop THE question! The next step may come with some trepidation as you decide on an engagement ring, and perhaps more importantly, how to pay for it.
An engagement ring is a special purchase, but it can often come with a hefty price tag. It may be one of the most expensive things you have ever purchased by this point in your life. If you're not ready to put down a lot of cash, you might consider financing your engagement ring with a credit card.
Buying an engagement ring with a credit card can be a strategic way of making the most of this purchase. Before you swipe that card though, it's important to consider the pros and cons of this option, as well as knowing the key features that you want in a card before using it for a purchase as big as this one.
Here's what we'll go over in this article:
- Credit card features you'll want when buying an engagement ring.
- Pros and cons of using your credit card to buy an engagement ring.
- Can you use a personal loan to buy an engagement ring?
Credit card features you'll want when buying an engagement ring
The best credit card for buying an engagement ring will have specific features that may help you avoid high interest rates and earn rewards. For a purchase this large, you'll want to take advantage of these features and earn rewards or cash back. After all, you were planning to buy this ring anyway. Rewards help those dollars go even farther.
Look for credit cards with these attributes:
Low introductory APR
Credit cards that offer a low APR, even for an introductory period, may help you save money on a big purchase like an engagement ring. With a low APR offer, you'll have a long window to pay off your credit card balance. Each month you can pay off another chunk, which may make it feel more manageable. Make sure you are planning ahead so that the ring will be fully paid off before the introductory period ends and a higher APR kicks-in.
The Chase Freedom Unlimited® credit card offers a very low APR for an intro period, making it a good choice to use for purchasing an engagement ring.
Credit cards with sign-up (or welcome) bonuses put money back in your pocket after you spend a certain amount within a stated time period. That means you can open your card, buy the engagement ring (which may easily cover the spending requirement), and enjoy your bonus reward. Perhaps that bonus helps you offset your honeymoon expenses.
The Chase Sapphire Preferred® credit card offers bonus points after you spend a certain amount within the first few months of your account opening. That could be worth several hundred dollars toward travel when redeemed through Chase Ultimate Rewards®.
Rewards and points
Many credit cards offer rewards for purchases in specific categories, such as travel, groceries or business expenses. This means a purchase from a jewelry store wouldn't qualify for these rewards or points because it doesn't fall in one of those frequently used categories. That's why it's best to choose a credit card that rewards you for everyday spending.
In addition to a low intro APR, the Chase Freedom Unlimited® credit card offers a percentage cash back on all purchases, regardless of category. You can redeem this cash back as a direct deposit, statement credit, gift card or redeem for a travel purchase through Chase Ultimate Rewards®.
Pros and cons of using a credit card for engagement ring financing
There are certain benefits to buying an engagement ring with a credit card, including:
- Rewards: As mentioned above, some credit cards provide rewards points or cash back for certain purchases. If you're spending big on an engagement ring, you could potentially rack up hundreds or thousands of points as a result.
- Liability coverage: Your credit card may provide additional insurance in case your ring gets stolen, or there's an issue with the product and you need to enter a dispute with the seller. Just make sure your credit card offers theft protection or liability coverage for jewelry purchases.
- Introductory period: If you open a credit card with a low APR for an introductory period of time, often 12 to 18 months, you can pay off the engagement ring over time instead of all at once.
There are also downsides to buying an engagement ring with a credit card, including:
- Good credit is required: In order to qualify for a credit card with highly desirable rewards and promotions, you'll need to have good credit. This may be an obstacle if you have an inconsistent history of paying your bills on time.
- High credit utilization ratio: If you carry a high balance from your engagement ring purchase, your credit utilization ratio could increase and bring down your credit score. This ratio is your current credit card balance divided by your total credit limit. As a rule of thumb, it's best to keep your credit utilization ratio below 30%. Because of this, you'll want to choose a credit card with a credit limit much higher than the price of the engagement ring.
- Potential debt: Even if you're financing your engagement ring purchase, you want to make sure you can eventually pay it off in full. Otherwise, you risk falling into debt and dealing with increased interest rates.
Can you use a personal loan to buy an engagement ring?
You can use a personal loan to buy an engagement ring, but be aware that it may come with a high interest rate. Especially if you have a poor credit history, personal loan interest rates can exceed 20%. In addition, it won't allow you to earn rewards points.
Getting engaged is a big deal. It comes with much excitement and planning. Although using your credit card to purchase an engagement ring requires a certain discipline and attention, it can be a strategic way to finance what may prove to be one of the biggest and most important purchases you'll ever make.
Most importantly, you'll want to choose a ring with a price tag that fits in your budget and won't be a hardship to pay off.