HOW TO PAY - FACTOR IN THE FINANCING
There will be a lot more expenses to think about over the next couple of years after she has said ‘Yes’. There will probably be a wedding to plan and save for, you may be saving for a deposit on a place of your own, or even planning a family. So think carefully about the future and the best way to pay for your ring in the medium term.
This is likely to be a significant expense on anyone’s scale, and although we are used to paying for larger items on our credit cards, if you can’t pay off the card in a very short time it is an expensive way to finance your purchase. At the time of writing, banks typically charge 16–25 interest per year on credit card balances, and perhaps a bit less for overdrafts or loans.
Some retailers offer financing arrangements, even 0 financing arrangements, but credit financing is expensive for retailers too. If it sounds too good to be true, it usually is – that 0 deal will already have been factored into the price of your ring.
To offer any form of credit arrangements legally, even to refer a client to a financing organisation, the retailer has to be registered under the Consumer Credit Acts. This is designed to protect people from themselves, but as an unintended consequence it does disadvantage the smaller independents. Registration is an expensive and uncertain business so many smaller retailers and designers are unable to offer this service to their customers, however much they would like to.
If you are thinking of using a credit card, an overdraft, a loan or any other form of financing, you need to know how much interest you will pay because that is part of the cost of your ring. If you have a budget of £3,000 and you will be charged £500 interest while you pay off the financing, you only have £2,500 left to spend on the ring. And even if you keep reducing the balance, interest accrues on all your purchases, not just on the old balances. If you are saving for a wedding, a home or a family, how will those repayments impact on your future plans?
There are of course credit card deals where you are not charged interest for the first six months or so, but these are fast disappearing. Clearly they are designed to get you hooked into that provider so that you end up paying their inflated standard interest rate in the end. But if you know that you can pay the ring off in six months, or however long the deal lasts, and you know you are pretty disciplined about those sort of things, then that could be a good option for you.
It may seem a bit old fashioned in our culture of instant gratification, but you might decide to save up until you have enough to pay for the whole thing, or most of it, before you propose. That could mean putting off your engagement for a while, but at least you won’t have the expense hanging over you after the event. It will also give you time to do your research and plan just exactly how you are going to propose to make it that truly memorable event. After all, if you are going to spend the rest of your lives together, maybe a few months of saving up isn’t the end of the world.