Purchasing a ring

[mr_brendo]

Good Morning All,

I am currently shopping around for an engagement ring but unfortunately do not have the cash for it.  What would placing around 4,000 on a card and paying it off in 3 months be better than taking out a loan and doing the same?

[youdontkillmoney]

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@mr_brendo wrote:

Good Morning All,

I am currently shopping around for an engagement ring but unfortunately do not have the cash for it.  What would placing around 4,000 on a card and paying it off in 3 months be better than taking out a loan and doing the same?

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Assuming you MUST buy a ring and have to di it right now, it is not just a matter of comparing a credit card versus a loan because a credit card is a short term loan as well. They are both loans. It depends on your credit quality and what you qualify for. For example, I have a Chase Freedom right now with 0% on purchases until July 2015. Right now there is a zero balance since I don't need anything, but if you were me you can put $4K on it and pay it off month by month at 0% an make payments of $364 each month through July 2015. Or you can take a loan out and pay interest, so in this scenario a credit card is better than ANY loan since any loan will chage something for interest. But if in your case the best credit card you can get is 10%, then you need to see if you can get a loan for less than 10%, etc.

[mr_brendo]

Ahhh, makes sense.  Now what if i did decide to go the creddit card route, by applying for a new card, and using that for the ring.  This would allow me to take advantage of any reward bonus.  but how would that plan affect my creddit score in comparison to taking out a loan.  In an atempt to help you give me more informed advice here are some details.

NavFed cash rewards 1000/5500

NavyFed Checking Line of Credit 12500

NavyFed Auto Loan 12700

And my creddit Score ranges from around 720 to 780 depending on what monoriting site im looking at.

One last addition is that my current living arrangement + being married in the military will give me about 1700+ more expendable income that i plan to use to pay of the ring ASAP

[youdontkillmoney]

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@mr_brendo wrote:

Ahhh, makes sense.  Now what if i did decide to go the creddit card route, by applying for a new card, and using that for the ring.  This would allow me to take advantage of any reward bonus.  but how would that plan affect my creddit score in comparison to taking out a loan.  In an atempt to help you give me more informed advice here are some details.

NavFed cash rewards 1000/5500

NavyFed Checking Line of Credit 12500

NavyFed Auto Loan 12700

And my creddit Score ranges from around 720 to 780 depending on what monoriting site im looking at.

One last addition is that my current living arrangement + being married in the military will give me about 1700+ more expendable income that i plan to use to pay of the ring ASAP

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Both a loan and a credit card are revolving loans meaning month in and month out you make payments until it is paid off so the credit would be affected the same. Look for a low interest loan (either credit card or personal loan). The fact that you will have more disposable income is something to put that on your application which will make you a better applicant since you have increased your ability to pay, Sometimes department stores have their own credit cards that promise 0% financing for jewerly BUT beware if you do not pay it off by the time frame indicated, interest charges are accrued since the first day!!!!

[Anonymous]

If you have solid credit and don't have any recent inquiries, I would totally look in to a vendor that offers a 0 percent financing deal.  I know tiffany and co offers it for a year!

[MarineVietVet]

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@youdontkillmoney wrote:

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@mr_brendo wrote:

Ahhh, makes sense.  Now what if i did decide to go the creddit card route, by applying for a new card, and using that for the ring.  This would allow me to take advantage of any reward bonus.  but how would that plan affect my creddit score in comparison to taking out a loan.  In an atempt to help you give me more informed advice here are some details.

NavFed cash rewards 1000/5500

NavyFed Checking Line of Credit 12500

NavyFed Auto Loan 12700

And my creddit Score ranges from around 720 to 780 depending on what monoriting site im looking at.

One last addition is that my current living arrangement + being married in the military will give me about 1700+ more expendable income that i plan to use to pay of the ring ASAP

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Both a loan and a credit card are revolving loans meaning month in and month out you make payments until it is paid off so the credit would be affected the same. Look for a low interest loan (either credit card or personal loan). The fact that you will have more disposable income is something to put that on your application which will make you a better applicant since you have increased your ability to pay, Sometimes department stores have their own credit cards that promise 0% financing for jewerly BUT beware if you do not pay it off by the time frame indicated, interest charges are accrued since the first day!!!!

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That's not quite true. Only a CC is considered revolving because it remains open even if it has a zero balance.

A loan such as a car, mortgage, personal loan etc. is an installment loan because it is paid in equal "installments" and once it is paid off the account is closed.

[Anonymous]

"If you have solid credit and don't have any recent inquiries, I would totally look in to a vendor that offers a 0 percent financing deal.  I know tiffany and co offers it for a year!"

This is what I was going to recommend as well.  One way or another, find something with 0% to put it on and try to get it paid off before it goes to a standard rate.  

[SunriseEarth]

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@mr_brendo wrote:

Ahhh, makes sense.  Now what if i did decide to go the creddit card route, by applying for a new card, and using that for the ring.  This would allow me to take advantage of any reward bonus.  but how would that plan affect my credit score in comparison to taking out a loan.  In an atempt to help you give me more informed advice here are some details.

NavFed cash rewards 1000/5500

NavyFed Checking Line of Credit 12500

NavyFed Auto Loan 12700

And my creddit Score ranges from around 720 to 780 depending on what monoriting site im looking at.

One last addition is that my current living arrangement + being married in the military will give me about 1700+ more expendable income that i plan to use to pay of the ring ASAP

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If you took out a personal loan or if you applied for a new CC, you'd see a temporary drop in score due to the HP, the drop in AAoA, and the "new account ding."  However, if you paid off the CC in a few months, the CC would still be open and improve your overall UTIL and your amount of zero balances.   Paying a loan off early won't provide that benefit.   Also, loans have interest, frequenly not much better than a good CC.   However, there are tons of places where you could get a CC with 0% financing for a ring.   You could get a store card or you could even get a major CC with a 0% intro period and use that.  

[Anonymous]

I purchased an engagement ring roughly 12 months ago and recieved 12 months 0% finance.

I ended up paying it off within 6 months but I knew if I put it on my credit card it would screw up my utilization percentage.

I try to keep mine below 5%.

Plus, loans like this can often raise your credit score a little as they show you can handle multiple types of credit.

The only reason I would ever put a large purchase like this on a CC would be:

1. If the rewards you would be getting on the card for the purchase would outweigh the risk/your credit dropping a little

2. If the card still had a 0% intro and you would definately pay it off in the next few months

3. If you couldn't handle another HP on your report

I would still highly recommend not putting this charge on your CC and taking out a 0% finance loan with the company.

[Revelate]

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@pricetyler wrote:

I purchased an engagement ring roughly 12 months ago and recieved 12 months 0% finance.

I ended up paying it off within 6 months but I knew if I put it on my credit card it would screw up my utilization percentage.

I try to keep mine below 5%.

Plus, loans like this can often raise your credit score a little as they show you can handle multiple types of credit.

The only reason I would ever put a large purchase like this on a CC would be:

1. If the rewards you would be getting on the card for the purchase would outweigh the risk/your credit dropping a little

2. If the card still had a 0% intro and you would definately pay it off in the next few months

3. If you couldn't handle another HP on your report

I would still highly recommend not putting this charge on your CC and taking out a 0% finance loan with the company.

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Nothing that  baby secured loan at trivial interest rates can't solve... or anyone with an auto / personal / mortgage / etc.  Consumer Finance Accounts are to be avoided wherever possible if there's equivalent paths: if it's a smart move financially fine, but FICO does penalize you somewhat for it.

Utilization is temporary, don't understand the rationale to micromanage to that level honestly.  Big expenses happen and are a normal part of life, living in fear of lenders beating you with the AA stick makes little sense.  It's one thing to be maxxing out your file sure, but single tradeline utillization with a pattern of paying it off in chunks?  Not a problem certainly at least in today's market.