After determining your budget, the next logical question is “should I pay debit, with a credit card, or finance my purchase?” This is primarily a personal choice, but here’s what we recommend:

  • Pay cash only if you have a minimum of a 3-month “emergency fund” saved on top of the purchase price. An emergency fund is a savings account that is meant to be a safety net in case you lose your job or have unexpected expenses come up. In the case of our 25-year-old friend, with $2,575 in monthly expenses, his emergency fund would need to remain at $7,725 or higher after the purchase of the $7,500 engagement ring. Since we know he has $25,000 in savings, we would recommend that he pays cash. 
  • Pay credit only if you plan on paying it off immediately. Some people choose to pay with a credit card in order to rack up points for mileage or for some other perk. We do not recommend paying with a credit card when the result will be that you have to pay it off with a high-interest rate over time. Many credit cards have interest rates in the 18-25% range, which add up to significant amounts of money being paid in interest over time. Our 25-year-old friend would end up paying thousands of extra dollars over time if he purchased with a credit card and made the minimum payments on the $7,500 balance.
  • Financing is a great option for those that don’t have the recommended amount of savings in their account at the time of purchase, or who don’t want to part with their cash for some reason or another. Here at Mint Diamonds, we offer 12-month, 0% interest financing through KLARNA, which allows you to pay over time without the drain of a high-interest rate. To learn more click here.