As some of you know, I recently proposed to my long time girlfriend (and she said yes!) during a trip to London and the hunt began for a wedding ring. I didn’t dare pick one out for her since I know she had very specific ideas on these things, so I proposed with a cheapish Tiffany’s silver ring and told her we’d pick out a ring together when we got back to the states. We found one relatively quickly that we both liked but it was way more than I had budgeted. It wasn’t her going crazy but more an issue of me not realizing what jewelry costs. Luckily, the store had 0% financing through Wells-Fargo so I thought I was all set. This is what I wish I’d known then.I didn’t really want to finance the ring, but I knew I had a big check coming in about 9 months that would cover the cost so I wasn’t too worried about it. The staff said it was 0% financing as long as you paid in full within a year and this way we would have the ring 9 months early. They didn’t know much more than that – just that they took our info and typed it into the computer and it told them how much we were approved for. So we filled out the forms, co-signing so that we’d have a better chance to be approved, and were approved for $10,800 which was almost the cost of the ring.
Now please don’t everybody comment about how little that is, or how they would never spend that much on a ring. My fiancé and I looked at our budget together and made an informed decision that made sense for us given our priorities and life situation. I would expect any of you to do the same.
Now let me tell you how I assumed this would work. I originally assumed at first that I could just not pay for nine months, and then pay in full when my check came in and we’d be all set. I did realize before signing anything that there would be a minimum payment each month. Luckily they wouldn’t charge interest for the first year, but if you didn’t have it paid off by then, they would charge you all the back interest they should have charged you from the beginning. Several other loans I had looked at were in the 10% range and most of the credit cards I have average about 15% so that’s what I assumed this would be at max. I also assumed that it would appear on my credit report as an installment loan much like student debt or a car; this was actually a plus for me since it would increase the types of debt I have.
A few weeks after we pick up the ring, we got a packet in the mail from Wells Fargo and I could instantly tell that many of my assumptions were wrong. In the packet was some information as well as a credit card with mine and my fiancé’s names on it. Apparently, this isn’t a loan but a credit card. They give you a credit card for the amount you’re approved for and instantly max it out. Those of you who know about your credit report know that this impacts your credit score in three ways: 1) It counts as a hard inquiry. 2) It lowers the average age of your credit accounts since it was just opened. 3) It comes maxed out which increases your debt to credit ratio and is a big flag on your report. You should try not to use over 30% of your credit limit on any single card since doing more can be a sign that you are living on credit and can’t afford it.
I did some more digging and looked at my credit report on Credit Secure, which is a product operated by American Express. They show that all three credit agencies report it as a retail card and show it being almost maxed out. In another area it tells you what is negatively affecting your score and they all three mentioned the over 90% usage on a credit card as a detrimental factor. It dropped my score by about 20 points. The image below is after I made the first payment.
The welcome packet also told us that the monthly payment would be $378 – no negotiation and no knowledge before making the decision. And at that point, it’s not even a take it or leave it offer since you’ve already taken it and there’s nothing you can do. And if you don’t have it paid off within a year, the interest rate is a whopping 28%, which they also didn’t tell you before you applied to this credit card you didn’t know you were getting. That’s the same range as payday loans. If you owe even a dollar when that one year mark hits, you’re looking at a couple thousand dollars in interest at least.
These last points are pretty annoying and extremely consumer unfriendly but I guess I should have known I’d have no control over those things. What really upset me is the affect to my credit score. I’m just starting out in life and don’t have a ton of cash or I would have just paid cash for the ring. My score it really important to me right now and them doing things to lower that score without me knowing is a huge deal. I see this as preying on people they know are desperate and taking advantage of them. At the very least it is consumer unfriendly not to have all of this information available before you sign up. it’s not on the packet and it’s almost impossible to find online. Really, the store employees should have known but Wells-Fargo specifically bills this to businesses as them not having to know or understand anything so I can’t really blame them too much.
So what do I do going forward? Well, I pay the monthly payment until I get that big check and use it to pay off the rest before the year is up. Then I cut up the card and never use it again. And when it comes time to look at a new bank or a bank for an auto loan or mortgage, you can sure as hell bet Wells-Fargo won’t get my consideration.
Hopefully somebody sees this before they sign up for the Jewelry Dis-Advantage Card so that they at least know what they’re getting into before they do it. If you’ve got any questions about it, ask them in the comments below and I’ll try to get back with you as soon as I can.