Bill Me Later might mean Pay Up Much More Later

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We support reforms to the financial marketplace that protect consumers from unscrupulous banks and lenders.

By Consumers Union on Monday, October 20th, 2008

Amazon.com, Overstock.com, Petco.com and many other online merchants offer it. eBay is in the process of buying it. And, with today’s credit crunch and the ever growing concern about identity theft and fraud, maybe Bill Me Later is offering consumers a better way to pay.

First, money mom will try to explain how Bill Me Later works:

You input your name, address, email address, telephone number, the last four digits of your Social Security number, and date of birth into the Bill Me Later form. Bill Me Later submits the information to a credit reporting agency, which runs a credit check. Within three seconds, you are either granted or denied a line of credit.

Money mom is concerned about keeping more money in your wallet and personal information under wraps. Here are some considerations to keep in mind:

1. You are opening up a new credit account.

This may or may not impact your overall credit score. It seems that the first inquiry (as with other new credit accounts) is a hard inquiry, and subsequent inquiries are soft inquiries (which should not impact your credit score).

However, what are the impacts when you use the “No Payment for 90 Days” feature?

You should also be aware there have been complaints from Bill Me Later users who said they were denied credit for using the payment method too often.

2. No Payment for 90 Days doesn’t mean No Payment for 90 Days

In order to get away without paying more than the purchase amount, you need to make the minimum payment on time (which is due around 25 days after purchase), and pay the entire balance by the due date.

3. If you don’t pay on time, it’s 20% more.
If you don’t pay off your balance when it’s due, you’ll be hit up with a 20% interest rate, which is applied from the purchase date.

Depending on your APR with your credit card, this could be rather steep. The average interest rate on credit cards surveyed by Consumer Action in its 2008 Credit Card Survey is 13.54%.

There is also a minimum purchase requirement to use this feature, and many merchants impose a minimum as well.

For additional online shopping tips, look at Consumer Reports’ January 2007 article on Virtual Wallets.

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