With credit card companies tightening approvals and slashing credit limits, even for those who can afford to use them, credit card use declined dramatically in 2009. But people still want to buy things without paying for them right away and it turned out there was already a company ready to step into the gap.
About Bill Me Later
In 2008, eBay’s Paypal company acquired Bill Me Later, a service that combines the checkout ease of PayPal with a credit card service. But unlike traditional credit cards which extend you a revolving line of credit, Bill Me Later approves the credit for each transaction. The result is something closer to a series of mini-loans.
They do this by requiring your date of birth and the last 4 numbers of your Social Security Number for each purchase and running a quick credit review. When you first open a Bill Me Later account, they make a hard pull of your credit report (like a credit card) but their FAQ implies that afterward they only review the credit report already pulled.
Because they’re owned by the same company, Bill Me Later can be connected with Paypal.
The balance is billed like a normal credit card with billing cycles and grace periods and is payable by check, online billing directly to your checking or savings account, automated phone service billing to your checking or savings account, or money order. Cash and credit cards (or debit cards, it seems) are not accepted.
Bill Me Later APR and Financing
Like any line of credit, Bill Me Later charges interest. The APR is 19.99% on any balance carried past the grace period. Also, if you’re carrying a balance from the previous month, balances from the current month will also be costing you interest.
Some retailers have promotional arrangements with Bill Me Later which allow you to finance an item for 90 days. These “No Payments for 90 Days” purchases are essentially short-term 0% interest loans. But like all such loans, they charge you 90 days of interest if you don’t pay it off at the end of the 90 days. From the site:
During the promotional period, interest will accrue. If you do not pay in full by the end of the promotional period, the accrued interest will be added to the remaining balance due. However, if you do pay in full by the promotion end date, you will not have to pay any interest.
This info from the site explains how different balances work and lists the fees for late payments:
Comparing Savings Plans
|Type of Account||Benefits||Drawbacks|
|Regular savings accounts||Low minimum balance|
Ease of withdrawal
|Low rate of return|
|Certificates of deposit (CDs)||Guaranteed rate of return for time of CD|
|Possible penalty for early withdrawal
|Interest-earning checking accounts||Checking privileges|
|Service charge for going below minimum balance
Cost of printing checks; other fees
|Money market accounts||Favorable rate of return|
Allows some check writing
|Higher minimum balance than regular savings accounts
No interest or service charge if below a certain balance
|Money market funds||Favorable rate of return|
Some check writing
|U.S. Savings bonds||Fairly good rate of return|
Low minimum deposit
Exempt from state and local income taxes
|Lower rate when redeemed before five years|
* Daily Periodic Rate and Annual Percentage Rate for Standard and Promotional Purchases. From time to time Lender may offer Standard Purchases or Promotional Purchases with a lower rate that may apply for a limited time.
** Grace Period for Standard and Promotional Purchases. Lender will not assess a Finance Charge on Standard or Promotional Purchases during any Billing Cycle in which payments and credits made on or before the Payment Due Date reduce the outstanding balance for Standard and Promotional Purchases (excluding Standard and Promotional Purchases made during the Billing Cycle, Promotional Purchases subject to a Deferred Payment option, and Promotional Purchases subject to a Deferred Interest option) to zero or to a credit balance. The Grace Period does not apply to a Promotional Purchase subject to a Deferred Payment option or subject to a Deferred Interest option.
Is This a Good Idea?
So is this the next best idea, the wave of the future? Maybe, but I don’t like to it. I’m prejudiced against easy credit and it worries me that this doesn’t even have limits or the same structure that a normal credit card has. Bad as can be, they have boundaries. I’m sure that Bill Me Later also has boundaries, but I worry that just like with pre-approved cards and sub-prime mortgages, the customers will take an authorization as proof that they can pay it off, rather than thinking about their particular finances.
Easy credit is dangerous.
Moreover, part of my mind can’t wrap around the idea that if you can’t get a credit card (or have no more balance left) and apparently need the credit so you can’t use your credit card or PayPal account (they’re the same company, so if you deeply distrust PayPal you should distrust Bill Me Later) or Google Checkout that you’d still be making purchases online using credit. If you don’t have the money to pay right now, then it’s time to think three or four times about buying something.
There’s almost nothing you’d be buying online that is critical enough that you have to buy it with Bill Me Later if you can’t buy it with money you actually have.
Perhaps it’s because the site gives the impression of this being a series of micro-loans and bills, which would be a headache to manage compared to a credit card with one statement. This impression may be incorrect and it may be better organized.
After thinking about it for a while, I decided that I could see it being useful in lieu of a credit card if you don’t use one regularly and only occasionally purchase things using credit. In that case, all the arguments which apply to the convenience of credit cards or 0% financing apply (as well as the accompanying risks). When looking into it in lieu of a credit card, you have to take into account the 19.99% interest if you’re planning on carrying a balance. That’s better than some cards, but nowhere near a competitive rate.
It’s not for me, but then I only use credit for one purchase a month in order to maintain a credit purchase. What about you, is this the kind of service you’d consider using? Think it’s a dumb idea? Best thing ever?
This is obviously NOT a sponsored post, but I wanted to clarify anyway for the good old FCC. I don’t have affiliate links for it nor was I compensated in any way. My husband asked me if I’d heard about it and whether I knew if it was on the up-and-up (he’d seen it among checkout options) and I decided to look into it. It’s an interesting concept but not one I think I’d ever find useful.