Don't touch Bill Me later with a 10 foot gift wrapped pole!
Filed under: Borrowing, Shopping, Simplification
Last night one of my colleagues shared that she thought many cash-strapped consumers may turn to a service such as Bill Me Later to get through the holiday season and wondered what I thought of the service. If you are thinking about using Bill Me Later or a similar service to buy gifts this year keep reading to get my opinion on these short term lenders.One good reason not to use Bill Me Later is that it requires a credit check. This means, if you open an account your credit score will get dinged the same as if you opened a regular credit card. Given the current economic issues, protecting your credit score should be at the top of your list!
The second reason why I wouldn't go near Bill Me Later is that the standard interest rate is 19.99% APR, a rate much higher than most credit cards. The normal grace period for a Bill Me Later loan is 25 days, so unless you really think you are going to have the money in less than a month to pay off the purchase you're going to be hit with some nasty finance charges!
Perhaps Bill Me Later's biggest draw is that it offers a "No payments for 90 days" promotion at many stores, almost always with a minimum purchase requirement. I hesitate to get preachy about how you should spend your money but, if you need to defer payment on something for 90 days in order to get it, you shouldn't be making holiday purchases that meet $100, $250 and $500 minimums. Bill Me Later doesn't charge any interest if you pay it off before 90 days, but if you pay late you're on the hook for the all of the finance charges, possibly turning a $100 purchase into a $160 purchase!
If you really feel the need to finance your gift giving this year my advice would be for you to to make use of your credit card's standard grace period or apply for a credit card with an introductory rate of 0% and pay of your balance before the 6 month promo ends. By going this route not only do you have longer to pay but also have the benefit of building your credit history with a revolving line of credit. Then again, with the current financial crisis friends and family should be better able to understand your holiday cutbacks and the reason you decided to shun a "Credit Card Christmas" this year.
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Reader Comments (Page 1 of 1)
10-14-2008 @ 11:14AM
mike said...
Good points, especially in the pay it off every month suggestion. I've used BillMeNow and I have to say, I do like it, mainly because I can get through the checkout process quicker. I've found it to be painless and efficient and since it's accepted so many places now it allows me to just have one bill for a few purchases at the end of the month. Definitely only buy what you can pay off at the end of the month though, those finance charges are killer if you dont.
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10-29-2008 @ 11:22AM
bea baldridge said...
A friend got in a huge mess with BML. Here is her story:
I have been arguing with a company called "Bill Me Later" that apparently I agreed to be billed for my hotel room the night before my trip. It wasn't explained very well to say the least, but before I ever left on my trip they billed me for the hotel room. I called to inquire what in the world this was and they weren't very cooperative. I told them I didn't want this and to cancel it. They refused. When I checked out of the hotel I paid the room on my credit card, which was $30 less that this Bill Me Later had billed. Thus begins the saga. Since returning I found 2 additional bills from them adding $19/month and also service charges all equaling about $160. I have been trying to get them to cancel this whole thing.
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11-05-2008 @ 2:37PM
Dan said...
So, your main argument against using Bill Me Later is that it is like a credit card, except with rates that are higher than most cards. That is a fair point, but certainly not one that is unique to Bill Me Later, but with credit generally. However, your point is completely undercut by your recommendation to, wait for it, apply for yet another credit card!!
As you point out, if you want to get gifts without the interest, why don't you use the 90 day same as cash that Bill Me Later offers and pay it off - without applying for a 0% credit card. I think your advice suffers from a fatal contridiction.
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