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.
Don't touch Bill Me later with a 10 foot gift wrapped pole!