Amazon invests in Bill Me Later. Our advice: Say no now
Amazon has invested in the alternative payment processing company Bill Me Later, a very clever system that makes it easy for consumers to acquire items at online stores without entering an account or credit card number. The system only asks for your birth date and the last four digits of your social security number. From that information it determines if you're an acceptable credit risk, and if you are, it completes the purchase and signs you up for billing and for the plan's credit terms.
Bill Me Later is an extraordinarily easy way to pay for a product or service, but smart consumers should avoid it. Here's why: it's a credit plan, and one with very high rates. While Bill Me Later purchases that are paid off before a certain period (90 days for purchases up to $500, six months for purchases more than that) are interest-free, if you miss that cutoff you'll be responsible for paying 19.99 percent APR interest backdated to the point of purchase. It's the standard, "Make no payments for six months!" scheme that low-end furniture shops use. It's great for the debt holders, but bad for consumers.
Buy now, pay later.
It's also great for Amazon, which has a history of offering payment schemes that encourage impulse purchasing. 1-Click shopping and Amazon Prime both defer the presentation of the real costs of acquiring products. Also, Amazon is establishing itself as a Web services company as well as a commerce site, and this investment gives it yet another product it can market to its services customers.
You can experiment with Bill Me Later right now on several sites, but if you already have a credit card at a more reasonable rate (and with useful features like reward miles and extra warranty protection), you'd be better off using that instead. If for some reason you don't, you'd probably be wise to not buy stuff online anyway.
Rafe Needleman writes about start-ups, new technologies, and Web 2.0 products, as editor of CNET's Webware. E-mail Rafe. 
" last four digits of your social security number." who wants to go ahead and do it, especially lots of spamers are out there, why not just pay right away , sooner or later we need to pay anyways. Sometimes Its better to buy stuff from (physical) store.
Free money is free money. No interest is great deal if you use it correctly. And you're a sucker if you don't because the cost of that interest is already built into the product.
Almost every computer, printer, copy machine, fax machine, monitor, etc. I have ever purchased (dozens over the years), whether for personal or business use, I have purchased with interest free deals.
Circuit City, Best Buy, CompUSA (though not long for this world), all offer interest free deals in the offline world. Online merchants must offer the same deals to compete. Now they can.
Today with automatic payments from a checking account, I just divide out the payments to ensure that all is paid in full before the free interest period expires and the bank does the grunt work. I just make sure the monthly payments are set to arrive a few days before they are actually due to avoid triggering any "fine print" clauses for late payments.
Especially for business purchases, this smooths out the cash flow and enables large equipment purchases to be handled affordably.
If Bill Me Later works the same way, I'll certainly try it.
- by billrubin October 6, 2008 10:29 AM PDT
- > 1-Click shopping and Amazon Prime both defer the presentation of the real
- Like this Reply to this comment
-
(4 Comments)> costs of acquiring products
I can understand this comment with 1-Click because you may not see the shipping costs until after the purchase is complete, but don't understand how it applies to Prime. Yeah, the customer has to pay $79 up front for the free 2-day/cheap 1-day shipping but that's pretty obvious. And then the customer knows exactly what they are paying when they check out because there is generally no shipping charge added.