Shop online without using a credit card

LOS ANGELES A growing number of online billing services say their payment options helps protect your identity. But be careful -- you could end up paying a lot more then you bargained for.

It's no surprise Kathryn Park is nervous to give out her credit card information. A few years ago, a sales clerk stole her number.

"He used it to pay bills and to go on a psychic hotline," said Kathryn.

So Kathryn was nervous about shopping online until she found a way to shop without sharing her info. She uses a third party payment service called Bill Me Later. She can shop at any of the hundreds of retailers that offer it.

At checkout, instead of entering your credit card information, click on Bill Me Later.

"[The first time you sign up], we do a credit screen for you, we approve you in two to three seconds, and then the merchant ships the goods," said Vincent Talbert of Bill Me Later.

Then you get a paper statement in the mail, and typically have about a month to pay.

"You pay it in full with no additional costs, or you can choose to pay it over time and interest accrues," said Talbert.

Bill Me Later is one of a growing number of third party payment companies. In the next five years, it's estimated that 30 percent of online transactions will be paid this way.

"It's very simple. It's actually faster than using a credit card number or another form of payment," said Kathryn.

While the services may be convenient and protect your account information, consumer advocates warn you may not be protecting your pocketbook if you don't pay your bill on time.

"You could be charged very high interest rates -- 20 percent or more," said Susan Grant of the Consumer Federation of America.

When you use many of these services, you're actually opening a new line of credit -- just like when you get a new Mastercard or Visa. So your credit score may initially go down.

"Anytime a company needs to approve you for credit, they check your credit. That creates an inquiry and that can drop your credit score," said Gerri Detweiler of "Your credit score could drop 10, 20, even 30 points."

But leading services such as Bill Me Later say if you pay on time, over the long run it only helps build your credit.

Also, be aware you don't have the same legal protections as you do with a credit card when it comes to unauthorized charges and disputes.

"These alternative payment services are a good example of where the laws that protect consumers haven't kept up with technology," said Grant.

With most of the third party payment services you typically have about a month to pay your bill until you start incurring interest. However, you'll sometimes see promotional offers where you have 90 days to pay before fees kick in.


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