If you use services like Bill Me Later, eBillme, or Pay Payl’s Pay Later—payment options designed to let you pay online without using a credit card—you should be aware of the risks as well as benefits that come with them, writes SmartMoney. The most important thing to consider: as far as FICO is concerned, you’re applying for a line of credit (with the potential for high interest rates) when you pay with one of these systems, and your credit score may drop accordingly.

Opening one new account could push a solid credit score of 707 down to 697 for six months, according to Fair Isaac’s FICO Score Simulator, which gauges how consumers’ actions affect creditworthiness. Even worse: Your score could drop by as much as 100 points if you come close to maxing out the line of credit, says Detweiler.

Fraud protection is also different compared to what comes with credit card purchases. Each payment system is different in this respect, so be sure to check the fine print and know what risks you’re assuming before you agree to one.

Frankly, we can’t see the benefit of using these alternate payment systems except for cases when the customer actually owns no credit cards at all—if you’re using it for short term financing, maybe you should ask yourself if you can put off the purchase until you save up enough money to buy it outright. Otherwise, if you’re really concerned about online security then we (and many of our readers) suggest paying with single-use credit cards, which are available from some banks and now from PayPal.

“Alternate-Payment Services Have Some Pitfalls” [SmartMoney]

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