These days, you can buy just about anything and worry about paying for it later.
Deferred billing is hardly a new concept, but more and more merchants -- from consumer-electronics sellers to office supply stores -- are offering buy-now-pay-later options.
Not to be outdone, PayPal, the electronic commerce payment service owned by online auction giant eBay Inc., has joined the game with its version of special financing. It's part of the PayPal Buyer Credit program introduced in late June so that eBay sellers could compete with financing deals offered by such traditional retailers as Best Buy, said PayPal spokeswoman Amanda Pires.
PayPal joined GE Consumer Finance to create a "line of credit" for PayPal users, a sort of credit card without the plastic card. There's still an application process, and your credit limit is determined by your creditworthiness.
Traditional PayPal lets buyers pay for online purchases using a credit card they have, a bank account number or stored balances. PayPal's fees are paid by the seller. If the new credit program catches on, it will mean additional revenue for PayPal and GE Consumer Finance through possible interest rate charges and additional fees.
Ebay merchants want to lure you in by offering special financing deals that might not cost you a cent if you pay on time. If you don't get one of those deals, or get one and fail to live up to it, you'll be paying roughly 20.8 percent interest for the privilege. Because it's a variable rate, it can increase or decrease. It will jump to a 24.75 annual percentage rate if you miss a couple of required payments.
That interest rate is typical for the retail industry, said Jim Daly, editor of Credit Card Management, a monthly publication, but it's much higher than on the bank cards you would ordinarily use with PayPal. Those rates hover in the low teens.
There's a cost for the eBay seller, too. A seller who wants to offer a special finance deal on an item selling for $199 or more will pay PayPal a fee of 0.5 percent to 3.75 percent of the total purchase price, if the buyer opts for the payment plan. (The actual amount depends on the terms of special financing.)
That is on top of the 1.9 to 2.9 percent plus 30 cents that PayPal takes as a fee on each transaction for accepting credit-card payments. So if a buyer takes a special financing deal of a year of fixed payments at 12.9 APR on a $1,000 purchase, the seller will pay $6 for the financing and up to $29.30 for using PayPal.
