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.

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.