SHOPPING ONLINE CAN

be difficult when you can't or won't use a credit card.

After all, more than 85% of e-commerce transactions are completed with a credit or debit card, according to Javelin Strategy and Research, a market researcher. For those Internet shoppers who have either cut up their cards, don't have credit or who are just plain scared of getting their information stolen, there are alternate-payment services.

PayPal, which is owned by eBay, is the oldest and most well-known of these services. PayPal enables shoppers to pay immediately with a credit card, bank account or e-check or, with PayPal's Pay Later service, they can put the purchase on a line of credit to be paid off later in monthly installments. Swiftly growing Bill Me Later, which launched in 2002, is the most widely accepted at top e-commerce sites including those of Wal-Mart, Amazon.com and PetSmart, according to Brulant Inc., a market researcher. The service puts orders on a line of credit and sends customers a paper bill. After placing their order, shoppers using newcomer eBillme receive a virtual bill that they can later pay using money from their bank account. Once the payment has been made in full, the retailer sends the customer their goods.

But for all their advantages, alternate-payment services can have some serious downsides for unwary consumers, cautions Susan Grant, director of consumer protection for the Consumer Federation of America. "It's really confusing for consumers because the laws [that govern credit and debit cards] haven't been updated to handle these new forms of payments," she says. The fine print can also be truly frightening.

Here are four reasons you may want to think twice before hitting the "checkout" button using one of these services:

Your Credit Score Could Take a Hit

If your goal is to get away from paying with plastic, be especially cautious about services like PayPal Pay Later and Bill Me Later, which function as a line of credit. "Any new account especially one that immediately carries a balance is considered a risk on your credit report," says Gerri Detweiler, a credit advisor for

. 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. For someone planning to shop for a mortgage, home equity line of credit or other loan, the difference could lead to higher interest rates and thousands of dollars more in payments. Even if you're not planning to make a big purchase, a drop in your credit score could prompt your creditors to raise the rates on your existing accounts.

PayPal says it clearly discloses its line of credit as a credit product, as well as the terms and conditions before consumers apply, says spokeswoman Amanda Pires. Bill Me Later did not respond to interview requests by press time.

High Interest Rates

"It's a trap we all fall into: We buy something we can't afford with the idea that we'll pay it off later," says Detweiler. But carry a balance with alternate-payment services and you face exorbitant interest rates. PayPal's buyer credit option charges a variable 22.75% APR, while Bill Me Later has an interest rate of variable 19.99%. For comparison's sake, standard credit cards carry an average rate of 13.89% variable, according to Bankrate.com. For consumers with great credit, those rates could be much lower.

Uncertain Limits

With most payment methods, avoiding the embarrassment of having your purchase declined is as simple as keeping an eye on your balance. Not so with Bill Me Later. Instead of a credit line, Bill Me Later doles out credit on a purchase-by-purchase basis. Each time you try to buy something, Bill Me Later reassesses your creditworthiness by reviewing your account and periodically, your credit report, according to the site

. Any changes a new account, higher balances or a late payment could result in a denial at checkout. The good news is that these so-called "soft pulls" of your credit report won't affect your credit score, says Craig Watts, a spokesman for Fair Isaac. (The only pulls that affect your score are so-called "hard pulls," when companies initially assess your creditworthiness following your request for new credit.)

Inferior Fraud Protection

Security is frequently touted as one of the upsides to alternate-payment programs. After all, there's no credit-card number for fraudsters to steal. "But that means you won't have the same protections as if you were paying with a credit card," warns Consumer Federation's Grant. "[Fraud] coverage is extremely limited, and whatever protections the service does give you are voluntary."

When it comes to using your credit card, federal law dictates what your liability will be if someone makes an unauthorized purchase with your account. (At most, you'll pay $50. The rest should be covered). The law also protects a consumer's right to dispute charges on their account for incorrect billing and defective items, among other problems. (To read more about the security features that credit cards offer, click here Although Bill Me Later, eBillme and PayPal have zero-liability policies for unauthorized charges (no matter what method you use to pay), their policies are somewhat weaker when it comes to disputes.

PayPal's Buyer Protection policy, for example, is a complex system of dispute resolutions and claims between you and the seller, all monitored by a PayPal staffer. Restrictions include time limits on each phase of the escalating complaint, as well as limits to what can be claimed. You can't dispute charges for airline tickets, for example, or purchases where the seller had a positive feedback rating of less than 98%. In these cases, a refund is issued only if the seller's account has the necessary funds, which is highly unlikely if he or she is a cut-and-run fraudster. The process and exemptions have been crafted to protect sellers as well as buyers, says PayPal's Pires. "If you qualify [for Buyer Protection], it's a blanket 'you'll get your money back.'" She also notes that more than 50% of the service's transactions are completed with a credit card, which means those are still eligible for traditional credit-card protections. "PayPal is like any other payment instrument: You have to be smart about how you use it.'"

EBillme has a Buyer Protection policy, but it specifically excludes damaged items, counterfeit goods (whether you knew they were at the time of purchase or not) and products purchased at auction sites, among other things. CEO Marwan Forzley says that although eBillme doesn't cover everything, the policy has advantages that other alternate-payment sites don't, such as price matching and in-transit protection (essentially, shipping insurance for loss, theft or damage). "We make sure there's extra protection for the consumer's peace of mind," he says.