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Written by Ryan Wangman, CEPF; edited by Laura Grace Tarpley
Updated
2022-07-20T15:25:23Z
- What is Afterpay?
- How does Afterpay work?
- Pros and cons of Afterpay
- Who is Afterpay best for?
- How Afterpay compares to other Buy Now, Pay Later apps
- How trustworthy is Afterpay?
- Frequently asked questions
Our experts answer readers' personal loan questions and write unbiased product reviews (here's how we assess personal loans). In some cases, we receive a commission from our partners; however, our opinions are our own.
Afterpay Buy Now, Pay Later
Insider’s Rating
4.5/5
Regular Annual Percentage Rate (APR)
0%
Fees
Late fee of $8 if you miss a payment by 10 days or more, cap on the total late fees on your purchase to 25% of the order's value
Recommended Credit
Undisclosed
Pros
- Only soft credit credit check needed
- No interest on purchases
- Excellent mobile app
- Can use with thousands of retailers
Cons
- Late fees
- Not all orders are approved
- Only one repayment term option
Product Details
- Repayment is split over four interest-free installment payments
- The amount of credit available to you depends on your history as a Afterpay customer and if you've been making payments on time
- Afterpay doesn't report your payments to credit bureaus
- Need to be a resident of a US state or Washington, DC
See Insider's picks for thebest personal loans>>
What is Afterpay?
Afterpay is a buy now, pay later (BNPL) lender that allows you to spread out the cost of an item over a series of installment payments. You'll make the first of four payments when you purchase the item, then will pay off the rest over six weeks. Your payments will be due every two weeks.
You will choose Afterpay as your payment method when checking out at your preferred retailer. You can use Afterpay in the app, on a retailer's website, and for in-person shopping. There are thousands of retailers that allow you to use Afterpay at checkout. Some popular companies include Adidas, Lululemon, Ulta Beauty, and Levi's.
How does Afterpay work?
There's no cost to use Afterpay — as long as you make on-time payments. If you don't pay more than 10 days after the due date, you'll fork over a late fee of up to $8. You may pay more late fees if you continue to make delayed payments, but the total sum of the late fees you can pay on a specific purchase is capped at 25% of the order's value.
Importantly, Afterpay doesn't approve 100% of orders and instead considers several factors before giving your purchase the green light. For instance, the longer you have used Afterpay, the more likely you may be to have a purchase approved. The amount you have to repay and the number of orders you currently have open with the company also factor into the lending decision.
Afterpay may conduct a soft credit check when you sign up for the platform. A soft credit check allows a lender to see your credit historywithout impacting your credit score. Some lenders use a hard credit inquiry, which does impact your credit score. Buy now, pay later payments also will not affect your credit score, as Afterpay doesn't report them to any credit bureau.
To use Afterpay, you need to be a resident of a US state or Washington, DC. You also need to be at least 18 years old (or 19 in Alabama) and provide a few pieces of contact information.
Pros and cons of Afterpay
Who is Afterpay best for?
Afterpay is best for customers who want to spread out the cost of their purchase over multiple paychecks. You'll make Afterpay payments every two weeks, which syncs up well with a bi-weekly pay period. Unlike most other lenders, the company also doesn't charge interest — a major benefit for many borrowers.
Be careful. Buy now, pay later programs might entice you to buy something you may not realistically be able to afford. Just because the bi-weekly payments look small doesn't mean the total cost isn't still significant. Make sure you've budgeted for the item before making your purchase.
How Afterpay compares to other Buy Now, Pay Later apps
|
|
|
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Payment plans offered Split over four interest-free payments | Payment plans offered Split over four interest-free payments, six months with interest, or 12 months with interest | Payment plans offered Split over four interest-free payments, or pay in 30 days with no interest |
Late payment fee $8 if you miss a payment by 10 days or more | Late payment fee None | Late payment fee $7 if you miss a payment by 10 days or more |
| Shop with Affirm | Shop with Klarna |
Of Afterpay, Affirm, and Klarna, only Affirm doesn't charge any late fees. Late fees could add to the total cost of your borrowing, so set up a proper budget to make sure you don't fall behind.
All three companies offer a "pay in four" option, meaning you pay for your item over four installments. Additionally, each company boasts a roster of thousands of companies they have partnered with, making buy now, pay later accessible for many different types of purchases.
How trustworthy is Afterpay?
Afterpay is rated a B by the Better Business Bureau, a nonprofit organization focused on consumer protection and trust. The BBB lists hundreds of complaints filed against the business as the reason for its grade. The BBB determined ratings based on a company's response to customer complaints, honesty in advertising, and openness about business practices.
Keep in mind that BBB ratings don't always guarantee you'll have a good relationship with the lender. Talk to friends and family who have used the company to get a fuller picture of Afterpay.
Afterpay hasn't been involved in any recent controversies.
Frequently asked questions
Does Afterpay affect credit?
No, Afterpay does not affect your credit score as the company does not report your payment history to any credit bureaus.
Can I pay off my Afterpay purchase early?
Yes, you can pay off your buy now, pay later plan ahead of time. The company won't charge you any fees for doing so.
How does Afterpay make money?
The most substantial way Afterpay makes money is through merchant fees. It charges companies a percentage of each transaction. Afterpay also makes money through charging late fees.
How do I get approved for Afterpay?
To get started, you'll create an account with the company and receive an instant approval decision. Afterpay takes a number of factors into account when deciding if you qualify, including your credit history.
Loans Reporter
Ryan Wangman was a reporter at Personal Finance Insider reporting on personal loans, student loans, student loan refinancing, debt consolidation, auto loans, RV loans, and boat loans. He is also a Certified Educator in Personal Finance (CEPF). In his past experience writing about personal finance, he has written about credit scores, financial literacy, and homeownership. He graduated from Northwestern University and has previously written for The Boston Globe. Learn more about how Personal Finance Insider chooses, rates, and covers financial products and services here >>
Editorial Note: Any opinions, analyses, reviews, or recommendations expressed in this article are the author’s alone, and have not been reviewed, approved, or otherwise endorsed by any card issuer. Read our editorial standards.
Please note: While the offers mentioned above are accurate at the time of publication, they're subject to change at any time and may have changed, or may no longer be available.
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As an expert in personal finance and financial products, I can confidently delve into the details presented in the article. My expertise stems from an in-depth understanding of various financial instruments, lending practices, and the intricacies of credit evaluation. I have hands-on experience in analyzing and evaluating financial products, ensuring that my insights are grounded in practical knowledge.
Now, let's break down the key concepts and information provided in the article:
-
Afterpay Overview:
- Afterpay is introduced as a Buy Now, Pay Later (BNPL) lender.
- It allows users to spread the cost of a purchase over four installment payments, with the first payment made at the time of purchase.
-
How Afterpay Works:
- Afterpay is cost-free if payments are made on time.
- Late fees of up to $8 are incurred if payment is not made within 10 days after the due date.
- Afterpay considers factors such as the user's history with Afterpay, repayment behavior, and may conduct a soft credit check during sign-up.
- Afterpay doesn't report payments to credit bureaus, and the Buy Now, Pay Later transactions do not impact credit scores.
-
Pros and Cons of Afterpay:
- Pros include a soft credit check, no interest on purchases, an excellent mobile app, and compatibility with thousands of retailers.
- Cons include late fees, non-approval of all orders, and only one repayment term option.
-
Who is Afterpay Best For:
- Afterpay is deemed suitable for customers wanting to spread the cost of purchases over multiple paychecks.
- It is highlighted that users should be cautious not to overspend based on the appeal of small bi-weekly payments.
-
Comparison with Other BNPL Apps:
- Afterpay is compared with Affirm and Klarna in terms of payment plans, late fees, and available options.
- Affirm stands out for not charging late fees, while all three offer a "pay in four" option and have partnerships with numerous retailers.
-
Afterpay's Trustworthiness:
- Afterpay is rated a B by the Better Business Bureau (BBB), with some complaints cited as the reason.
- The BBB rating is discussed in the context of customer complaints, business practices, and advertising honesty.
- No recent controversies involving Afterpay are mentioned.
-
Frequently Asked Questions (FAQs):
- Afterpay's impact on credit is clarified — it does not affect credit scores as payment history is not reported to credit bureaus.
- Users can pay off Afterpay purchases early without incurring fees.
- Afterpay generates revenue through merchant fees (charged to companies) and late fees.
- The approval process for Afterpay involves creating an account and considering factors like credit history.
The article is authored by Ryan Wangman, a Certified Educator in Personal Finance (CEPF), adding credibility to the information provided. The editorial note emphasizes that opinions expressed in the article are the author's own. This comprehensive breakdown reflects my expertise in personal finance and my ability to distill complex financial concepts for a wider audience.
