Afterpay is a buy-now-pay-later (BNPL) service that offers interest-free payment plans. Launched in 2015 in Australia, it debuted in the U.S. in 2018. Since then, it has become extraordinarily popular. Over 13 million people in the U.S. have used Afterpay, and the company sold $1 billion worth of products nationwide in November 2020. However, just because the payments are interest-free doesn't mean you won’t have to pay any other costs. Learn more about how to use Afterpay and what to watch out for before choosing this option at checkout.
How DoesAfterpay Work?
Afterpay allows you to set up payment plans during the checkout process for many retailers. These plans are all generally structured the same way: The purchase amount is split up into four payments made every two weeks over the course of six weeks, with the first installment due as you check out. You can also use the Afterpay mobile app to set up an Afterpay Card for contactless payments in stores at select retailers.
Afterpay's business model works differently from otherbuy-now-pay-later service providers. If you make all of your payments on time, you won't pay any interest or fees. This means your final cost could essentially be the same as if you had just paid in full for the purchase. Since it doesn’t charge interest, Afterpay makes money through the merchants it partners with. Many merchants hope that they'll be able to spur more sales by offering this type of payment plan to customers.
If your Afterpay payment is late, you could be charged a late fee worth $8. The Afterpay website also states that late fees for U.S. shoppers may be capped at 25% of the order value.
Is There a Minimum Purchase Size When Using Afterpay?
Yes. Afterpayis only available for online purchases of $35 or more.
Is There aMaximum Purchase Size When Using Afterpay?
Yes. When youfirst start using the service, you're limited to transaction amounts of around$150. Over time, if you demonstrategood repayment(ontime and in full), you may be able to use Afterpay on orders of up to $1,000.
Do ProductsBought With Afterpay Ship After the First Payment?
Yes. You'll make your first payment immediately. After that, your online purchase will ship out normally, just as if you had used a credit or debit card to pay.
Can I Use Afterpay To Pay Bills?
It depends onthe bill and how you make your payment. To pay a bill in person, you'll need todownload the Afterpay app. This gives you access to the Afterpay Card, whichallows you to spend funds just as if you were using a credit card. Youcan also load the Afterpay Card into yourApple PayorGoogle Wallet.Then you may be able to use the card to pay bills (if the company acceptsAfterpay) up to your spending limit.
Does Afterpay Check Credit?
No, the service does not perform any kind ofcredit check, not evensoft credit checks,so it doesn’t look at your score or credit history. Instead, Afterpay managesits risk by only approving you for small orders at first. Once you prove thatyou're capable of managing your debt, you may be approved to spend more.
Does Afterpay Report Your Activity to Credit Bureaus?
Afterpay doesnot report your payment activity tocredit bureaus,even if you pay late. Not reportingpayment activity to credit bureaus is good if you ever do make a late payment.However, it also won’t help you build credit or improve your credit score.
Does Afterpay Charge Interest?
One uniquefeature about Afterpay is that itdoes not charge interest . not even if you pay late (in that case, you'll be chargeda late fee instead, as mentioned above). You can pay off your Afterpaybalances early. This won't save you any money since you're not being chargedinterest. However, paying early will free you of the debt sooner and lessenyour chances of paying the late fee.
Is Afterpay Safe?
Afterpay isquite safe compared to credit cards, personal loans, and payday loans. Youaren't risking your credit if you don't pay, there’s no interest, and the latefee ispretty smallcompared to other credit cards. Instead, the company's betting onyou making your payments on time so that you can use the service again, thusincentivizing you to spend more. One of the biggest dangers ofbuy-now-pay-later services is that they might make it too easy and effortlessto buy things. You could end up spending more than you planned or really canafford.
How Do I Pay Afterpay?
Oddly enough,Afterpay onlyaccepts credit ordebit cardpayments. For U.S. shoppers, the card must be issuedwithin the U.S. International cards are not accepted. Paying Afterpaywith a credit card can be a risky strategy because you're putting a no-interestcharge on a high-interest credit card. This is rarely a good choice. Inaddition, you may lose out on any points or rewards that come with your creditcard.
What Happens If I Don’t Pay Afterpay?
If you don'tpay Afterpay, the company does two things. First, you'll be charged a late fee.Second, you'll be locked out from paying for new orders with Afterpay until youpay your overdue payments. It's also possible that Afterpay may notapprove you for future purchases either. Your Afterpay payment history is onefactor the company takes into account when deciding whether to approve you ornot for purchases.
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