What You Need to Know About Afterpay

A buy-now-pay-later (BNPL) service called Afterpay provides interest-free payment schedules. It was introduced in Australia in 2015 and made its American debut in 2018. Since then, it has gained enormous popularity. According to a press statement from Afterpay in December 2020, more than 13 million Americans have utilized the service, and in November 2020, the company sold $2 billion worth of goods countrywide.

Even though the payments are interest-free, there may still be additional expenses that you must cover. Before selecting this option at the checkout, find out more about Afterpay’s capabilities and potential pitfalls.

How Does Afterpay Work?

For many stores, Afterpay enables you to create payment plans as you check out. The general layout of these plans is the same: The whole purchase price is divided into four equal payments over six weeks, with the first payment being payable as you complete your purchase.  Additionally, you can set up an Afterpay Card for contactless purchases in-store at specific businesses using the Afterpay mobile app.

Unlike other buy-now-pay-later service providers, Afterpay operates under a unique business model. You won’t be charged any interest or fees if you make all of your payments on time. This implies that your overall expense can be the same as if you had purchased full upfront. Since there are no fees or 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.

Is There a Minimum Purchase Size When Using Afterpay?

Although some retailers could, Afterpay does not have a minimum purchase requirement. To find out if there is a minimum amount you need to spend, you will need to contact the shop.

Is There a Maximum Purchase Size When Using Afterpay?

Yes. Depending on how you utilize your account, Afterpay’s maximum spending limit may fluctuate. Afterpay does not state this maximum because it differs from customer to customer. Your maximum will be higher if you are a long-term Afterpay user and a satisfied customer. Your maximum amount will be smaller if you are a new customer or have a history of denied or late payments.

Additionally, some shops might have their upper buying limits.

Do Products Buy With Afterpay Ship After the First Payment?

Yes. Your first payment will be due right away. After that, your online order will be shipped routinely, exactly as it would have been if you had paid with a credit or debit card.

Can I Use Afterpay to Pay Bills?

It is dependent upon the bill and the method of payment. You must download the Afterpay app to make a physical payment for a bill. By doing so, you gain access to the Afterpay Card, which enables you to make purchases just like you would with a credit card.

The Afterpay Card can also be loaded into Google Wallet or Apple Pay. If the business allows Afterpay, you might be able to use the card to pay invoices up to your spending limit.

Is There a Credit Limit With Afterpay?

The Afterpay Card application will display the approved spending limit for you. The laws operate somewhat differently, though, if you use Afterpay to make a direct purchase from a business. The first time you use Afterpay, you can only use it to make purchases up to about $150.

How Can I Increase My Credit Limit?

By completing your payments on time and in full, you can show Afterpay that you have solid debt management skills and progressively get approved for larger spending limits. According to Scala, you might eventually be able to use Afterpay for online transactions up to $1,000.

How Does Afterpay Affect Your Credit Score?

You might be interested in learning how Afterpay affects your credit record and score because it is an intriguing service.

Does Afterpay Check Credit?

No. Scala claims that the service doesn’t examine your credit score or credit history in any way, not even through mild credit checks. Instead, By initially only allowing you for minor orders, Afterpay reduces its risk. You can be permitted to spend more once you show the business that you can handle your debt.

Does Afterpay Report Your Activity to Credit Bureaus?

Even if you pay late, Afterpay does not record your payment behavior to credit bureaus, according to Scala. This means that making an Afterpay payment past due won’t lower your credit score.

What Credit Score Do You Need to Use Afterpay?

There is no required minimum credit score to use Afterpay because it does not use credit scores. Instead, there are a few reasons why you might not be permitted to use Afterpay:

• You’re behind on your payments with another purchase made through Afterpay
• You already have too many orders open with Afterpay (this varies per person)
• You haven’t yet demonstrated that you can handle paying back smaller purchases with the company.

Does Afterpay Charge Interest?

The fact that Afterpay doesn’t charge interest is one of its distinctive features. Zilch. Nada. Not even if you pay after the deadline (in that case, a late fee would be applied instead, as previously specified).

In comparison, data gathered by The Balance shows that the average annual percentage rate (APR) for a credit card was 20.28 percent in April 2021. According to the Federal Reserve, the average rate for a 24-month personal loan was 9.46 percent APR as of March 2021. The APR is 0% when using Afterpay.

You will need to exercise caution, though. Using a credit card is one of the options you have for paying your Afterpay payment plan. You’re not saving anything if you don’t pay off your credit card bill in full each month money at by using Afterpay. You’re just trading an interest-free installment plan for high-interest credit card debt, which defeats the whole purpose of Afterpay.

Does Afterpay Charge Fees?

Indeed, this is a crucial point. Afterpay is free to use as long as you pay on time; all you’re paying for is the item you purchased.

However, if you pay after the due date, a late fee of $8 or maybe 25% of the order value will be assessed. Additionally, until you make your past-due payment, Afterpay won’t let you use its service to make any other transactions.

Is Afterpay Safe?

In comparison to credit cards, personal loans, and payday loans, Afterpay is extremely safe. There is no interest, no harm to your credit if you don’t pay, and the late fee is rather low when compared to other credit cards. Instead, the business is banking on you to make your payments on time so that you can continue using the service, which will encourage you to spend more.

Afterpay may be useful if you do need to buy something now but can’t afford it. For example, if you’re moving into a new apartment, you may need to buy a mattress to sleep on. Afterpay could break that large cost down into four smaller payments over six weeks.

Who Accepts Afterpay?

Afterpay works with over 55,000 merchants around the world. Some notable ones you might have heard of include:

• Anthropologie
• Bed Bath & Beyond
• Old Navy
• Ray-Ban
• Urban Outfitters

How to Use Afterpay In Stores

You can use the Afterpay Card to make purchases in physical stores with Afterpay as well. Through its app, you can request to use Afterpay at these retailers. If accepted, the app will display a predetermined spending cap.

You must add the card to your Google Wallet or Apple Pay account to use it. Simply use that to make your payment while making your purchase in-store.

How Do Returns Work When Using Afterpay?

You can quickly return any or all of your products if necessary. Simply follow the store’s standard return procedures when returning your product.

The retailer will then inform Afterpay of the amount of your refund. Your payment plan will get the refund beginning with the most recent payment and going backward. Understanding this is crucial because returning an item doesn’t always guarantee you won’t owe anything on your subsequent payment.

Instead, you might still be required to pay the difference if your return doesn’t equal the full cost of the initial purchase price. However, you will receive a refund on the card that is used if your return does not completely cover the amount of your outstanding debt connected to your Afterpay account.

How Do I Pay Afterpay?

Surprisingly, Afterpay only accepts payments using credit or debit cards. For American consumers, only domestically issued cards are accepted; international cards are not.

Because you’re putting a no-interest charge on a high-interest credit card, paying using a credit card when using Afterpay can be dangerous. Rarely is this a wise decision. You can also forfeit any points or benefits that come with your credit card. For instance, you can miss out on earning travel benefits if you use Afterpay to pay for a vacation package and then pay with a travel rewards card.

What Happens If I Don’t Pay Afterpay?

If you don’t make a payment, Afterpay takes two actions. You will first be assessed a late fee. Second, unless you make your past-due payments, you won’t be able to use Afterpay to pay for future orders.

It’s also possible that Afterpay won’t accept your application for further purchases. One aspect taken into consideration by the business when determining whether or not to accept you for purchases is your Afterpay payment history.

Frequently Asked Questions (FAQs)

Does Afterpay help raise my credit score?