Buy Now, Pay Later (BNPL) services are quickly becoming a popular alternative to credit cards for online and in-store purchases. One such service that has gained significant attention is Afterpay. In this blog post, we’ll look at what Afterpay is, how it works, and its pros and cons.

What is Afterpay?

Afterpay is a payment platform that allows customers to buy products now and pay for them later in instalments. The platform is available in Australia, New Zealand, the United States, the United Kingdom, and Canada. Afterpay allows customers to split their payments into four equal instalments, due every two weeks.

How does Afterpay work?

When you’re ready to purchase with Afterpay, select it as your payment option at the checkout. If it’s your first time using Afterpay, you must create an account and provide basic personal and payment information. Afterpay will assess your creditworthiness and determine your eligibility for the service.

One of the benefits of Afterpay is that no credit check is performed, meaning it won’t appear on your credit file. However, missing a payment or failing to pay back the full amount owed can negatively impact your credit rating. Afterpay charges late fees for missed payments, and if the account is not paid in full after being referred to a debt collector, it can be reported to credit agencies.

Assuming you’re approved, Afterpay will pay the retailer for your purchase upfront, and you’ll receive your item(s) as normal. You must make your first payment to Afterpay two weeks after your purchase date. The remaining three payments will be automatically deducted from your account every two weeks.

Pros of Afterpay

• No interest charges: Afterpay doesn’t charge any interest on purchases as long as you make your payments on time.
• Convenience: Afterpay allows you to split your payments into smaller, more manageable amounts, making it easier to afford big-ticket items.
• Easy to use: The Afterpay platform is simple, with no complex forms to fill out or lengthy application processes.
• No credit check: Afterpay doesn’t perform a credit check, which means you’re more likely to be approved for the service.

Cons of Afterpay

• Late fees: Afterpay charges late fees for missed payments, which can add up over time.
• Potential credit rating impact: If you miss a payment or fail to pay back the full amount owed, it can negatively impact your credit rating.
• Limited spending power: Afterpay’s spending limits are based on your creditworthiness, so you may be unable to make larger purchases.
• Limited retailer options: Afterpay is not accepted at all retailers, so your options may be limited.

Conclusion

Afterpay can be a convenient purchase method without paying the full amount upfront. However, it’s important to remember that missing payments can lead to late fees and negatively impact your credit rating. While opening the application, Afterpay only does soft credit checks, which won’t affect your credit rating. The other Buy Now, Pay Later services like laybuy and spot do hard credit checks which can negatively impact your credit ratings. So if you can, it’s probably best to avoid those options. As with any financial service, it’s important to carefully consider your options and ensure you can make your payments on time.