The pros and cons of Afterpay

The pros and cons of Afterpay

If you buy anything online, you would have noticed or heard about Afterpay recently. Afterpay was launched in Australia in 2014, with the aim of making payment options for consumers simple and flexible.

So, what is Afterpay? It’s a buy-now-pay-later service. Much like lay-by, Afterpay allows you to purchase an item and pay for it in several small instalments, rather than all at once. However, unlike a credit card, you will not be charged interest or fees for the staggered payments. Instead, you get your purchase immediately and pay for it later.

But what are the benefits and potential drawbacks of Afterpay? Is it too good to be true? Here are the pros and cons of Afterpay.

The pros of Afterpay

The main benefit of Afterpay is the staggered payment plan on purchases. When you buy an item, you simply select Afterpay as your payment option. If you are a first-time customer, you will be prompted to create an account;  if you are returning, you will just need to sign into your account to authorise the payments. Afterpay will then charge you in four equal instalments every two weeks.

The lack of fees makes Afterpay an extremely attractive option to many customers. Unlike a credit card, you are not charged interest and will not need to pay off a lump sum at the end of the month.

Afterpay also charges you automatically every two weeks on your payment date, so you do not have to add another bill payment to your to-do list.

There is a fast and easy approval process, with the only requirements being to be at least 18 years old and to have a valid credit or debit card to link to your account. There are no credit checks and practically no wait times in getting approved.

The cons of Afterpay

With so many benefits to Afterpay, it’s hard to imagine any downsides. But the benefits could turn into drawbacks, depending on your circumstances.

Afterpay will charge you a late fee if one of your automatic payments fail. If you are not in the habit of keeping close track of your bank account balance, you may want to consider this before using Afterpay.

The staggered payment plan can also make it difficult to keep track of your upcoming payments. If you accidentally over-purchase on Afterpay, and don’t have the funds to pay all of your upcoming instalments, late fees will become inevitable, and you will end having to pay far more than the price of your items.

The ability to link your credit card to your Afterpay account could also be more trouble than it’s worth. If you already struggle to keep on top of your credit card repayments, linking your card to Afterpay could make this even more difficult to track.

So, should I use Afterpay?

Like any financial product, whether or not Afterpay is right for you will depend entirely on your personal spending habits and circumstances. If you want a flexible payment plan and a fee-free alternative to credit cards, Afterpay could be a great option for you.

However, if you already have trouble paying your bills or keeping track of your spending, Afterpay could make this even more complicated.

Always make sure that you can afford the repayments before making a purchase on Afterpay.

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Learn more about bank accounts

How can you cash a cheque without a bank account?

You can cash a cheque without a bank account if you visit the bank that issued the cheque. For example, if somebody sends you a cheque from Bank X (as written on the cheque) and you visit Bank X, it’s likely that Bank X will let you cash the cheque – provided the person who wrote the cheque has enough money in their account. Bank X would probably charge you a fee for the service.

What do I need to open a company bank account?

To open a company bank account, you will probably have to provide 100 points of ID, an ABN and an ACN. You will probably have to provide the details of all signatories as well.

How can I check my bank account balance online?

Checking your bank account balance online is a simple process. Once you’ve logged in to your online banking, clock on the relevant account and the balance should be visible.

How do I close my bank account online?

You can usually easily open a bank account online, but you often can’t close it online.

Many banks and credit unions will only let you close an account if you go into a branch or call them on the phone.

However, some banks will let you request to close the account via your internet banking. Check your financial provider’s website for details.

Just remember: If you still have funds in the bank account, transfer them to another account, or withdraw the cash. Also, if you have any payments like direct debits going in or out of the bank account, these will also stop when you close your account.

What do I need to open bank accounts online?

Opening a bank account online is a simple process and only takes between five to 10 minutes to complete. To get started you will need a computer or smartphone with internet access.

Information to have available when you’re ready to apply is:

  • Identification (such as driver’s licence, birth certificate, passport, proof-of-age card)
  • Tax file number
  • Residential address, email and a contact number

In some cases, you might be asked to provide employment details. If you’re not able to verify your identity online, most financial institutions let you provide this in the branch at a later date.

There are some types of bank account that you can apply for only in a branch. However, most bank accounts can be applied for conveniently online.

Can I close my bank account over the phone?

In most cases, you can close a personal or business bank account over the phone. In fact, this is the best way to ensure you’ve closed an account properly.

By speaking to a banking representative, you can capture and close out any pending transactions, or interest owing/payable on the account being closed.

In the instance where the account is a joint account, or you have multiple bank accounts you want to close, your bank may send you a form that you need to fill out and return.

Either way, you would be advised over the phone of the steps you need to take. Calling your bank ahead of closing an account is often a smart course of action.

What do you need to open bank accounts?

Opening a bank account is one of the simplest online tasks you could perform. The hard part is deciding which type of bank account you want to open.

All banking institutions have a website where you hit ‘apply’ on the account of your choice and step through an application in less than 10 minutes.

Here’s a list of information that is generally required for applications.

  • Identification (driver’s licence, passport, proof of age card, proof of citizenship and/or birth certificate)
  • Tax file number (so you don’t get charged the highest tax rate)
  • Address, contact email and phone number

If you decide to open a new account at the branch, make sure you ask beforehand what information you need to take with you, or take all of the above to be safe.

How do I open a bank account if I'm under 18?

The good news for savvy young folks like you wanting to take charge of your finances is that there are many bank accounts available for under-18s.

For bank accounts that require you to be 18 or older, you’ll have to rope in a parent or guardian to open the account for you.

Otherwise, you can apply by yourself online or at the branch of the bank, credit union or building society that has the account you would like to open. 

If applying online, you might be asked for a form of identification. For under-18s, this could be a Medicare card you’re listed on, your birth certificate and/or your current home address.

In most cases, you can verify your identity online (at the time of applying) or at the branch afterwards.

Can you get a payday loan without a bank account?

Yes. Some payday lenders are willing to transfer loans to prepaid debit cards instead of bank accounts.

How to transfer money to another bank account

Transferring money to another bank is often called a bank transfer, and it can be done a few different ways.

Customers generally need three pieces of information to transfer money to another bank account. Customers need the account name, BSB and account number of the account they wish to transfer money to.

One way of transferring money to another bank account is in a branch with the help of a staff member; they will often give you a receipt as well as confirmation of the transfer.

Transfers can be also made via internet banking and phone banking.

Some banks also allow customers to make transfers via partnered ATMs, especially if the account is with the same bank.

How do you deposit change into your bank account?

One way to deposit change into your bank account is to visit a branch. Many lenders will also allow you to deposit your change through one of their ATMs.

Can I start a bank account online?

Yes, most lenders that operate in Australia will let you set up a bank account online. The process is usually simple and takes five to 10 minutes. You will probably need to provide a passport or birth certificate, as well as a driver’s licence, Medicare card or another form of secondary identification. Requirements differ from lender to lender, so some institutions might ask for more or different forms of ID.

How do you transfer money from PayPal to a bank account?

Transferring money from PayPal to an Australian bank account is simple. Just follow these three steps:

  • Go to your Wallet
  • Click ‘Transfer Money’
  • Follow the instructions

The money will take three to seven business days to reach your bank account.

Once you’ve made the transfer request, it can’t be withdrawn.

How do you open a bank account under 18?

If you’re under 18 and you want to open an Australian bank account, you will need your passport or birth certificate. (Some lenders might require just a Medicare card or driver’s licence.) You can apply online or at a branch. If you’re 13 or under, you will probably need a parent to accompany you to a branch.