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.