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What is Afterpay?

Nick Bendel avatar
Nick Bendel
- 3 min read
What is Afterpay?

Banks and retailers are increasingly offering flexible payment options for people shopping online, like Afterpay.

If you’ve never used it before, this Afterpay for beginners guide is a useful way to get your head around this online payment service, before dipping your toes in.

What is Afterpay?

Afterpay is designed to be a buy-now-pay-later service, working on much the same philosophy of the ‘lay-by’ service you might have used in the past.

Afterpay breaks a transaction down into smaller instalments, which can theoretically be a more manageable way to making a larger purchase, especially if you’re on a tight budget.

How does Afterpay work?

Once you’ve signed up with Afterpay, participating online retailers will allow you to make a purchase with this payment service.

The only thing that’s different is the way the transaction is processed from your credit or debit card.

Instead of one lump sum which is paid upfront, Afterpay payments are made over multiple transactions. For instance, a $500 chest of drawers could be paid off in four instalments of $125, which could be much more manageable for some shoppers.

What are the pros and cons of Afterpay?

As with every online payment service, Afterpay has some pros and cons for users:


  • Afterpay can be budget-friendly – Afterpay can be a budget-friendly way to make a major purchase, letting you pay off an item in instalments you can incorporate into your budget.
  • You won’t be charged interest – Unlike other buy-now-pay-later services, Afterpay won’t slug you additional interest charges while you’re making repayments.
  • Afterpay lets you have your item straight away – Another benefit is the fact that you can access your purchase straight away, rather than waiting until you’ve completed your Afterpay repayments.


  • Fees can kick in – Afterpay late payment fees can be steep, so it’s important to keep an eye on your account and make sure all your payments are coming through.
  • Temptation to spend can be high – Not having to pay the full amount straight away can tempt you into buying items you can’t afford, even over multiple repayments.
  • Payment schedule it set in stone – Once you’ve made an Afterpay purchase, your repayment schedule is set in stone, although you can make additional repayments.

Beginner’s tips for using Afterpay safely

If you’re careful, Afterpay can be a useful shopping tool. Here are some Afterpay beginner’s tips:

  • Stick to a budget – Crunch the numbers and see how much you can afford, making sure you’ve got enough money set aside for bills and everyday expenses.
  • Use your debit card – Linking your debit card to Afterpay ensures you’re still only spending money you will have in the future, provided you’re sticking to budget.
  • Payment reminders – Afterpay automatically deducts funds from your account, which can be a problem if there’s not enough money in there. To avoid late payment fees, set up regular reminders and make sure you always have enough money in your account.


This article is over two years old, last updated on December 1, 2017. While RateCity makes best efforts to update every important article regularly, the information in this piece may not be as relevant as it once was. Alternatively, please consider checking recent bank accounts articles.

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