Afterpay: What You Need to Know

With the economy of today being what it is, there seems to be more and more ways of making large purchases bearable for the customer. One popular “buy now, pay later” service making waves right now is Afterpay. Whether you’re a frequent online shopper or new to installment-based purchase systems, you’ve probably seen Afterpay pop up as a payment option when checking out with major retailers. But how exactly does it work? Does Afterpay charge interest? And what makes it different from traditional credit? Let’s find out!

Afterpay: Quick Overview

Afterpay is a company that offers additional financing through short-term loan plans. With Afterpay, you can buy items right away, whether it’s a new wardrobe, tech gadgets, or household essentials, and pay for them later in several installments.

Does Afterpay have interest? A significant advantage of this system is that installments are interest-free, so customer purchase costs remain unchanged. However, missed payments will entail late fees, which vary by region but are generally reasonably high to encourage timely payments. Besides, the service employs a spending limit, which is typically quite low for new users. As you build a positive payment history with Afterpay, your spending limit may increase.

But how does the service earn money without charging interest, we hear you ask? Well, Afterpay do charge some funds per purchase, but it is the provider (i.e., the seller) who must cover the fee. This system has proven to be a huge success thus far.

Afterpay is particularly popular among customers who are wary of traditional credit options or looking for more budget-friendly ways to shop. Subject to responsible use, it’s an affordable alternative to more expensive consumer and credit card loans.

How to Shop With Afterpay

Accessible via an app, the service lets shoppers split the cost of their purchases into four equal payments spread over six weeks. Once you make an initial payment of 25% of the price, Afterpay automatically schedules three more payments over the next six weeks, typically every two weeks. Your payment schedule will be visible in your Afterpay account so that you can check it at any time.

Notably, the system doesn’t approve all purchases automatically. The company reserves the right to deny your request or restrict the credit amount available to you. To check the limit Afterpay pre-approved to spend, go to the “Orders” section in the app. The factors determining your order approval include:

• Funds available on your card (that should be enough to cover the initial payment);
• Afterpay use period;
• Order value;
• Number of open orders you have with the service;
• Your payment history.

How does Afterpay work for the first time?

If you are new to this service, you should start by downloading the app. Signing up is a quick and straightforward process, as helpful in-app prompts will take you through all the necessary steps.

Eligibility criteria for using the Afterpay service are:

• Legal age (18 years and older);
• US residency (50 states and District of Columbia);
• Capability to sign legal contracts and agreements;
• Valid email and phone number for identity verification;
• Having a credit/debit card or bank checking account.

Once your account is set up, you’ll be able to shop with Afterpay at any retailer that has it as a payment option, whether online or in-store.

Online and in-store purchases

Using Afterpay for online shopping couldn’t be any easier. In fact, you don’t even have to register an account. It’s enough to pick the service as a payment method during checkout, and the system will automatically create one for you when you enter your payment details and finalize the purchase after approval.

For in-store shopping, you’ll have to log into your Afterpay account with a card. When creating an account, you pass an eligibility check to get a virtual Afterpay card. You can then add it to your Apple Pay, Google Pay, or Samsung Pay wallet (you can find instructions on how to do so in the “In-Store” section of the app).

With Afterpay, when do I get my order? Using the service entails no additional delays. YYou can get your order immediately in the store, or receive it on a specified date if ordering online. The remaining three installments will become payable in two-week periods.

Flexible payment options

You can choose between Pay-in-4 and Pay Monthly repayment options.

The “Pay monthly” option is a better choice (where applicable) for high-value purchases over $400 that won’t be approved for the regular “Pay-in-4” schedule, especially when you submit your first Afterpay order.

Can I use Afterpay to pay bills?

The service is currently for shopping purposes only and doesn’t allow for bill payments. At least, this is true for a common Afterpay Card, which is free and available to all users.

However, an exclusive Afterpay Plus card provided to selected users on an invitation basis might allow for service bill payments where Apple Pay, Google Pay, and Samsung Pay are accepted as payment methods. This doesn't include gambling, telemarketing, and adult services.

Afterpay refund and return conditions

All refunds are handled as per merchant’s policies. Once the refund is processed by the merchant, it will pop up on your account. In practice, though, it can take up to 10 business days for the service to return the funds you’ve already paid back to your linked credit or debit card.

Will Afterpay Influence My Credit Score?

Afterpay does file soft inquiries for new users. When setting up your account, you’ll be required to agree to a soft check; otherwise, your registration will be rejected. It’s a compulsory provision of the service agreement and one of the key factors that determines your spending limits. However, soft pulls don’t affect your creditworthiness since they are not reported to credit bureaus.

Where Can I Use Afterpay?

A wide range of stores and online retailers choose to participate in the Afterpay program, including providers specialized in fashion, beauty, electronics, home goods, travel, and more. The service is integrated into the shopping experience at both well-known brands and local stores. You can find a full retailer list here.

Final Thought

How does Afterpay work? Functioning as a short-term loan, it’s a flexible, interest-free payment option for everyday purchases as well as bigger buys. So, if you meet the basic requirements, Afterpay can be a surprisingly catch-free way to shop now and pay later.