Think of Afterapay as a good saving.
If you remember the installment plan (ask your parents!), you will know that this is an old retail habit where you can purchase products or services that you cannot afford in advance by paying in installments over a period of time.
But a new generation of buy-and-pay later services, such as Postpaid Increase your stakes by allowing you to keep the goods immediately after the first payment. You pay off your balance in three installments, but you don’t need to wait any longer until you hand over the last dollar to start buying.
If you feel like you see more of these offers in your favorite stores and online, then you have nothing you imagined (and you may be shopping at a retailer that caters to young presenters).
Australia-based Afterpay said it has signed up with more than 20 million U.S. customers and has worked with more than 100,000 global retail partners.Other buy-and-pay later options include confirm with Krana.
For consumers who are unable or unwilling to use a credit card, these installment services can provide the attractiveness of decentralized payments without incurring high interest rates related to credit card balances.
Choosing installment payments is as easy as choosing a credit card or PayPal at checkout, but is it worth trying? We explain how Afterpay works here.
What is post payment?
Buy-before-pay services like Afterpay are also called point-of-sale lenders. Buyers choose Afterpay when purchasing, and they can be approved immediately without a credit check. Once approved, the buyer will make the first payment and join the six-week payment plan.
These services advertise their benefits through credit cards and point out that users do not need to pay purchase fees or interest.
That’s true, but according to Ariel Ward, a certified financial planner, changing the method shouldn’t change how you think about buying. Abacus Wealth Partner.
“If you have a credit card balance and don’t pay it off every month, I think it’s time to stop and see if there are different ways to get what you need, or really evaluate whether the things you want to buy with Afterpay are yours. Something needed,” Ward said.
How Afterpay works
Afterpay and other installment services are not credit lines, so you don’t need to perform a hard credit check like using a credit card-but you can’t add the benefit of paying on time from your credit history.
The way Afterpay works is as follows:
1. Set up an Afterpay account online or through the app. You need to provide the following information:
- phone number
- date of birth
- Debit or credit card information-prepaid cards cannot be used for payment.
2. Select Afterpay at the checkout. You will receive a notification about your approval within a few seconds (if you have a late payment, you will not be able to make a purchase). If you buy a physical store, we will charge you the first 25% immediately and take the purchased items home. If you buy online, your goods will be shipped after the first payment is processed.
If you placed an order online but did not receive it, you and the retailer will resolve the issue. Although the order has not been delivered, the installment payment will continue.
3. The remaining three payments are paid every two weeks. You can choose to pay manually before the due date, pay on the due date, or set up automatic payment, and let Afterpay pay in installments from the payment methods you have on file. No matter which method you choose, Afterpay will send you a reminder before the payment is due. If you make multiple purchases, you can track the due time of different payments through the Afterpay account dashboard.
What happens if you don’t pay?
If your payment is not successfully processed within 10 days after the due date, you will be charged a late fee Up to 8 USD (Or up to 25% of the purchase price-whichever is lower). Every time you miss an installment payment, you will be charged a late fee.
How much can I spend using Afterpay?
The maximum amount you can spend with Afterpay depends on a variety of factors, including:
- The time you use the service (there is a lower limit for new members)
- Available funds on the debit or credit card you submitted (the more you have, the more you buy)
- Your payment history (always on time = more dollars)
Advantages of Afterpay
Compared with credit card balances, Afterpay offers a big advantage: you don’t need to pay interest when you pay off your purchases.As long as you pay in full and on time, you can use the service for free
In addition, using Afterpay does not require strict credit checks like when applying for a credit card, which will temporarily affect your credit score.
If it’s free, how does Afterpay make money? The service charges merchants as a percentage of each sale and profit from late fees charged to buyers.
So when is it a good idea to use Afterpay?
Maybe you have found a lot of offers on a certain item, and you know that in the near future you will receive a large amount of cash-such as a bonus-but you will not receive this money until the sale ends.
Basically, using Afterpay can be helpful when you can afford to pay for the product in full, but installments provide some breathing room for your budget.
Disadvantages of Afterpay
So why Shouldn’t Do you use Afterpay?
Let’s start with this question: Do you have a credit card balance?
If the answer is “yes”, then although Afterpay seems to be a simple solution to get the essential shirt, it will only provide the illusion that you have money to spend.
If you encounter any problems with the installment payment, you will receive a late fee. For a single purchase, this may not seem like much, but if you use Afterpay to make multiple purchases, you will need to track a lot of payments-and you will need to pay a lot of fees.
Afterpay stated on its website that it meets the requirements set by the Payment Card Industry Security Standards Committee (the organization responsible for monitoring the security of credit card data).
In addition, Afterpay is not necessarily a reliable source of payment, because you never know how much you can spend on any particular purchase or how many valid orders you can have before being rejected.
Remember that your credit score will not be affected by using Afterpay? Well, on the other hand, you won’t get the credit benefits of using a credit card.
Ward recommends that instead of considering using Afterpay, consider applying for a credit card with a very low limit and a grace period (most card issuers do this, but please check the terms of your agreement).
By charging a small fee that you pay off each month, you will enjoy the benefits of a grace period from the time of purchase to the expiration date of your credit card.
By using a credit card, your on-time payment will be reported to the credit bureau to help you establish Credit score, Installment payment cannot be done.
Afterpay and credit cards
So is a buy-and-pay service like Afterpay better than traditional credit cards? This is a side-by-side comparison to help you make the best choice:
|been accepted||More than 100,000 locations, including Anthropologie, Free People and Ulta Beauty. But you can only use it to pay for retail merchandise.||Major credit cards (such as MasterCard and Visa) are accepted almost everywhere, including abroad.|
|Payment schedule||Payment is made in four installments, due once every two weeks.||If you do not have a balance and your credit card issuer provides a grace period, according to the law, the grace period must last at least 21 days.|
|How does it affect your credit score?||Afterpay will not perform a credit check before you apply, and paying on time will not improve your credit history.||When you apply, the card issuer will conduct a strict credit check, which may temporarily lower your credit score. The history of payments on time can build your credit history and improve your score. Late payment will hurt your score.|
|interest rate||Interest-free.||If you have a balance, youu2019ll will generate interest every day. According to data from the Federal Reserve, the average credit card interest rate is 14.54%.|
|Late fee||The late fee is 8 USD or up to 25% of your initial order value u2014, whichever is lower.||Credit card issuers can charge a late fee of up to $28 when you are late for the first time, and up to $39 if you delay payment in the past six months.|
|Minimum purchase||Although Afterpay does not specify a minimum purchase amount, stores usually do so.||Normally, there is no minimum purchase amount, but some merchants may require a minimum transaction amount to offset processing fees.|
|What is the limit?||Personal purchase approval is based on a variety of factors, including your history of using Afterpay u2014 to make timely payments, and new shoppers will be more restricted. If you miss the payment, you will not be able to make any more purchases.||Your credit limit is listed in your credit card agreement. According to Experian, the average income is US$30,000.|
Finally, no matter which way you choose, as long as you use these services responsibly-read: you pay off your balance on time every time-you can enjoy any of the benefits.
Tiffany Wendeln Connors is the full-time writer/editor of The Penny Hoarder.read Her biology and other work is here, And then find her on Twitter @TiffanyWendeln.