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Afterpay is an excellent choice for borrowers who would like to make a purchase and spread out the cost over several payments, especially if you don't want to pay interest. However, make sure you're able to budget for and afford the item before buying through Afterpay.
What is Afterpay?
Afterpay is a buy now, pay later (BNPL) lender that allows you to spread out the cost of an item over a series of installment payments. You'll make the first of four payments when you purchase the item, then will pay off the rest over six weeks. Your payments will be due every two weeks.
You will choose Afterpay as your payment method when checking out at your preferred retailer. You can use Afterpay in the app, on a retailer's website, and for in-person shopping. There are thousands of retailers that allow you to use Afterpay at checkout. Some popular companies include Adidas, Lululemon, Ulta Beauty, and Levi's.
How does Afterpay work?
There's no cost to use Afterpay — as long as you make on-time payments. If you don't pay more than 10 days after the due date, you'll fork over a late fee of up to $8. You may pay more late fees if you continue to make delayed payments, but the total sum of the late fees you can pay on a specific purchase is capped at 25% of the order's value.
Importantly, Afterpay doesn't approve 100% of orders and instead considers several factors before giving your purchase the green light. For instance, the longer you have used Afterpay, the more likely you may be to have a purchase approved. The amount you have to repay and the number of orders you currently have open with the company also factor into the lending decision.
Afterpay may conduct a soft credit check when you sign up for the platform. A soft credit check allows a lender to see your credit history without impacting your credit score. Some lenders use a hard credit inquiry, which does impact your credit score. Buy now, pay later payments also will not affect your credit score, as Afterpay doesn't report them to any credit bureau.
To use Afterpay, you need to be a resident of a US state or Washington, DC. You also need to be at least 18 years old (or 19 in Alabama) and provide a few pieces of contact information.
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Late fee of $8 if you miss a payment by 10 days or more, cap on the total late fees on your purchase to 25% of the order's value
Undisclosed
- Only soft credit credit check needed
- No interest on purchases
- Excellent mobile app
- Can use with thousands of retailers
- Late fees
- Not all orders are approved
- Only one repayment term option
- Repayment is split over four interest-free installment payments
- The amount of credit available to you depends on your history as a Afterpay customer and if you've been making payments on time
- Afterpay doesn't report your payments to credit bureaus
- Need to be a resident of a US state or Washington, DC
Afterpay Pros and Cons
Pros
- Only soft credit check required. A soft credit check will not impact your credit score and is solely used to help Afterpay make a lending decision. This credit check will allow Afterpay to set your initial spending limit.
- Spread out payments over six weeks. You'll make your first payment equaling one quarter of the order value when you purchase an item, then a payment every two weeks after that until you've paid 100% of the item's value. If you don't have all the cash up front to buy what you want, this could make the item affordable.
- Doesn't charge interest on purchases. You won't pay any interest to use Afterpay's service. The only fee you'd face is a late fee if you fall behind on payments.
- Easy to shop on the mobile app. Afterpay's mobile app is extremely well review on both the Google Play and Apple stores. You're able to manage your payments from the app as well as browse products from different companies.
- Available with thousands of retailers. You may be able to use Afterpay at most of your favorite stores.
Cons
- Late fees. Afterpay charges a relatively small late fee of $8 if you miss a payment by 10 days or more. If you continue to pile up late fees, Afterpay caps the total late fees on your purchase to 25% of the order's value.
- Not all orders are approved. Afterpay is "committed to ensuring [it] supports responsible spending," according to its frequently asked questions page. If the company deems you ineligible to use buy now, pay later because of your financial situation, you'll have to either find a different way to afford your item or choose not to buy.
Who is Afterpay best for?
Afterpay is best for customers who want to spread out the cost of their purchase over multiple paychecks. You'll make Afterpay payments every two weeks, which syncs up well with a bi-weekly pay period. Unlike most other lenders, the company also doesn't charge interest — a major benefit for many borrowers.
Be careful. Buy now, pay later programs might entice you to buy something you may not realistically be able to afford. Just because the bi-weekly payments look small doesn't mean the total cost isn't still significant. Make sure you've budgeted for the item before making your purchase.
Afterpay Alternatives
Of Afterpay, Affirm, and Klarna, only Affirm doesn't charge any late fees. Late fees could add to the total cost of your borrowing, so set up a proper budget to make sure you don't fall behind.
All three companies offer a "pay in four" option, meaning you pay for your item over four installments. Additionally, each company boasts a roster of thousands of companies they have partnered with, making buy now, pay later accessible for many different types of purchases.
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How trustworthy is Afterpay?
Afterpay is rated an A+ by the Better Business Bureau, a nonprofit organization focused on consumer protection and trust. The BBB lists hundreds of complaints filed against the business as the reason for its grade. The BBB determined ratings based on a company's response to customer complaints, honesty in advertising, and openness about business practices.
Keep in mind that BBB ratings don't always guarantee you'll have a good relationship with the lender. Talk to friends and family who have used the company to get a fuller picture of Afterpay.
Afterpay Frequently Asked Questions
No, Afterpay does not affect your credit score as the company does not report your payment history to any credit bureaus.
Yes, you can pay off your buy now, pay later plan ahead of time. The company won't charge you any fees for doing so.
The most substantial way Afterpay makes money is through merchant fees. It charges companies a percentage of each transaction. Afterpay also makes money through charging late fees.
To get started, you'll create an account with the company and receive an instant approval decision. Afterpay takes a number of factors into account when deciding if you qualify, including your credit history.
