It seems the days of holding all your Christmas presents on lay-by at Big W are disappearing.
Over 840,000 Australians are enjoying Afterpay’s modern approach to lay-by, where you take home an item and pay for it later in 4 equal fortnightly instalments.
The popular payments company describes it as the “indulge now, pay later” phenomenon on its Instagram page.
Available to consumers both online and instore, Afterpay has received a lot of praise for its innovative business model – winning the FinTech Organisation of the Year award in 2017.
So with all the hype, we thought it would be worth noting a few of the pros and cons of this nifty payment option.
Will you choose to shop with Afterpay? We’ll let you decide.
The pros of using Afterpay
With a huge range of partnering retailers and no interest fees involved, Afterpay makes for a pretty enticing payment option.
Below are some of the main benefits of using Afterpay:
Customers are able to quickly setup and use their Afterpay account straight away, rather than go through the lengthy application processes you might experience when taking out a loan, for instance.
All you need to enter is your phone, email, payment, and address details to sign up. Afterpay currently accepts Mastercard and Visa credit and debit cards issued in Australia.
Does this purchasing process sound too good to be true? It could be, if you are not able to make the necessary payments on time (see the ‘cons’ section for more information).
Seamless integration within store
Afterpay is fully integrated within an online store’s checkout, which ensures easy useability. There’s also no need to keep track of complex payment plans.
You can simply opt to pay with Afterpay at the checkout and let them sort out the plan for you – it will get sent straight to your email inbox!
Fee and interest-free terms
By using Afterpay you don’t have to pay any interest on your repayments, and you’ll avoid hefty application fees that can be associated with money lending options.
The Afterpay service prides itself on being free for all customers to use, with the only associated costs being the price of your purchase and late payment fees.
Afterpay is not just online
Afterpay is becoming pretty well known for its seamless integration into online stores.
But if you consider yourself a bit of an old-school shopaholic, you may prefer the experience of being in a shop to try things on. Luckily for you, the Afterpay service is increasingly popping up instore.
How does it work instore? Before you go to the shops you must go online, choose the amount you want to spend, and provide your details. Once you’ve found what you want to buy, shoppers can simply present the barcode on the Afterpay app and have it scanned by the sales assistant to pay.
It may be a good idea to know exactly what you want to buy ahead of time though, because the payment barcode has an expiry date and can only be used in a single transaction.
Not all retail shops have Afterpay available instore yet, so check ahead to see where you can use it.
Provides automatic framework for payment
It’s hard to create and stick to your own payment plan sometimes, but Afterpay does all the organising for you.
Afterpay splits the total amount of your bill into 4 equal fortnightly instalments, which will be automatically charged to your the nominated debit or credit card. You will be emailed a copy of your payment schedule, so you can make sure your bank account is prepared for those payments each fortnight, or even pay ahead of time if you choose to do so.
Refund process stays the same
If you were worried that adding Afterpay to the mix might interfere with your ability to get an easy refund, don’t stress. You can still claim a refund for purchases you have made with Afterpay, in line with the individual store’s refund policy.
Good alternative to using a credit card
If you usually use your credit card to make purchases you wouldn’t otherwise be able to afford, switching to Afterpay for retail spending may be a good option because you’ll avoid interest fees.
Even though you will avoid paying interest by using Afterpay, it is still a good idea to stick to your budget, to make sure you can afford to spend that money.
The cons of using Afterpay
There is no doubt that Afterpay is an interesting and innovative retail purchasing concept, but consumers should bear in mind the cons of using this service:
Encourages impulse spending
While interest-free payment plans are an enticing prospect, they can lead to poor spending habits.
It’s a common concern for anyone on a budget – impulse spending can break the bank and leave you with an item you can’t realistically afford.
The question you need to ask is: if you had the cash to pay for the item in 4 weeks’ time, would you still spend the money? The likely answer is no.
However, as long as you meet the fortnightly repayments and consider what you can realistically spend, you can avoid being bundled in retail debt and be free to enjoy the benefits of this easy payment option.
There is a spending limit for some shoppers
Afterpay has an automated system that decides how much money you’re approved to spend, which is based on a number of different factors.
The company says that customers who have been with Afterpay for a while, and have made their payments successfully, are more likely to be able to spend more.
The upside? If you’re bad at budgeting, this could actually be a good thing.
So don’t be too disheartened if you’re not approved to use your Afterpay account for a big spending spree – just think of the dollars you might save instead.
Once you enter into a payment plan with Afterpay, you could face late payment fees if you fail to make your fortnightly payment instalments.
Customers may be charged a $10 late payment fee from Afterpay in the first instance, and another $7 fee if you don’t pay that instalment amount within 7 days.
If you’re worried about keeping track of your payments, log in to your Afterpay account at any time to make additional payments or change your payment method.
May require a credit check
All customers wanting to use Afterpay will be automatically approved straight away, as long as you’re at least 18 years old and have a valid debit or credit card.
But Afterpay’s terms make it clear that the company and unspecified “third parties” may go through an identity and payment verification process on your account. This may include undertaking credit checks or using third party databases to verify who you are.
— The Today Show (@TheTodayShow) June 8, 2017
Head to the Afterpay or individual retailers’ websites to find out more information on where you can use this service.
If you’re currently considering a credit card, the comparison table below displays some of the low interest credit cards currently available on Canstar’s database for Australians looking to spend around $2,000 per month. Please note that this table features links direct to the provider’s website, and is sorted by Star Rating (highest to lowest), followed by provider name (alphabetical). Use Canstar’s credit card comparison selector to view a wider range of credit cards.