AfterPay is a short-term financing service that allows consumers to buy now and pay later. This type of service is also referred to as point-of-sale installment loan. Essentially, consumers are able to pay for their purchase over a period of time, typically with no interest.
How it Works
Online: AfterPay is partnered with thousands of websites. You can find AfterPay on anything from clothing stores to travel sites. When checking out, select AfterPay as your payment option. You will make the first payment upfront and the next 3 installments over the next 6 weeks.
In-store: Download the AfterPay app and simply use the tap to pay feature at participating stores. AfterPay ultimately works as a credit card with no interest. Just like online payments, you will make the first payment upfront and the next 3 installments over the next 6 weeks.
- AfterPay provides convenience.
- There is no interest, unlike a credit card.
- You do not need good credit to qualify.
Let's elaborate on some of these pros. AfterPay is a great resource, as long as it is used responsibly. AfterPay allows consumers to buy products and services now and pay for them later with no interest. Another pro of AfterPay is that you don't necessarily need good credit to qualify for this service.
- Can increase impulse spending habits.
- Fees can pile up if the service is not used responsibly.
- AfterPay can negatively affect your credit score.
- Can potentially decrease your chances of qualifying for a loan.
Let's elaborate on some of these cons. AfterPay can negatively affect your credit score. “A Consumer Financial Protection Bureau report from March 2023 found that users of buy-now-pay-later services were far more likely to have bank overdrafts, payday loans, pawn loans, and other high-interest financial products, indicating that they are more financially vulnerable than non-users of BNPL financing."
AfterPay can also decrease your chances of qualifying for a loan. When an individual applies for a loan, typically three months of bank statements are pulled. If lenders see that you are using buy now, pay later services such as AfterPay, your chances of qualifying for a loan may decrease.
Cash or Convenience?
Determining whether or not AfterPay is for you is based on your habits as consumer. Read over the cons of AfterPay again and think about whether or not you would be susceptible to the downsides of this service. Happy Shopping!