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Personal Financeshopping

All About Afterpay

By December 29, 2021 March 9th, 2022 No Comments

Afterpay is a unique way of paying for items that you want without having to pay the full amount right away. Using Afterpay as a payment method lets you make your first payment on purchases and then pay the remaining balance in installments.

Afterpay does not charge interest on payments but there is the possibility of late fees. You can also set a spending limit through the Afterpay app which can increase as you continue to make agreed-on payments, on time.

What is Afterpay?

Afterpay is a way for consumers to make the most of their money without having to apply for loans or using other types of services such as rent to own. Every purchase is divided into four installments with the first payment made at the time of the transaction.

From a business standpoint, Afterpay is an Australian company with its current headquarters in Melbourne, Australia. Afterpay is accepted by retailers in Australia, New Zealand, Canada, the US, and the UK.

Shoppers can use this payment method in stores or online by using the app. The app is free to download.

What is Pulse Rewards?

Pulse Rewards is an exclusive rewards program through the Afterpay App. The program is free to join. Benefits include:

  • Points for every on-time payment that you make
  • Exclusive offers
  • Payment flexibility
  • New members get an automatic 20 points just for signing up

Does Afterpay Affect Your Credit Score?

Afterpay does not affect your credit score in any way. On the plus side, that means that your score will not go down if you are unable to make a payment on time. But it also means that your score will not go up even if you pay all payments as scheduled.

Unlike other point of sales loans, Afterpay does not charge huge late fees and does not do a credit check.

How Much Does Afterpay Let You Borrow?

Afterpay allows customers to borrow between $35 and $1,000 in general but there are some factors that determine the exact amount. Each account will have an estimated spend limit that is posted based on:

  • How long you have used Afterpay.
  • Your payment record.
  • Limits set by the merchant you are shopping with.
  • Credit card or debit card history.

New users may have lower estimated spend limits until they are more established. Making payment late, paying less than the agreed-on amount and other factors can reduce your limit. On-time payments can increase your spending limit unless you request that your amount be lowered.

Reducing Your Spend Limit on Purpose

For shoppers who need the additional incentive to stick to a budget, Afterpay allows the option to reduce spending limits. Contact customer service and request the limit as well as how long the restriction should last.

Requested restrictions can be lifted by following the same procedure.

Who Qualifies for Afterpay?

It is important to note that while Afterpay does not do credit checks, not everyone will qualify to use it as a payment method for every order.

To qualify for Afterpay:

  • Customers must be over age 18.
  • You must have a debit or credit card.
  • You must pay 25% of the total cost (Including taxes, shipping, and other fees) upfront.
  • Your order must be a minimum of $35 but within your spending limit.
  • You must download the app if shopping in physical stores.

Is it Bad Using Afterpay?

Using Afterpay is only bad if you misunderstand it or misuse it. There are some risks with any type of debt and that may be the first important thing to keep in mind. As attractive as the concept may be, using Afterpay is still the act of incurring debt. To reduce the risk:

  • Use Afterpay sparingly and only for needs rather than just for items you want or for impulse buys
  • Resist the urge to splurge during the holidays or big sales events
  • Set your own personal spending limit far below what is allowed by Afterpay
  • Sign up for reminders that come straight to your inbox but also set additional reminders so that there are never any surprises or missed payments
  • Whenever possible, use a debit card rather than a credit card as the payment method of record for your Afterpay account.

Why should I use a debit card for Afterpay instead of a credit card?

Afterpay does not charge interest on any of the payments that you make. The average credit card rate ranges from around 15% to 18% based on factors including the length of account, payment and credit history, and whether the card is secured or not.

If you use a high-interest credit card for Afterpay payments you are transferring a relatively low, no-interest debt to it resulting in spending far more money than you would if you paid using the debit card option.

US users can only use debit or credit cards issued in the US.

Can you Pay Off Afterpay Early?

Yes, you can pay your Afterpay balances off early. The only advantage to doing this is a possible increase in your Afterpay spend limit. You can get this same advantage by making payments on time.

Can You Get Cash with Afterpay?

In Australia, you can get Afterpay to get cash. Australian consumers can use the Afterpay app to perform a number of banking functions, including bill pay, setting up a savings account, and cash withdrawal.

U.S. and Canadian consumers cannot use Afterpay to get cash.

What is the Max Afterpay Limit?

The total Afterpay max limit varies by country and by customer. In general, there is a limit of $1,000 per transaction and a limit of $2,000 overall outstanding debt. New customers will have a much lower limit until they are more established.

Established customers who miss a payment or pay late will have their limits reduced for a short time.

How Do I Know My Afterpay Limit?

Your estimated Afterpay limit is found in the app or on the Afterpay website. The amount listed is just an estimate with the actual approved amount determined by recent activity and the merchant. Retailers have the right to set the limits for their websites and in their stores.

What Merchants Take Afterpay?

In the US alone, Afterpay has been used by over 5 million customers and is accepted by over 15,000 merchants. Worldwide, there are over 100,000 merchants that accept Afterpay. The list below is a small sample of these merchants covering makeup, fast fashion, footwear, toys, and more. Check out your favorites from the list, use the coupon codes on the Swagbucks website and save money, earn points, and get some cash back as well.

Pro Saver Tip: You can use AfterPay and earn cash back rebates. Shopping rewards sites like Rakuten, MyPoints, and Swagbucks offer cash back rebates of 1% to 20% at 1000’s of featured stores. If you’re going to make an AfterPay purchase anyway, you might as well claim the free cash back reward.

Final Thoughts on AfterPay

Afterpay is a great way to make purchases when the sale is hot but the ol’ budget is not. If you set and follow your payment restrictions it can be a helpful tool to stretch your dollars. If you are a reckless impulse buyer with little self-control and can’t keep track of payments even with emailed reminders, it can be a bad thing.

Know your triggers, know your spending style and know your limits before downloading the Afterpay app and then take some time to consider every purchase before clicking to finalize the order.

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