Think about the last time you made a large purchase online from a prominent retailer. Did you notice an option to pay in several small installments spread out over time? How tempting did you find that offer? If you were intrigued, then this guide to AfterPay – a popular “buy now, pay later” option – is for you. Read on to learn how to get approved and start using the app to make purchases today you can pay for tomorrow.
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What Is AfterPay?
AfterPay is a buy now, pay later fintech service. These services allow you to pay for large purchases in small installments rather than all at once while still receiving the product immediately. Depending on the retailer and the item you’re buying, you can use AfterPay for purchases as small as $35 and as large as $1,000. You’ll see the logo at checkout if the item you want to buy qualifies.
Importantly, AfterPay is not a line of credit, but a point-of-sale loan equivalent to the cost of your purchase that enables you to buy now and pay over several weeks. This payment option is available at many prominent brick-and-mortar and online retailers.
How Does It Work?
To use AfterPay, you’ll need to download the mobile app, then link a debit or credit card to your AfterPay account. During online checkout, you can use the app to set up your payment plan. For in-person transactions, it works a bit differently. Before the transaction, you’ll need to use the app to add a virtual AfterPay card to your digital wallet. You’ll then access your digital wallet and use your virtual AfterPay card to pay for your in-person purchase.
When you buy something with AfterPay, you’ll make four smaller payments every two weeks. Your purchase total is broken into payments equal to one-quarter of your total purchase. Occasionally, for larger purchases, you may pay more than one-quarter of the cost as a down payment. You’ll make your first payment immediately upon completing your purchase, Then, the payments will be spread out evenly over the following six weeks.
Additionally, AfterPay won’t charge you interest fees. It also won’t charge you fees of any sort unless it can’t process your payment method. In that case, you’ll pay a late fee of $8. You can often waive this fee if you log into your account and update your payment information to a working method within 10 days.
How Do You Pay?
Once your credit or debit card is linked and your order is placed, AfterPay will set up automatic payments for your purchase. You’ll be notified before each payment in case you need to transfer funds or update your payment method. You can also pay before your due date if you’ve come upon sufficient funds earlier than expected.
If you wind up unable to pay, you can contact AfterPay for assistance. You can also reschedule certain payment dates in the app. These actions, though, can lower your future credit limit.
Does AfterPay Affect Your Credit Score?
No, AfterPay doesn’t affect your credit score. Unlike many financial companies, AfterPay won’t report you to the credit bureaus if you don’t make payments on time. In fact, AfterPay won’t even run a credit check on you as part of the qualification process. For both these reasons, AfterPay has no effect on your credit score.
Do They Approve All Purchases?
No, AfterPay doesn’t approve all purchases, though it does approve many of them.
Whether your transaction is approved depends partially on your credit limit. To see this limit, tap the “Orders” button toward the bottom of your app. There, you’ll see a pre-approved credit limit under the amount you currently owe AfterPay.
Even if you have sufficient funds left in your credit balance, AfterPay might still decline your purchase. As with many prominent buy now, pay later fintech companies, AfterPay uses a proprietary algorithm for approving and declining certain purchases. By definition, the exact details of this system are private, but AfterPay does say that it incorporates the following factors into its automated decisions.
- The funds available on your virtual AfterPay card.
- Your current debt to AfterPay.
- Your number of open orders.
- The value of the purchase in question.
- The amount of time for which you’ve had an AfterPay account.
How to Get Approved for AfterPay
You can start using AfterPay After completing the qualification process, which is typically quite easy. You’ll likely qualify for if:
- You’re at least 18 years old. This qualification is mostly self-explanatory. However, two exceptions exist. Alabama-based AfterPay users must be at least 19 years old, as must wards of the state in Nebraska.
- You’re a U.S. resident living in one of the 50 states or Washington, D.C. If you live in another U.S. territory, such as Guam or Puerto Rico, you can’t use AfterPay.
- You have the legal ability to enter into a binding contract. Most people will meet this qualification.
- Your phone, email address, and mailing address are all valid. Use the information you normally use to ensure that validity checks don’t lead to any denials or other issues that may impact you using AfterPay.
- You have the legal ability to use a U.S.-issued debit or credit card. Notably, AfterPay is currently not compatible with Discover debit and credit cards. To be approved for AfterPay, you’ll need a Visa, Mastercard, or American Express debit or credit card in your name to make the payments.
Tips for How to Use AfterPay When Shopping
There are smart ways and less savvy ways to use AfterPay when shopping. Here are some tips you can keep in mind to avoid bad uses in favor of good ones.
- Be sure you’ll eventually have the money to pay. With buy now, pay later services like AfterPay, the temptation to buy products you can’t yet afford is understandable. Just like with a credit card, it only makes sense to use AfterPay if you’re certain you’ll have the money soon – say, with your next paycheck. If there’s even a remote chance you won’t actually have the money on time, don’t buy it. You could wind up introducing yourself to more late fees.
- Set a discretionary spending budget. Let’s say you can make space for $500 in discretionary spending every month. In that case, a $1,000 purchase you pay for with AfterPay over six weeks fits your budget. You’ll spend two months’ budget on this purchase and solely this purchase, so it’s a tight fit, but it’s still a fit. But a $2,000 purchase won’t fit, so don’t use AfterPay to try to afford it.
- Turn on AfterPay notifications. By default, the app notifies you more than once in advance of your payment dates. With these notifications on, you’ll know whether you need to transfer funds to your linked debit account to cover your payment. This way, you won’t get hit with late fees. Of course, you can bypass this issue if you link a credit card instead, but doing so may be unwise.
- Link a debit card instead of a credit card. Paying for one loan with another doesn’t actually close out your debts. It just forestalls your payment of what remains a pressing loan. That’s why you should ditch the linked credit card in favor of a debit card. This way, once you make your AfterPay payments, you’re done covering the purchase – no need to constantly kick the can down the road.
How Else To Pay Later Instead of Now
AfterPay holds great potential when you need to make purchases now you can’t quite yet cover. It lacks the convenience fees of other services, and similarly, it doesn’t charge interest fees as with credit cards. That said, credit cards may be a better option for making several larger purchases now that you know you can pay for later. On that front, visit the MoneyMash credit cards section to find the right card for your needs.