Pros and Cons of Afterpay: What You Need to Know Before You Buy Now and Pay Later
Getting the things you want now and paying for them over time (without paying interest) seems tempting. It’s lay-by without the waiting, but you know what they say: If it sounds too good to be true, it probably is.
So, is Afterpay good? Are there any sneaky traps you could fall into when you buy now and pay later?
Join us as we explore the Afterpay pros and cons while answering some common concerns about this payment platform.
Afterpay Pros and Cons
Pro: Accessing Essential Items
Many people have times in their lives when buying something they need or desperately want isn’t possible due to a lack of funds. Whereas other types of “urgent expense” solutions (such as payday loans) come with the obvious downside of high interest, Afterpay offers an interest-free way to buy what you need now and pay it off over the following four fortnights.
Con: Late Fees
If you miss your scheduled repayments with Afterpay, you may find yourself with late fees up to 25% of the purchase price or $68 (whichever is lower). The fees start small ($10 for your first missed payment), but they can add up if you miss repayments over several weeks.
If you use Afterpay without proper planning to ensure you’ll be able to pay off the debt in time, these fees could lead to financial stress. Thankfully, the Afterpay app won’t let you make any new purchases until your overdue amount is paid back, which can help you avoid late fees piling up across multiple purchases.
Pro: No Credit Rating Impact (Usually!)
It’s one of the most common questions people have about using the platform: Does Afterpay affect credit ratings? The good news is that it doesn’t… most of the time.
Providing you make all your repayments on time, using Afterpay won’t leave any mark on your credit history. It’s important to note however what’s in their fine print, which does give them the right to report any negative activity to ratings bureaus. Some lenders including CUA may ask you to provide your Afterpay commitments in a loan application.
Con: Afterpay and Credit Cards can be a Bad Mix
If you connect your Afterpay account to a credit card (rather than a debit card), this could lead to problems. Afterpay is interest-free, but you’ll still owe interest on your credit card – and credit card debt can be just as overwhelming when it’s spread across four fortnightly instalments.
To keep things simple, you might be better off using your credit card directly or switching your Afterpay account to a debit card if possible.
Con: Fuelling Unhealthy Shopping Addictions
If you only buy things you need and fulfill your wants within reason, using Afterpay can be perfectly fine. Having said that, if you have an existing retail addiction, it can make it all too easy to access those instant-gratification purchases and spiral into unaffordable debt. It’s essential to understand that Afterpay isn’t a free pass to live beyond your means.
Conclusion: Is Afterpay Good?
As with most financial products and services, Afterpay itself is neutral. We’re not here to say it’s bad or you should avoid it, though we do recommend caution based on some of the potential disadvantages discussed above.
When used wisely, Afterpay can be a handy app to have in your back pocket for those urgent or unforeseen expenses. You should know that it can also lead to problems if used recklessly. It’s up to you to assess your circumstances and decide if Afterpay is an appropriate platform for you to use.