Planning on giving Afterpay a try? You’re not alone; Afterpay has around 14.6 million active users around the world and is accepted at over 85 thousand retailers!

But, should you be using it too? The answer is: it depends. Let’s take a look at seven important facts you should know about Afterpay before using it.

What is Afterpay?

Afterpay is a payment option that lets you buy things online without needing to pay upfront. It’s not a credit card, so there aren’t any credit checks. Plus they don’t charge any interest or fees, as long as you pay on time.

How Does Afterpay Work?

Afterpay works by splitting your purchase into four equal payments, which you then pay off over eight weeks. The first payment is made at the time of purchase, and the remaining three are deducted from your account automatically every two weeks.

If you miss a payment, you’ll be charged a $15 late fee. If you don’t pay within 60 days, you’ll be charged a $35 default fee, and Afterpay may send your debt to a collection agency.

How Will Afterpay Affect My Credit Score?

There’s no doubt that Afterpay is a convenient way to finance your purchases. But how will it affect your credit score?

Fortunately, the impact of Afterpay on your credit score is minimal. That’s because Afterpay doesn’t perform a hard inquiry on your credit report when you sign up for an account. So, if you’re worried about Afterpay negatively impacting your credit score, you can rest assured that it won’t have a major effect.

With that said, there are a few things to keep in mind. First, late payments on Afterpay can be reported to the major credit bureaus. So, if you’re not careful, you could end up damaging your credit score. Secondly, after you’ve used Afterpay a few times and built up a history with the company, they may start performing periodic soft inquiries on your credit report.

While these soft inquiries won’t have a negative impact on your credit score, they will be visible to potential creditors. So, if you’re planning on applying for a loan in the near future, keep in mind that Afterpay may show up on your credit report.

What Are the Benefits of Using Afterpay?

Now that we’ve looked at some of the potential drawbacks of using Afterpay, let’s take a look at the 5 main benefits.

1- No interest or fees as long as you pay on time:

Assuming you always make your payments on time, Afterpay is a great way to shop because you’ll never be charged any interest or fees. That’s a big benefit compared to using a credit card, which almost always charges interest if you don’t pay your balance in full every month. And even if you do pay your credit card balance in full every month, you’re still usually charged an annual fee.

2- Doesn’t perform a hard inquiry on your credit report:

Another big benefit of using Afterpay is that it doesn’t perform a hard inquiry on your credit report. So, if you’re worried about Afterpay negatively impacting your credit score, you can rest assured that it won’t have a major effect.

Periodic soft inquiries may be performed after you’ve built up a history with the company.

While these soft inquiries won’t have a negative impact on your credit score, they will be visible to potential creditors. So, if you’re planning on applying for a loan in the near future, keep in mind that Afterpay may show up on your credit report.

3- No major impact on your credit score:

As we mentioned earlier, the impact of Afterpay on your credit score is minimal. That’s because Afterpay doesn’t perform a hard inquiry on your credit report when you sign up for an account.

So, if you’re worried about Afterpay negatively impacting your credit score, you can rest assured that it won’t have a major effect.

Of course, there are a few things to keep in mind. First, late payments on Afterpay can be reported to the major credit bureaus. So, if you’re not careful, you could end up damaging your credit score. Secondly, after you’ve used Afterpay a few times and built up a history with the company, they may start performing periodic soft inquiries on your credit report.

But overall, the impact of Afterpay on your credit score is minimal.

4- Convenient way to finance your purchases:

Another big benefit of using Afterpay is that it’s a very convenient way to finance your purchases. With Afterpay, you can buy the things you want now and pay for them later. There’s no need to wait until you have the money saved up.

And, unlike a credit card, you’ll never be charged interest or fees as long as you make your payments on time.

So, if you’re looking for a convenient way to finance your purchases, Afterpay is a great option.

Just be sure to keep track of your spending and always make your payments on time.

5- You can buy without upfront payment :

The final benefit of using Afterpay is that you can buy without upfront payment. With most other financing options, you have to pay a portion of the purchase price upfront. But with Afterpay, you can finance your entire purchase.

So, if you don’t have the money saved up to pay for something outright, Afterpay is a great option.

Overall, Afterpay is a great financing option for young adults with bad credit. Just be sure to keep track of your spending and always make your payments on time. If you do, you’ll never be charged any interest or fees.

What Are the Drawbacks of Using Afterpay?

While Afterpay can be a helpful tool for some consumers, there are certainly drawbacks to using this service.

1- Can lead to debt:

One of the biggest dangers of Afterpay is that it can easily lead to debt. Since there is no interest charged on the money you borrow, it can be easy to forget that you are actually borrowing money. As a result, you may find yourself spending more than you can afford, leading to debt and financial hardship.

2- Not available at certain stores:

Another drawback of using Afterpay is that it’s not available at all stores. While Afterpay is accepted at many major retailers, there are still some stores that don’t offer this service. So, if you’re planning on using Afterpay to finance a purchase, be sure to check if the store you’re shopping at offers this service.

3- Very high late fees:

If you’re late on a payment with Afterpay, you’ll be charged a very high late fee. In fact, the late fee is often higher than the minimum payment you would have been required to make if you had used a credit card.

For example, let’s say you’re late on a $100 payment. With a credit card, you might be charged a $25 late fee. But with Afterpay, you could be charged a $40 late fee.

So, if you’re considering using Afterpay, be sure to budget for the possibility of high late fees.

Conclusion

Overall, Afterpay can be a great financing option for young adults with bad credit. Just be sure to keep track of your spending and always make your payments on time. If you do, you’ll never be charged any interest or fees.

However, there are some drawbacks to using Afterpay, such as the possibility of high late fees and the fact that it’s not available at all stores. So, be sure to weigh the pros and cons before deciding if Afterpay is right for you.

Have you ever used Afterpay? What was your experience? Let us know in the comments below!