"Buy now, pay later" - we all love the sounds of that!

It's becoming more and more common to see this as a payment option amongst popular Australian retailers. Go on and search it in your google browser - the result will be a full page of retailer giants that offer Afterpay, tempting you with lines like 'Afterpay is easy' and 'Pay later in 4 simple instalments'- It's hard to not be sucked in! 

Since so many consumers are now turning to Afterpay we thought we'd do some of our own research to see if Afterpay is in fact as good as it's cracked up to be and all the things you should know about this retail game changer.

Afterpay in a nutshell

For those of you who have heard of Afterpay but don't 100% understand how it's different to lay-by, here's a breakdown; Lay-by requires you to complete all of your instalment payments before you can pick up the item. The difference with Afterpay is that you can walk in store, pick whatever tickles your fancy, and walk out with it the same day, without paying! You'll then need to pay for it later in four easy instalments.

Pros:

  • ​Interest Free - Given you make all repayments on time.

  • Immediate Use - Easy and quick process to sign up, either in-store or online.

  • Automatic Deductions - Each amount is automatically deducted from your account.

  • Refunds- You can still apply for a refund, as long as it's in line with the stores refund policy.

  • Advance Payments- You can make payments in advance to pay it off quicker.

  • Spending Limits- could be good for you if you're budgeting.

Cons:

  • ​Encourages Impulse Spending- can lead to poor spending habits, it's easy to spend money you don't have.

  • Late Fees - If you fail to make payments on time for whatever reason, there are late fees involved. 

  • Easy to lose track - It's easy to forget about the automatic payments coming out of your account, if you forget to make sure there's enough money in your debit account then you may default on your payment without even realising, or you may find yourself unable to repay other bills due to overspending. 

Proceed with caution

Afterpay is great - as long as you are using it properly. If managed properly you should be fine, but there are implications if not utilised with care (like most credit facilities). If you accidentally make a late payment, miss a payment, or your payment defaults for whatever reason, Afterpay has the right to report this negative credit activity to credit reporting agencies. Automatic deductions mean you don't have to worry about making payments weekly, but you still need to make sure there is enough money in your account for the debits to come out of. So if you already know that monitoring bills and making payments on time is just not your thing then it might smart to steer clear of Afterpay - it's just another thing you'd have to remember!  If you're good at ensuring there's always a healthy cash flow in your debit accounts then Afterpay may be your flashy new best friend!​

What happens if I default?

So you've missed a payment or failed to meet the obligations laid out in your Afterpay agreement. It's not as simple as a slap on the wrist penalty or an extra surcharge, the implications can actually be quite serious. Once reported, it can have a harmful effect on your credit rating which can affect you in the future when you want to take out a loan for a home.

 

KEY TAKEAWAY: Afterpay can be an amazing payment tool if you manage it correctly! Much like credit cards there are fees involved if you fail to make fortnightly repayments. It's easy to make impulsive purchases with the "I'll deal with the costs later" mentality, the key is to consider what you can and should realistically spend. If you're good at managing your money then Afterpay may be your new best friend!