The bottom line: Afterpay may work for borrowers who need to finance a large purchase, as long as they can make payments on time.
Min. Credit Score
Pros & Cons
Does not charge a prepayment fee.
Accepts applicants with little credit history.
Charges a late fee.
Does not report on-time payments to the credit bureaus.
Not available at all retailers.
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Afterpay provides point-of-sale loans for online and in-store purchases at retailers like Bed Bath & Beyond, Old Navy, Ulta Beauty and Lululemon. It’s a similar financing option to Klarna and Affirm, which also allow shoppers to buy now and pay later.
Afterpay was founded in Australia in 2014 as an alternative to traditional financing tools like credit cards and has served almost 10 million customers at over 55,000 merchants around the world.
The cheapest way to pay for a purchase is usually with cash, but a point-of-sale loan can be a good fit for borrowers who need to break up a big-ticket expense, as long as they can afford the payments and make them on time.
How does Afterpay work?
Afterpay offers one payment plan — the Pay in 4 — which lets shoppers divide a purchase into four equal installments, due every two weeks, with the first payment due at checkout.
For example, if your purchase costs $200, you'd pay $50 at checkout. The three remaining $50 payments would be due every two weeks until you’ve paid off the full $200.
For large purchases, your first payment could be higher than the others, but the company will show how installments are split before you pay.
If you’ve used Afterpay for a while and have a strong repayment history, your payments may start after two weeks instead, giving you a longer repayment plan.
Afterpay doesn’t charge interest with its Pay in 4 plan, so if you pay on time, you essentially use the service for free. However, if you miss the payment date by 10 days, you're charged a late fee up to $8.
How to qualify: Afterpay doesn’t have a minimum credit score requirement. According to the company, loan approval depends on whether there are sufficient funds available through your debit or credit card, how long you’ve been using Afterpay, the purchase price and whether you have other outstanding loans with Afterpay.
Should you use Afterpay?
Afterpay may be a good option if you:
Are looking for a straightforward point-of-sale loan. Unlike other point-of-sale loan providers, Afterpay offers only one zero-interest payment plan to all shoppers. Other companies, like Affirm, negotiate their underwriting criteria with each merchant, so your interest rate will change based on where you shop.
Have bad credit or no credit. Afterpay doesn’t check your credit score, even with a soft pull, which is rare among point-of-sale lenders. If you have fair or bad credit (689 or lower on the FICO scale) but need to finance a purchase, Afterpay is one way to buy now and pay later.
Plan to set up automated payments. Afterpay gives you the option to set up automated payments. If you opt in, your card will be automatically charged on each due date, so you can avoid late fees.
Afterpay is not a good idea if you:
Have a habit of overspending. Afterpay will likely increase your credit limit as you make additional purchases and successfully pay them off. If you have a hard time building an emergency fund or paying down other debts, this feature could encourage you to overextend your finances.
Sometimes miss payments. Afterpay charges a late fee of $8, which is higher than its competitors. Though the company will charge only one late fee per installment and caps all fees at 25% of the order value, it can add up. Afterpay also pauses your account once you miss a payment, so you can’t charge other purchases until you’ve paid up.
Want to build credit. Like other point-of-sale lenders, Afterpay doesn’t report on-time payments to the credit bureaus, which can help build your credit.
Alternatives to Afterpay
Personal loans: If you’re considering financing a large purchase, you may want to compare rates and terms on personal loans.
Personal loans are best used for non-discretionary purchases. Most online lenders offer pre-qualification, so you can check available rates without impacting your credit score.
0% interest credit card: If you have good or excellent credit, you could apply for a 0% APR credit card. These cards offer introductory periods up to 18 months and charge no interest during that period. You may also receive a sign-up bonus or access to a rewards program.
Cash-back credit card: If you’re confident you can make the minimum payment each month, a flat-rate cash-back card may be a good option for some borrowers. Cash-back cards earn rewards equal to a percentage of the amount you spend, usually 1% to 6%, so you’ll get money back with each purchase.
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Frequently asked questions
Afterpay’s Pay in 4 plan lets shoppers divide the cost of a purchase into four interest-free installments to be paid every two weeks. The first payment is due at checkout.
Afterpay doesn’t check your credit score.
There’s no minimum credit score required to use Afterpay. Loan approval depends on whether there are sufficient funds available through your debit or credit card, how long you’ve been using Afterpay, the purchase price and whether you have other outstanding loans with Afterpay.
It’s unlikely that using Afterpay will affect your credit score. Afterpay doesn’t perform a hard credit inquiry, which can lower your score, and it doesn’t report missed payments to the credit bureaus for most borrowers.
As long as you make your payments on time, there’s no catch with Afterpay. But similar to a credit card, it’s easy to overspend.