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A guide to Afterpay

Afterpay has been hailed as a ‘reverse layby’ service that encourages you to ‘indulge now, pay later’. But what does that really mean?

What is Afterpay?

Afterpay is a fairly new digital platform that provides a more manageable solution for buying items. It allows you to break the total cost of your product down into four equal installments, which can be paid off fortnightly over a six to eight-week period.

Think of it like layby, with the added bonuses of receiving the item upfront instead of at the end of the term, and without having to pay interest.

How does it work?

Afterpay acts as a moneylender. When you make a purchase through Afterpay, you authorise them to pay the retailer for your item upfront, under the proviso that you will pay them back within the specified period.

Signing up with Afterpay and tethering your debit or credit card to your account is done simply via the website or the app. Once you’ve confirmed your details and verified your account, the market is your oyster.

Afterpay is available in more than 3000 online retailers including Booktopia, T2, Myer and Big W, with some retailers also offering Afterpay in store.

When shopping online, you can easily select it as your payment method at the checkout. However, there are a couple more steps for in store purchases. You’ll need to generate a unique barcode via the Afterpay website on your phone, which can be scanned at the time of purchase.

While you don’t have to pay interest, there is a $10 fee if you are late on installments. However, you will receive a notification email telling you that there were insufficient funds and the installment hasn’t been paid, allowing you 24 hours to pay without penalty. Afterwards, there is a $7 fee for every week that you’re late on a payment.

Refunds and exchanges

The process for obtaining a refund or exchanging an item is the same as normal – per the terms of the retailer. However, instead of receiving the refund directly, Afterpay is refunded by the retailer. Afterpay will then return any funds you’ve already paid, and cancel any future scheduled payments. Afterpay’s involvement in your purchase dissolves after 120 days, after which you will be able to deal directly with the retailer.

The Good, the Bad, and the Ugly

There are several advantages to using Afterpay, including:

  • The ability to receive an item before you pay it off, without paying interest
  • It’s high level of security. Afterpay boasts that it has the “highest level of security in the payment industry”
  • The ability to track purchases and payments
  • Automatic withdrawal of payments from your account, thus removing the hassle of having to make sure that you get online in time to do it.
  • Access to thousands of retailers online and instore

However, there are a lot of things you need to keep in mind:

  • Afterpay was designed to encourage impulse spending and overspending, particularly if you’re using a credit card. Make sure to keep track of your spending, try and use a debit card and limit purchases to goods that you really need and can’t live without.
  • If you’re using a credit card, there will be interest on the payments made back to the bank, even if Afterpay doesn’t directly require interest.
  • Afterpay also has its late fees of $10 after the payment is initially missed, and $7 for each week after.
  • In its terms and conditions, Afterpay has specified that it has the right to sell your debt to third party collection agencies without notifying you.

To sign up for Afterpay, head to the website and follow the prompts.