What Is The Advantage of AfterPay?

I recently thought of checking out after pay - the way it works is if I use afterpay for a $100 item, I need to pay them 4 equal payments of $25 every week. If I have a credit card, I can still keep that $100 in a savings account, earn a few cents before the billing cycle and pay my credit card the same amount of money and even earn some points.

What is the advantage of AfterPay ?

If a person had the same amount of dedication towards payments, wouldn't just a credit card suffice ?
I understand afterpay as an option for people who don't have a credit card - out of choice. Other than this what appeals to people about after pay ?

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Comments

  • +2 votes

    After pay has a missed flat payment fee of $10 and is structured like layby you don't incur compound interest on purchases. For goods its better than a credit card in my opinion.

  • +1 vote

    Remember dollarmites? Financial education. Sounds good, right? Except they pay the school for every sign up. I wonder why.

    Remember getting a credit card from CommBank on your 18th birthday?

    The education is a ploy for long term loyalty and setting up credit as the norm for a young adult.

    If it hasn’t already happened, banks should be booted from schools.

  • +1 vote

    i use afterpay for discounts - eg the recent PAYIN4 promo on ebay…use any payment that gives you the edge… simples..

  •  

    have a credit card, I can still keep that $100 in a savings account, earn a few cents before the billing cycle and pay my credit card the same amount of money and even earn some points

    This is exactly how and why I use it.

  •  

    Never used after pay before, and after reading the thread I have 3 questions to determine if there's any possible benefit:
    * When paying instalments on credit card, do you get frequent flyer points on after pay instalments? (I know the rewards card terms usually exclude cash equivalent transactions, just wondering if these would be treated as such)
    * Can you change the credit card you're using to pay the after pay instalment? (Eg instalment 1 & 2 on card A, 3 & 4 on card B)
    * Does the credit card you pay the instalment with have to be in your name, or can it be in your spouse's name? (just wondering if there's a way to smooth out transactions a bit more, to help churn a little faster through rewards cards….)

  • +1 vote

    Isnt after pay just a modern Lay-Buy?

    •  

      Except you get the goods straight away.

  • +2 votes

    I'm on a fairly high income and have no CC debt and I use Zip and AP. For me, I'd rather have money in my offset account and use these services to pay for things with no interest. I'v never paid a late fee. I also use CCs (to collect FF and for purchase protection) and time purchases to give myself essentially 2 months interest free. The opportunity cost of money at play.

    • +3 votes

      How much are you making on the $2k over 2 months? Worked out the opportunity cost of managing all this rubbish rather than just putting it on credit card and paying off at the end of the month?

      • +1 vote

        It's useful for buying something when the timing for a CC purchase is not right - like this week when I bought some expensive PC parts. It's easy to manage (well it is for me) though phone apps.

        Each to their own.

        • +4 votes

          But how much are you actually "saving"/making by doing this?

          •  

            @brendanm: I'm not paying interest and the money I would have used is in my offset account, reducing the amount of interest I'm paying.

            Like I said, each to their own.

            • +3 votes

              @R4: Yes I understand that, but how much interest do you save, on an absolute maximum of $2k, for (less than?) 2 months?

              I understand the "each to their own" comment, however you were the one who made the comment about opportunity cost.

              •  

                @brendanm: So, using your logic, because it's only $2k maximum, there's no point in trying to save on interest. Why bother in other words - a bizarre standpoint from someone on Ozbargain!

                There is an opportunity cost involved. My opportunity cost position may be different to yours

                • +1 vote

                  @R4: The only way it would be worthwhile is if you put a very low value on your time.

                  Why bother is hardly a bizarre standpoint. Instead of chasing a 3 cent saving in J retest through mixed usage of credit cards and afterpay providers, you could be spending that time with family (to me worth a lot more than the 3 cents), or using your time to make a proper amount of money.

                  •  

                    @brendanm: I won't bother then

                    Thanks for setting me straight

          • +1 vote

            @brendanm: Not necessarily for OP but for a lot of people it's about still having enough 'emergency' fund for car repairs, house fixes, dental, health etc. If you get a month where there are birthdays, holiday, wedding. Why get smashed with all the money leaving your account when you can maintain your account in case of unforeseen expenses and pay instalments for the non-essentials.

            I imagine students who have expenses like textbook etc. but still have a social life, will be able to buy the clothes/make-up they need without letting all the money leave their account. If I had a choice and someone offered me to pay off my car without interested with $4 per day for 3years, I would take that in a heart beat than have the lump sum taken out of my account.

            • +1 vote

              @Jaysful: Perhaps organise your money and your budget so you aren't wasting more than you can actually afford for birthday and wedding gifts. If you are using all of your savings for these things, you have much larger problems than afterpay.

              Do people not keep at least a couple months pay in reserve, but then spend all their money on birthday gifts? Seems insane.

              • -1 vote

                @brendanm: That's your life buddy boy.

                I have a similar system as @Jaysful and I have an account with at least 1 month's pay as reserve.

                When it comes to people like us, Afterpay and ZipPay is more for the in between purchases because monthly payment is a right bitch.

                I would rather pay $50 to Zip and $50 to AfterPay each month rather than getting slugged the whole amount all at once on my CC.

      • +1 vote

        I agree with a credit card (or in fact having more than one) you can mitigate the timing issues, having ongoing interest free periods and continue to save in your offset.

        The benefit of the credit card is price protection, additional warranty and even charge back.

  • -2 votes

    Afterpay's revenue is based on late fees; the lending of money operates at a loss.

    So as a consumer who isn't constantly in debt, you can abuse this by never paying late, and "smoothing out" the payments on big ticket items, it may make no difference if all the payments fall within the same month on a credit card, but if it's spread out a little bit, it might be easier to manage.

    That being said, it's a bit like signing up to a new service like PayPal. The question is, do you want another intermediary between your bank and the merchant?

    If you MIGHT run into issues with late fees, I highly recommend using a credit card instead, as the "late fees" on Afterpay payments are the equivalent of an astronomical interest rate.

    • +5 votes

      Sorry I don’t think you’re right.

      Their revenue is mainly from the merchant who has to give up certain % to apt to use their service.

      The late fees are nothing

  •  

    The advantage is easier sign up with no employment or other conditions. With credit cards you may be required to provide pay slips and prove you are employed etc etc.
    The disadvantage is that it costs the retailer more increasing prices across the board. Missing a payment with afterpay can seriously mess up your credit score more so than a credit card. Finally it's not a profitable business model and it never may be.

    • +1 vote

      After reading Afterpay's recent financial report it seems like late fees is definitely not a major revenue stream for them. In fact they're trying to reduce it because higher late feels means their last enquiry with AUSTRAC would be questionable and also it means they're taking on more risk which won't sit well with the shareholders.

      You might be referring the other BNPL schemes such as ZIP Money (not ZIP pay), Splitit, Humm, Lattitude Pay and maybe Klarna. Where there's is more of a 'personal' loan feel to their service (usually it involves upping your limit).

  •  

    Afterpay is essentially another credit provider. You get a 43 day loan. It's up to you. If you can manage to time your payments right, it's a good way to take advantage of credit and manage your cash flow

    •  

      This. 43 day loan, and then you pay it off with your credit card (and get points for it). The cash that you would have paid on your credit card in that time sits in your mortgage offset for your PPOR. Marginal, but you get a benefit of a few bucks, at no cost to you as long as you always pay off your credit card in full.

  • +1 vote

    After pay is in it to make money. If you can’t afford it don’t buy it. 45 days will do nothing if you don’t have enough funds by then.

  • +5 votes

    The advantage for me is that I put some of my Super into Afterpay shares.
    This time last year Super balance $285,000
    Today $$695,000

    Woohoo

    •  

      Yeah just saw the last 12 months performance, whats your prediction?

      •  

        No idea - I was just lucky.

      • +1 vote

        you can check wirecard 5years chart

        •  

          I chuckled at this comment! Upvoted!

    •  

      Holy crap, that's a good bet.
      Doesn't always work out like that though

      •  

        Lucky that it went your way, you would have had several heart attacks in march when 280k became for 100k for a few weeks. lol.

      • +2 votes

        Yeah, my flight centre shares lost $50,000 over the same time

    • +3 votes

      How do you allocate super to a specific stock? Which super fund are you with?

      •  

        Self-managed super funds (SMSF)?

  •  

    The reason I closed my credit card was due to the annual fee. I use Afterpay as not having to pay fees appeals to me.
    Using Afterpay benefits me on larger purchases, as my money stays in my offset account for longer.

    •  

      Using Afterpay benefits me on larger purchases, as my money stays in my offset account for longer.

      On a $1200 purchase, with a mortgage interest rate of say 4%, the benefits over 8 weeks amount to about $4. That's good enough for the ozbargain community!

      I suppose a better cash flow helps too.

      • -2 votes

        It might not sound like a lot, but imagine that over a long period of time. It’ll certainly stack up.

    •  

      28 Degrees and ING don't have annual fees on their credit cards.

      But, I agree with the general sentiment as I do the same.

  • -2 votes

    Afterpay shows on your credit report, and as such is considered as potential debt when calculating your homeloan capacity.

    • +5 votes

      So if you happen to owe Afterpay $1500 at the time of the check you'll have to buy a $834,500 home instead of a $836,000 house. May as well wear a sack and grow a long beard and warn everyone, "look what Afterpay did to me, Afterpay killed my family!".

      • +4 votes

        It's not the amount you currently have outstanding that they care about. Once you have an Afterpay account, even 0 balance, they have to factor in that you could use it, which would affect your ability to make your homeloan repayments.

    •  

      It makes sense for banks to consider things like AfterPay when calculating your capacity but it's a bit redundant. I can get approved for a home loan one week, then sign up for AfterPay the next and start spending. Credit card applications would at least consider your home loan in the assessment.

    •  

      Not showing on mine. I find it strange that you state it shows when they don't perform a credit check. Maybe if you default?

      •  

        ¯_(ツ)_/¯
        That was my assumption. They find out somehow - maybe it's when you disclose it during the application.
        Yes, would definitely show when you default.

        • +1 vote

          They see it on your statements, not credit file.

          •  

            @dmbminaret: Which is what is shown on the credit reports places like Dunn and Bradstreet do :)

    •  

      And so does my HECS debt. Your point?

      •  

        The point, for the slow witted, is that your loan potential is better without it.

        •  

          And my life is going to end 7 years faster than everyone else.

          I would rather buy things that spark joy rather than be a miser and die an old person, filled with regret.

  • +1 vote

    It is better than paying interest on a credit card. Of course only people in financial trouble or idiots will buy stuff they can’t afford. Unfortunately this is most of the population.

  •  

    Yes but who the hell can get a credit card?? Not me who earns like less than taxable threshold annually there's no credit card for people if they dont meet the minimum income requirement like of 25K or something. Wish i could get a loyalty credit card with no income requirement. Of course I'd pay everything before the due date, and only buy things that i can afford

  • +1 vote

    We actually ditched the ANZ credit card for Afterpay. No point paying annual fees when the same service is given for free in a way.

    This is the reason banks don't like afterpay and penalise the users.

    •  

      It's a brave new world for banks. They could have done their own version of Afterpay any time they wanted, years before the actual Afterpay, but those banks didn't do that. They are still operating under the assumption of a 20th century business model where they own everything in the country and everyone needs to rely on them.

      •  

        Well you can't afterpay a house yet so when it comes time to that then shut the accounts 3 months before.

        I know afterpay don't do credit checks but I know ZipPay and others do. So I would be avoiding those ones as the banks can see that on a credit check.

        • -1 vote

          Some new solution to financing a house will come up soon and the banks will be left high and dry. Some app or something someone will come up with that lets people crowd invest in your debt or whatever, with other people crowd risk assessing debts for a portion of the mortgage value on debts that are eventually successfully repaid, putting their own money forward for professional background checks in the form of an in-app currency.

  • +3 votes

    All the posters limiting Afterpay's user base as credit poor, irresponsible people are narrow minded.
    Plenty of people use this as a free credit provider, it direct debits you over 4 payments.

    HOW GOOD IS THAT? Guess what? Doesn't cost anything.

    Even if you could afford something upfront, why wouldn't you split it over 4 payments? I would do this for ALL things in my life if i could mind you i'm far from living week to week.

    • +4 votes

      You would get way better benefits from a credit card, albeit harder to get due to credit check, but Amex gives you credit offer, and others give u extended warranty, price protection and so on.

      Why afterpay?

      • +2 votes

        Absolutely, you can throw it on your CC too, double the fun :)

        • +1 vote

          Your credit card is paying afterpay. You are giving up the ability to chargeback and any other CC benefits

          • -2 votes

            @Shacktool: Using a credit card to pay afterpay or any other payment gateways doesn’t negate customers rights to initiative a chargeback.

            • +1 vote

              @whooah1979:

              Using a credit card to pay afterpay or any other payment gateways doesn’t negate customers rights to initiative a chargeback.

              yes it does, AP doesn't have a charge back option. lol

              you transaction is between AP and the merchant

              •  

                @cloudy: Customers can use a credit card to pay for the Afterpay instalments. This will allow the customer to initiate a chargeback with their credit card issuer.

                https://help.afterpay.com/hc/en-au/articles/360016052892-How...
                WHICH CARDS DOES AFTERPAY ACCEPT?
                We accept credit and debit cards from Mastercard and Visa which were issued in your country of residence.
                HOW CAN I PAY?
                Afterpay accepts payments from debit and credit cards from Mastercard and Visa which have been issued in your country of residence.

                •  

                  @whooah1979: So when you pay AP, which of the following has AP failed?

                  When you can ask for a chargeback
                  Consumers request chargebacks for many reasons. The most common are when:

                  -they pay for products or services with a debit or credit card, and:
                  -the products or services received are not as described
                  -they do not receive the products or services at all or within the agreed timeframe
                  -there are duplicate or fraudulent transactions
                  -charges are made without permission
                  -unrecognised transactions appear
                  -the business stops operating and does not supply the purchased product or service.

                  •  

                    @cloudy: All of those points are valid reasons to initiate a chargeback.

                    •  

                      @whooah1979: No shit, it’s the reasons for chargeback. But Which of those does AP not fulfill? The credit card is used to pay AP, so AP will need to fail to pay merchant for your chargeback to be successful.

                      •  

                        @cloudy: A customer orders a good from an online store that accepts afterpay. The customer uses a credit card to pay afterpay. The store for whatever reason doesn't ship the good and is unresponsive to the customer's request for a remedy. The customer initiates a chargeback with their credit card issuer on the grounds that they didn't receive what they ordered. The issuer reverses the transaction and returns the money to the customer.

                        Chargeback refunds may be as quick as one business day.

                        • +1 vote

                          @whooah1979:

                          grounds that they didn't receive what they ordered

                          But AP fulfilled their end of the contract

                          •  

                            @Ughhh: The transaction is for good and service. Afterpay is processing the payment for the good which makes them liable for the reversal when the supplier doesn't deliver.

                            Think in terms of eBay > Paypal > seller, Amazon Pay > 3rd party sellers or Aliepress > Alipay >3rd party seller. The credit card issuer will always go after the party that processes the transaction. That is Paypal, Amazon pay, Alipay and Afterpay.

                            •  

                              @whooah1979: AP will tell you if you chargeback you breach their terms and you be pursued.

                              https://www.ozbargain.com.au/node/501835#comment-8059304

                              Have you used AP? maybe own shares? or just like to chat ?

                              •  

                                @cloudy:

                                I got told on the phone by Cameron if I do a chargeback, they'll pursue me legally as it's a breach of my contract with Afterpay

                                Threating customers with legal actions is a scare tactic which isn't beyond a company have a history of dodgy practice. The cost of litigation would be more costly than the good itself.
                                https://www.abc.net.au/news/2019-11-25/afterpay-audit-austra...

                                However, the buy now, pay later company was found to have committed breaches of anti-money laundering laws during its first two years of business (February 2015 to November 2016).

                                •  

                                  @whooah1979:

                                  Threating customers with legal actions is a scare tactic which isn't beyond a company have a history of dodgy practice. The cost of litigation would be more costly than the good itself.

                                  Doesn't have to be litigation. They 'll just sell the debt to collections and ban your account, just Paypal.

                                  Your link is irrelevant to the issue.

                                  .

                                  •  

                                    @Ughhh:

                                    https://www.ozbargain.com.au/node/501835#comment-8052460

                                    Another scare tactic. They won't be able stop a chargeback and any attempt to collect a debt would cost them more than the payment.

                                    just Paypal.

                                    We've done chargeback for purchases paid using PayPal. They didn't ban us nor did they fight the chargeback because they simply took the money from the seller.

                                    Chargebacks are provided by banks to protect their customers. Every merchant that signs a contract to accept Visa, Mastercard, AMEX, etc, knows this. They just have to factor the cost of chargebacks in their cost.

                                    •  

                                      @whooah1979:

                                      any attempt to collect a debt would cost them more than the payment.

                                      Are you talking about going to court or selling the debt the collections?

                                      Are you guaranteeing your experience is the same for every situation and that they won't pursue?

  • +4 votes

    As someone who is careful with his money and does not like to contribute to the wealth of already wealthy individuals I tend to stay clear of things like making trips to Crown Casino or purchasing stuff using Afterpay. Did you now that the 2 founders of Afterpay had sold off $250 million worth of shares in July? They also sold stocks in 2018 and 2019. They must be the ones laughing all the way to the bank. To me, cash is still king.

    • +2 votes

      My beef with them isn't that it contributes to others wealth. Buying anything can do so. What i dont like is it skims the wealth of everyone, the people who use it dont know it, the people who don't use it pay as well.

      The wealth of the nation isn't generated by having ever more middle men doing something that can be done perfectly well. Credit cards aid the processing of money between buyer and seller perfectly fine. Having someone else in between to take another cut is not necessary or desirable.

  • +3 votes

    It may not make a huge difference, but if I use Afterpay, then my credit card to pay that, and then my wages to pay that it means the money stays in my offset that little bit longer.
    As long as I pay no fees or interest I feel like it's making a difference.

    I never buy anything I can't afford to pay with cash (except my house/mortgage!).

    • +3 votes

      yea, i hear that a lot, and you're right it does make a difference, but lets go thru some maths.

      Lets say you buy 6 things with AP a year, take 8 weeks to pay off each, so basically 48 weeks of a year you owe AP, average purchase of $300 each.

      So you're average debt with them (ie the time value of money you get) is $150 for lets call it the whole year.

      Your offset account gives you around 3% (probably lower?)

      Your saving $4.5 a year.

      Lower the interest rate, or average price, or if assuming you use it for the whole year and its even less. Maybe $2-3??.

      mind you, the retailer pays an extra $90 ($300 x 6 x.05*) for you to save $4.50, plus you lose your ability to credit charge back if required.

      • .05 is 5% extra processing charge over the usual CC fees a retail would normally pay
      • +1 vote

        Fine by me. Every little helps and it all adds up in the long run.

        • +2 votes

          Just remember, when everyone uses AP retailesr will lift prices to make up for it, so your $5 saving now will probably a health % of $90 loss later. Even a reasonable 20% using AP will equal a $18 increases in prices to make up for it soon :)

          • -1 vote

            @cloudy: Why would they lift prices because people use Afterpay? Makes no sense.

            •  

              @leethompson: If you can’t see why, I am sad.

              Let me reverse the scenario to help.

              Imagine your boss can pay your wage into your bank account, or he can pay your wage into an another account that charges you 5%. Your boss is enticed because he gets to pay your wage in 4 instalments.

              Would you not demand a 5% wage increase?

              •  

                @cloudy: Sorry man, your example doesn't prove anything.
                Credit cards charge more fees than afterpay. Are prices going to drop?

        • +1 vote

          If the owner maintains the profit margin, at lower costs, price will drop. But if the cost rises, the price will go up. Pretty simple example. Not saying anyone is wrong here.

          However, if someone is settled on a little bit helps, that spending $2400 a year on non essential items to save $4.5, then let it be. At least we think we are buying at a price lower than its perceived value aka a form of bargain.

  • +1 vote

    After pay is pretty good, however I think the max you can buy is $1000. Treat it like a credit card and follow the rules in paying it off and it is quite a convenient service that wont cost you any extra other than the cost of the product.

  •  

    Hadnt really even considered using afterpay and the like - just put everything on credit card and rack up as many points as I can…however, didn't realise you can link them! Would be a good way of earning a little more out of an offset account by putting repayments off a little longer but not sure it's worth the effort for the couple of thousand I may be able to use with the service.

    Absolutely astonished looking at the share price!

  • +1 vote

    Hmm… It could possibly assist people using offset accounts for home loans. The more money you have sitting on an offset account, the less interest you need to pay (is how I interpret it).

    So if you need to only spend N amount for 1 week, you still have 3N in your account for a while longer to reduce what you pay to the home loan for that period. Combo it with a interest free credit card to delay paying it for a few more days / less money leaving the offset account quickly.

    Though if you're not good at managing timing, that could backfire real quick and end up costing you more

    •  

      agree, although most of my spending each month goes on things like groceries and "bills" which i dont think any are able to be paid via one of these methods… The potential saving of less then a couple hundred each month probably isnt worth the hassle…

      •  

        There is no hassle!

  •  

    just use it. they are the next Australian unicorn. No one cares if you pay for your house all cash, or have a few million dollars cash in your savings, just use it!

  • +10 votes

    The advantage of AfterPay is that it allows those who are poor to become poorer.

    • +1 vote

      100%

  •  

    So let's say I'm looking at buying work shoes which cost $300AUD
    And I use AP, but I pay it off in 2-3 weeks instead of a month
    Would that affect me in the long run? Like mortgage wise or anything else?
    I'm only doing it that way so that I don't have to spend half a weeks income on shoes