Afterpay - I've Never Used It, but I See It Everywhere,

whitepuma on 14/06/2023 - 07:45
Last edited 14/06/2023 - 09:49 by 1 other user

Hi everyone, I've been using and loving OzBargain a lot lately. I've noticed there are a lot of deals that involve Afterpay. I don't personally have Afterpay but I'm hearing about it a lot more often.

From a quick Google search I noticed it's just a buy now pay later service, but that leaves me asking more questions.

• What makes it different to a credit card?
• How are they able to offer such amazing deals if you use afterpay?
• How do they earn their money?
• Can afterpay have an impact on your borrowing capacity if you want to get a loan/mortgage?

I had assumed they earn their money from fees or interest on the pay later model, if that's the case isn't that something that most OzBargainers would steer away from?

Not here for a fight, just want to learn more, see what it's all about from fellow OzBargainers perspectives, and most importantly in true OzBargain style I want to learn if it's worth it and how to get all the benefits of Afterpay whilst minimizing the drawbacks.

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• 

  Jimothy Wongingtons on 14/06/2023 - 07:47

  +3

  Iirc they charge the retailer for offering services for one

• 

  JimmyF on 14/06/2023 - 09:06

  I had assumed they earn their money from fees or interest on the pay later model

  They do, the retailer pays a % fee of the sale, the end user pay fees if they miss payments.

  Basically just like a credit card.

• 

  nubzy on 14/06/2023 - 09:08

  +5

  Ozbargainers only use it for the promos and pay the balance off immediately

  They make their $ from people who live a life of debt and fall behind on payments

  • 

    whitepuma on 14/06/2023 - 09:13

    I see, so if I pay immediately, I shouldn't be incurring any fees, yes?

    Also, would you happen to know if using afterpay may impact my borrowing capacity? I ask because i know that for some banks,owning a credit card can impact your capacity

    • 

      coffeeinmyveins on 14/06/2023 - 09:31

      +3

      Also, would you happen to know if using afterpay may impact my borrowing capacity?

      Yes. If you have $5000 in your afterpay account to pay back, when you go to get a loan they ask you what debts etc you have. You'd obviously declare that and that would reduce your borrowing capacity.

      I ask because i know that for some banks,owning a credit card can impact your capacity

      I think things are about to change with these BNPL scams where they are going to be considered similar to credit cards, so watch out for that.

      I see, so if I pay immediately, I shouldn't be incurring any fees, yes?

      Check the fine print. Similar to a credit card that you pay off on time, they won't make any money off you, they make money off the people who can't pay it off in time and have to pay fees/interest.

  • 

    AustriaBargain on 14/06/2023 - 11:51

    +2

    Actually they only make a few tens of millions in late fees, and they are reducing the max amount of fees you can face. Most of their $ come from fees from the retailer. The late fees are cherry on top for them sure, but AfterPay spell out their system very clearly and you get constant warnings of upcoming payments. You'll forever be clearing the app and email notifications for each payment from your phone.

• 

  buckethat on 14/06/2023 - 09:53

  +2

  • Functionally can be used the same as a credit card, the payment term is what makes it attractive I suppose.
  • They offer amazing deals as they spend a lot of money on marketing, and merchants use these opportunities to market themselves. Most offers are entirely subsidised by the merchants.
  • They charge anywhere between 4-6% per transaction from merchants.
  • Not 100% sure about AfterPay but I know ZipPay did. If you make sure you pay it on all on time, and when it comes time to take out a loan/mortgage, just close the accounts before you apply.
• 

  happydude on 14/06/2023 - 12:15

  +2

  What makes it different to a credit card?

  The limit is set by your repayment history. You cannot apply for a higher limit. Payments are every 2 weeks, but depending on your "tier" you can sometimes change the dates. Each purchase is always spilt into 4 payments. So unlinked a credit card, what you owe is not pooled into one amount. Each purchase remains separate However, you can pay each installment early or immediately if you like.

  How are they able to offer such amazing deals if you use afterpay?

  A credit card charges about 1% to the seller. Afterpay is much more. I have heard up to 4%-6%.

  What happens in the background for the deals, I'm not sure but probably reduced fee for the promotion. Afterpay gets new customers to sign up to access the deal would be my guess.

  Wherever there is Afterpay available, that 4%-6% is built into the price. Afterpay do not allow this to be passed on.

  How do they earn their money?

  See above, they take a cut of each sale. The retailer accepts this as customers have bigger "basket sizes" when they pay with afterpay. The theory goes, if they can split the payment in to 4 over 8 - 10 weeks they will spend more per transaction.

  Afterpay also charge a $10 late fee.

  Afterpay would also charge retailers for the adds that are in their app when you start it up. So more afterpay customers means more eyes on those adds. Hence the promos to get new customers.

  Can afterpay have an impact on your borrowing capacity if you want to get a loan/mortgage?

  Each bank will look at it differently. My broker told me afterpay repayments are often considered an expense. So it will slightly reduced the amount you can borrow, but if you would have otherwise would have spend that money in cash then it won't have any difference

  It is also easy to close. It does not get recorded on your credit report.

  I had assumed they earn their money from fees or interest on the pay later model, if that's the case isn't that something that most OzBargainers would steer away from?

  With the exemption of a late fee, there is no direct cost to the end user. The cost is the same whether it is cash or Afterpay.

  However due to the fees that are charged to the retailer, we all pay higher prices to account for that 4%-6%. No point hating the game though, you just got to get on board.