Afterpay was conceived initially as a new way to buy now, pay later. Afterpay provided people with the means to purchase products if they did not have the currently available funds. An advantage was no requirement for interest to be paid.
It’s a proven method popular with people under 30, but there are some hidden traps that you’ll need to look out for if you choose this method of payment.
First of all, while Afterpay does not charge interest on the money it lends you to make the purchase, it charges the retailer a merchant fee. This can be anywhere from 4-6% of the value of the transaction, with an additional 30c on top of that. To cover this cost, retailers often raise their prices to compensate, affecting customers who don’t use Afterpay.
Secondly, though Afterpay does not charge initial interest, it recoups its losses by charging late repayments. Customers will incur a flat fee of $10 for late fortnightly payments. If the amount is still outstanding after a week, a further charge to the debtor of $7.
If you’re someone who can afford to make the repayments on time, this might not seem like a dealbreaker. However, for those who may struggle, Afterpay can be a tempting but lethal drain on your finances.
Buy now, pay later schemes like Afterpay is not subject to the Credit Act that regulates other lenders, including its responsible lending obligation. This obligation requires the lender to perform credit checks and verify a customer’s income and repayment ability. In Afterpay’s case, the onus of knowing if you can repay the debt or not lies solely with the person who has requested the money.
Afterpay Repayment Tips
Here are some easy ways to ensure that you can meet your repayment obligations:
- Set aside the amount you will need to repay every week for your Afterpay debt – make room for it in your weekly budget.
- Pay the amount as soon as possible to avoid accidentally missing repayments and incurring late fees.
- Know your financial limit, and don’t commit to a more significant debt than you can comfortably afford.
If you are experiencing difficulty with money management, you can speak with us for further advice and assistance in planning out debt repayments, budget management or more.
