Afterpay Review: How It Works, Fees and Is It Worth It?

Afterpay is a buy now, pay later (BNPL) platform that lets you split purchases into manageable amounts that won't wreck your budget. The service can help free up cash flow by breaking purchases into four installments, offering alternatives to traditional borrowing options like personal loans. Find out more about how Afterpay works and whether it could be a good fit for you.

MoneyLion offers a service to help you find personal loan offers. Based on the information you provide, you can get matched with offers for up to $100,000 from our top providers. You can compare rates, terms, and fees from different lenders and choose the best offer for you.

Quick Take

• Afterpay Pay in 4 allows you to make installment payments with no interest.

• Payments are typically due every two weeks after the initial purchase.

• If you miss a payment, a late fee may be charged.

What Is Afterpay?

Afterpay was founded in 2014 and now serves more than 20 million users. The platform operates in the U.S., the UK, New Zealand and Canada. Afterpay is a BNPL service that partners with over 348,000 global retailers, allowing shoppers to split purchases into smaller payments over time.

How Afterpay Works

• Payment structure: You can choose to pay in four installments due over six weeks, or you can elect to pay monthly with terms ranging from three to 24 months. Interest accrues daily for monthly installments.

• Spending limits: Afterpay doesn’t set a blanket spending limit. New users start with $100 to $500. Your repayment history, time on the platform and number of active orders will determine if your spending limit increases.

• Approval process: Approval is generally instantaneous. Each transaction is assessed individually.

Afterpay Costs and Fees

• Late payment fees: If you miss a payment, Afterpay may charge a late fee. Total late fees are capped at 25% of the order total or $68 per order, whichever is lower.

• Monthly financing: If you pay month-to-month, you may pay interest rates. These vary and are disclosed at checkout.

Pros and Cons of Afterpay

Like any payment service, Afterpay comes with benefits as well as trade-offs.

How To Sign Up and Use Afterpay

One convenient feature of Afterpay is that you don’t necessarily need to create an account before making a purchase. You can choose Afterpay as your payment method at checkout and follow the prompts to sign up during the transaction.

If you’d rather create an account ahead of time, you can do so through the Afterpay app or website. Here’s a step-by-step guide.

Signing Up for Afterpay

1. Download the Afterpay app on your phone.

2. Create an account by entering your legal name, phone number and email address. You must be at least 18 years old and live in the U.S. or Canada.

3. Verify your identity for a soft credit check. You’ll likely be asked to provide the last four digits of your Social Security number.

4. Link a payment method, such as a bank account, credit card or debit card.

Using Afterpay

You can select Afterpay as your payment method at checkout and follow the prompts to choose your payment plan. The first installment is typically due at the time of purchase.

If you’re shopping in-store, open the Afterpay app, find the retailer and generate your one-time virtual card. You can add it to Google Pay or Apple Wallet and complete your purchase.

Afterpay vs. Other BNPL Apps

To see whether Afterpay is the right fit, it helps to compare it with other BNPL services.

Klarna

Klarna and Afterpay both work with a list of participating retailers, but Klarna gives you more payment options.

• Pay back your purchase in four installments

• Pay the full balance in 30 days after purchasing

• Pay off your purchase over six to 24 months

You might have to pay interest on any payment plan longer than 30 days.

Sezzle

Sezzle has an advantage over Afterpay because it allows you to build credit. Sezzle reports all on-time payments to the credit bureaus.

Sezzle also charges more fees than Afterpay and the late fees are higher.

Zip

Zip provides you with the freedom to pick any retailer, but you’ll need to apply for approval for each purchase. Unless you need the flexibility to shop pretty much anywhere Visa is accepted, Afterpay is the better option.

Origination fees with Zip are $0.50 to $124, depending on your total purchase price.

Who Afterpay Is Best For

• Millennials and Gen Z shoppers

• Budget-conscious shoppers

• Those who prefer not to use a traditional credit card

• Shoppers who want quick approval at checkout

Final Take

Afterpay may be a good option for shoppers who want to avoid a hard credit inquiry and prefer instant approval at checkout. The service offers 0% interest when purchases are split into four installments. Longer monthly payment plans are available, though those plans carry annual percentage rates (APRs) and daily accruing interest.

Afterpay FAQs

Here are answers to some of the most common questions about Afterpay and how the BNPL service works.

Is Afterpay legitimate?

Afterpay is a well-known BNPL service that is widely used.

Does Afterpay check your credit?

Afterpay will conduct a soft credit check, but this will not impact your credit history.

Does Afterpay charge interest?

If you opt for the Pay in 4 and pay on time, Afterpay will not charge you interest.

What happens if I miss a payment?

Afterpay will pause your account until you catch up with your payments. There may be late fees that are charged.

Can Afterpay send you to collections?

If you have late payments that are outstanding for some time, they can send your account to collections.

How much can I spend with Afterpay?

Afterpay payment limits start low, but may increase as you establish a consistent paying history.

Photo credit: filadendron / iStock