As online shopping grows in popularity, companies are searching for ways to keep shoppers engaged and to entice them to spend more money. One way these online businesses are accomplishing this is by offering delayed payment on purchases. Traditionally, this has been done by offering consumers a store credit card, however, retailers have now started offering AfterPay. This Australian-based company is appealing to both retailers and shoppers, as it offers delayed payment for purchases, without the hassle of applying for a credit card.
How does this work? Is it a good way to make purchases? We’ve answered some questions you may have about AfterPay, and offer suggestions on how you can spend responsibly.
What is AfterPay and How Does it Work?
AfterPay is a digital payment platform offered to online shoppers that allows them to delay payments on purchases. Users can make weekly payments on items purchased until they are paid in full. No credit check is required to use AfterPay, and no interest is charged.
Customers can sign up for a free AfterPay account, shop at select online retailers, and then use AfterPay to make purchases. Requirements include:
- Customer must be 18 years of age or older, and be the authorized holder of an eligible debit or credit card
- Purchases need to be over $35
- Customer pays 25% of total cost up front
- Customers may pay in four installments every two weeks until the entire purchase is paid off
AfterPay is an easy-to-use solution, giving savvy shoppers an opportunity to make quick purchases without having to dip into savings.
What’s the Catch?
One thing that seems to catch customers off guard are the late fees. If a customer misses a payment, or if the payment is unsuccessful, they are charged an $8 late fee. If the customer is still unable to make the payment within seven days, an additional $8 fee is charged, and these fees will continue for each week the customer falls behind. Additionally, the person’s AfterPay account is frozen until the purchase and fees are paid off.
Should Consumers Take the Risk?
While AfterPay is an easy, convenient payment method for online shoppers, it is always best to proceed with caution. Breaking up payments for a large purchase can be easier on your bank account, however, it can also lead to overspending. Digital solutions like AfterPay make it incredibly easy for you to purchase more than you can afford, leading to an increase in debt.
If you decide to use AfterPay, here are some helpful tips so that you can shop responsibly:
- Have a set budget – Use a designated amount set aside for online shopping that you can easily pay back in a set timeframe.
- Link to your debit card, not credit card – If you happen to miss a payment, and your credit card is linked to the account, then not only will you be incurring AfterPay late fees, but also interest on your credit card. It is best to link your AfterPay account with your bank debit card from the start.
- Set up reminders for payments – once you make a purchase, set reminders for yourself, so that you will never be surprised or miss a payment.
For someone who can make payments on-time, AfterPay is a viable option. As long as you make sure to use it responsibly, it can help you shop at the stores you love and not feel guilty about spending money all at once.
Here at Blackhawk Bank, we want all our customers and clients to have responsible spending habits and understand the products they are using. If you are interested in learning more about how Blackhawk Bank can help you, contact us today!