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The reason that many people choose to use Afterpay accounts is because of its promise not to negatively affect your credit score, as well as the fact people who have bad credit scores and bad credit history can use it. You may be wondering how this is possible and how Afterpay works. Well, it’s simple, but it’s not. Let’s take a look.
How To Use Afterpay
Using Afterpay is actually pretty simple. Once you’ve found the product you’d like to buy in the shop directory, you choose Afterpay as your method of payment. If it’s your first time purchasing with Afterpay and you are a new customer, you do have to sign up with an account first. However, all approval decisions are instant, so it won’t take long. You can then complete your purchase, and the order will be sent to you. You can also make orders as an Afterpay customer through the Afterpay app.
Also, you don’t have to wait until your upcoming payments come out in order to make a payment. You can log into your online account to make a payment anytime to make sure you make on-time payments. You can also see your repayment schedule and any remaining payments to be sure you don’t miss payments and maintain responsible spending.
It’s also important to note that just because you were approved for Afterpay once doesn’t mean that you will be approved again. The approvals are made per purchase and depend on various factors, which include your payment history, your bank account balance, the amount of the purchase and how many active Afterpa purchases you currently have.
Afterpay and The Credit Bureaus
Unlike other forms of credit, Afterpay doesn’t report to the credit bureaus. This is due to the fact that they don’t perform a hard credit check when going through your application. Instead, they do something called a soft credit check. You may be wondering how Afterpay affects credit scores then. Well, it doesn’t.
In Canada, soft credit checks give the lender an estimate of your credit score and don’t show the lender your detailed credit file. While this doesn’t provide as much information, it’s enough to let Afterpay know if you meet their requirements or not. That said, though, it also means that they won’t report your monthly payments to the credit bureaus, which means this loan won’t build credit at all.
How It Can Negatively Impact Your Credit Score
One of the benefits of using one BNPL provider, known as Afterpay, is that they don’t report late payments to the credit bureaus, also referred to as credit reporting agencies. This means that your credit reports and credit rating will not be negatively affected by your BNPL account. That said, positive payments on your payment plan aren’t reported either, so there’s no positive effect on your credit report either.
However, your Afterpay payment history will affect another Afterpay approval. It can impact your spending power and spending limits on future purchases. This is why your payment information should be accurate, your purchase price should be something you can afford,
Afterpay and Interest
One of the most important factors you have to consider before using Afterpay is the cost. As long as you make your BNPL payments on time, then it’s actually a free service. The payments come out of your debit or credit card account at the time you agreed with them. If the payment bounces, then Afterpay will contact you to make arrangements and avoid late fees. However, if you do make your payments late, then you will have to pay some fees.
As we mentioned, you do incur late fees with Afterpay. However, most Afterpay charges are 25% of the purchase price or up to $68. This is specifically the case for amounts up to $40. Amounts over $40 are also subject to a $10 flat fee for each of your installment payments missed, as well as a $7 fee 7 days after the payment was due.
For Afterpay purchases above $400, then there are some interest charges based on the purchase. With these higher-value purchases, you get monthly payments and a timeline of a fixed period of 6 or 12 months to pay back the funds. The interest rates are specific to each client.
Reasons To Use After Pay
If you’re looking for a simple methods to make purchases that can be made in installments and charge interest at 0%, then Afterpay is a great way to go. Not only can you make a purchase without using your credit card or dealing with credit card companies, but you also don’t have to wait until payday. This means that you can take advantage of any sales and save yourself the hassle of not being able to purchase the item before it sells out.
Another reason that customers choose to use Afterpay is because it’s considered to be a budgeting tool. It allows you to split your purchase into 4 equal payments, stretching your paycheck just that little bit further. They even provide you with updates on your payments as well as order and account limits to help prevent you from spending too much.
Afterpay is a seamless payment process for online shopping. You aren’t held up waiting for approvals, and you can complete the order process just like you were completing any other payment method. Since their 2022 integration with Square, it’s even available at some physical stores with the Afterpay Card, which can be found on your account and downloaded to your digital wallet.
The Downsides of Afterpay
While Afterpay can be a great way to make purchases that you can’t quite afford to pay in full, there are some downsides associated with it. Let’s take a look at these.
- Encourages Spending: Due to the fact that Afterpay is so convenient and allows you to purchase things you may not have the money for, it makes it easier to make impulse purchases. This can cause people to be less responsible with their money and incur more debt.
- Late Fees: As long as you make your Afterpay purchase on time, you’re fine, but if you can’t afford it, then you’re going to incur more fees. These can keep adding up until you’re able to make your payments.
- Assigned Payment Dates: With Afterpay, you have no control over your payment dates. These payment dates are given to you based on the day the purchase is made. This can cause some difficulties in making your repayments even though they’re automatically deducted from your bank account.
- Spending Limits: With Afterpay, there is a limit on how much you can spend. They’re automated system determines how much you’re able to spend and you can’t really argue with it.
- Soft Credit Checks: While this can be good for those looking to get access to credit, it can also pile up the debt. If traditional lenders wouldn’t approve you and Afterpay will, it can increase your debt, making things more difficult to pay off.
Where To Use Afterpay
In Canada, Afterpay isn’t available everywhere, so there are only certain places where you can use this program. These places include:
- Jennybird
- Cettire
- JD Sports
- QE Home
- Shein
- Pandora
- Fragrance X
- Revolve
- Shiseido
- Clarins
- Birkenstock
- Cupshe
- Roots
- Herschel Supply Co
- Native Shoes
- American Eagle
- Ardene
- BikeExchange
- Dermalogica
- Huda Beauty
- GOLI
- Maelys Cosmetics
- Nixonapp
There are so many more than this, though. Currently, Afterpay is available in over 4,395 e-commerce stores in Canada. Plus, you don’t just have to buy from stores in Canada. With the Afterpay Cross Border Trade List, companies can sign up to allow purchasers in different countries, giving purchasers access to even more products.
Other Buy Now Pay Later Companies
While Afterpay is a popular option in Canada for those looking into Buy Now Pay Later credit products, it isn’t available at all retailers. Here’s another list of different BNPL providers and retailers through which they’re available. That said, before you use any of these providers, you should keep your financial health in mind. You don’t want to take on too much debt and create financial difficulty by spending more than your financial situation can handle.
Flexiti
In Canada, Flexiti is a credit card and credit provider that allows for 0% interest throughout your term. That said, there is a fee depending on the term you choose. The nice thing about Flexiti, though, is that you don’t have to pay until your amount is due, so no monthly payments are required.
Unlike most BNPL companies, Flexiti approves you for a total credit limit when you apply. You can then use this credit limit on as many BNPL purchases as you like until the card is maxed out. However, if you don’t pay your amount by the end of the term, then you need to start paying interest, which usually starts at around 30%.
Some of the most prominent retailers that partner with Flexiti are:
- The Brick
- Rona
- Kal Tire
- Staples
- Wayfair
- Sleep Country
- Leons
- Michael Hill
- Fountain Tire
- Iris
- Coast Appliances
Affirm
Affirm, formally known as Paybright, is another form of Buy Now Pay Later financing. The application is fast and easy and doesn’t impact your credit score. Affirm doesn’t charge any fees, not even late payment fees, and they’re upfront about what you owe and when it’s due.
Using Affirm is simple. All you need to do is select them as the payment method when you’re using a partnering retailer. Here are some of the most prominent retailers that work with Affirm
- Apple
- Amazon
- Samsung
- Hudson’s Bay
- Rona
- Peloton
- Cozey
- Dyson
- Casper
- Endy
- Foot Locker
Klarna
Another option for Buy Now Pay Later purchases for online retailers is Klarna. Klarna allows you to split your online purchases into 4 simple payments. The first payment is made when you check out, and then the rest are made in multiple payments every 2 weeks.
While Klarna partners with a variety of different retailers throughout the world, here are a few of the most notable:
- Walmart
- Expedia
- Game Stop
- Nike
- Coach
- Ssense
- Wayfair
- Best Buy
- Adidas
- Temu
- Dynamite
- Ticketmaster
- Fossil
- West 49
- Aldo Shoes
- Ray-Ban
- Suzy Shier
Final Thoughts
When it comes to making purchases in Canada, you don’t really need a credit card anymore. You can use your debit card that has credit card capabilities, or you can use the Buy Now Pay Later option. These options allow you to purchase an item with no down payment or just the first installment due at the time of purchase. Most are also interest-free unless you make late payments. One of the most notable of these BNPL services is Afterpay.
Afterpay allows you to purchase items in just 4 easy installments. What’s nice about Afterpay is that they don’t do a hard credit check either. This means that it doesn’t affect credit scores, no matter how many times you apply. And the more you use Afterpay responsibly, the more you can borrow. That said, Afterpay isn’t for everyone and can still end up costing you money. It’s important to be careful when deciding how much you’re going to spend and who you’re going to spend your money with.
