Afterpay: How it works

What is Afterpay?

Afterpay is an Australian retail payments company. It offers customers a simple interest-free “buy now, pay later” option for online and in-store purchases. As of September 2018, it has 17,700 retailers and 2.3 million customers.

Afterpay makes shopping more convenient – you can get what you want when you want it, and spread the cost over time. You can use Afterpay for anything from a haircut to a new sofa, unforeseen emergency purchases to absolute must-have items.

How Does Afterpay Work?

The customer chooses Afterpay as the payment method at the checkout. They don’t need to register beforehand or fill out a credit application. Customers must be aged 18 or over; have an Australian residential address, a valid phone number and email address; and use an Australian credit or debit card for the purchase.

Afterpay splits the cost of the product or service into four equal payments. The customer pays the first instalment upfront and receives their order straight away. Afterpay pays the retailer and assumes any credit or fraud risk. The customer pays the remaining amount in three fortnightly instalments. For example, if a customer purchases a $200 item on 1 October, their payments will be:

1 October - $50

15 October - $50

29 October - $50

12 November - $50

As long as the customer pays on time, there are no additional costs to use Afterpay – they pay only the price of the item or service. All the payments are interest-free, and you don’t have to wait to receive your order. Afterpay charges late fees for missed payments – currently, $10 if the first fortnightly payment is missed, with further fees if more instalments are missed.

The Afterpay app allows customers to view and manage orders, find stores offering Afterpay, and even pay in-store using a barcode on their phone.