How does Afterpay work? All you need to know

Adam Rozsa

With no shortage of consumers looking for financing options on goods and services, many buy now, pay later companies have popped up all over the world. These companies allow people to buy items with interest free loans and pay them off in short term installments.

Afterpay is one of the services out there along with companies like Klarna and Quadpay. They’re based in Australia, but the platform is available in the US, Canada, UK, and New Zealand.

This article breaks down the essentials of what you need to know about Afterpay. We’ll explore how it works, credit limits, if it can affect your credit score, and give you an overview as to whether it’s safe to use.

But if you’re shopping internationally, you may be looking for a range of options to help you save cash. Why not look at Wise? With a Wise debit card, you can always spend money in the local currency and never incur any sneaky currency conversion upcharges or foreign transaction fees.

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📝 Table of contents

How Does Afterpay work?

Afterpay allows you to pay for goods with installment plans spread out over four payments every two weeks. Like other buy now, pay later fintech companies, they offer a large online directory of affiliated retailers.

To use the service you must meet the following qualifications:¹

  • 18 years of age
  • A resident of the US and reside within the 50 states or District of Columbia
  • Capable of entering into a legally binding contract
  • Have a valid email address and mobile phone number
  • Authorized to use a US-based debit or credit card—Visa, Mastercard or AMEX

If you meet those qualifications, you can download the application on your smartphone and sign up. From there, you’ll be able to shop online and choose Afterpay as your method of payment at checkout or download a virtual card that you can use in-store.

You’ll make the first payment immediately and the rest of the payments in equal installments every two weeks. The item will ship as though you paid for the full purchase right then, so it isn’t like layaway.

The application will take the money from your linked credit or debit card automatically on the due dates or you can pay early if you have the funds. And Afterpay charges no interest on the payments.

Is there a credit limit with Afterpay?

Yes, there is a credit limit with Afterpay. To see your limit, open the app and tap ‘Orders’ at the bottom of the screen. It will display a pre-approved amount underneath the total amount you owe.

However, just because you have a pre-approved balance available doesn’t mean you’ll be approved for every purchase. Like other buy now, pay later services, Afterpay has an automated system they use to approve payment plans at the time of purchase. And they do not share this information with the public.

The company states that they “consider a number of different factors” and look at things like:²

  • Availability of funds on your Afterpay virtual card.
  • The amount of time you’ve been using the service.
  • The current amount you need to repay.
  • The total value of your order.
  • The total number of orders you have open.

Does Afterpay affect your credit score?

Afterpay doesn’t run a credit check at all. Instead, the company builds trust with clients by allowing them to do smaller purchases at first and build up over time.

In fact, the company states that they don’t report to credit bureaus even if you miss a payment with Afterpay. So since there are no credit checks or credit reporting involved, Afterpay cannot affect your credit score.³

What credit score do you need to use Afterpay?

Afterpay doesn’t run a hard or soft credit check, so no credit score is required.

Does Afterpay Check Credit?

No, Afterpay doesn’t run a credit check.

Afterpay fees

When you pay on time, there are no fees—not even a convenience fee—for using the service. However, Afterpay does charge late payment fees if they can’t process your payment. The fee may be waived if you login to your account and update the payment method.

For US Afterpay users, they cap the fees at 25% of the total value of the order.⁴

Does Afterpay charge interest?

Though Afterpay will charge late fees if you don’t pay on time, there are no interest charges for anything purchased through the service.

How do Afterpay repayments work?

You can sign up for Afterpay using a US based debit or credit card—Visa, Mastercard, and AMEX, but not Discover. Once you link the payment method, the app will automatically charge your card on the installment due date with some notifications beforehand.

But if you want to pay early, you can tap the ‘Pay Now’ button in the ‘Orders’ window of their app and enter card details to make a payment. Just be sure to uncheck ‘store my card’ if you don’t want Afterpay to use the card in the future.

If you can’t make a payment, Afterpay is willing to work with their customers. For the first and last payments, contact their customer service, and they’ll provide some options to help you though. And for the second or third payments, there’s an option in the application to reschedule your payment dates—just be aware it might affect your spending limit in the future.⁵

Also, if you are late on a payment, expect to incur a late fee if you don’t update your payment method within their grace period—usually 10 days. And the app will automatically block all future purchases until the item is paid off.⁶

Again, Afterpay will only charge one late fee per installment and never over 25% of the initial order value.⁶

Which Stores Accept Afterpay?

Afterpay has a lengthy list of clients in the US. Some of the most popular include:

  • Dillards
  • Pandora
  • Forever21
  • Steve Madden
  • Old Navy
  • American Eagle
  • UGG
  • Pacsun

How do I pay with Afterpay?

In retail stores

To use Afterpay in store, download the Afterpay app on your smartphone and sign up for the service. Then, tap the ‘Card’ button and follow the prompts to set up an Afterpay virtual card. The app will add the card to your Google Pay or Apple Pay Wallet where you can use your phone to complete the purchase in-store.

You can only use the in-store function at stores that accept Afterpay, so be sure to confirm through their online store directory first.


To make an online purchase with Afterpay, open the app on your smartphone or online and browse through their affiliated stores. When you see the store you want, tap on it and shop online like you normally would.

Once you get to the checkout cart, select Afterpay as your payment option. If you don’t have an account or payment method set up already, you’ll be able to instantly set one up and complete the purchase.

Do you get your items right away with Afterpay?

Yes. With Afterpay, you will receive your purchase just like you paid for the item in full. So if you use Afterpay online, it ships immediately, and if you use it in-store, you walk out with the item.

How Do Returns Work With Afterpay?

If you’re going to make a return, do it like you normally would with any other purchased item following the store’s return policy. After that, the store will refund the amount of the purchase to Afterpay.

Their system will apply the refund to your last payment and then to each installment all the way back to your initial payment. So if you get a full refund, they’ll apply the full amount and refund anything you’ve already paid back to your linked payment method.

For partial refunds, you’ll still be responsible for any outstanding balance. But the app will cancel any future installments already covered by the refund.

Be aware that it can take some time for refunds to process in Afterpay’s system. And until the refund is confirmed and processed by the merchant, you’ll still be responsible for making payments on the installments. If you’re having trouble here, there’s a function in the app that can push the payments out by two weeks on items in the return/refund process.⁷

Follow these steps:

  • Tap ‘returning an order’ under the order details menu
  • Select whether the purchase was online or in-store
  • Follow the prompts and enter the order details

Is Afterpay safe?

When you compare Afterpay to some of the other loans and financing options out there like payday loans, credit cards, or personal loans, it’s a very safe option.

Afterpay offers interest-free installment plans to pay for goods with no credit checks or credit reporting. And even if you miss a payment, the late fee is relatively small when compared to a credit card company, and the fee is capped at 25% of the order value.

The company is also PCI DSS Level 1 certified which is the highest level of certification offered by the Payment Card Industry Security Standards Council. To put it succinctly, they have the highest standard compliance certification from the top payment card security council in the world.⁸

Can I use Afterpay outside the US?

While Afterpay accounts based in Australia and New Zealand offer international shopping, the US version does not. So if you want to save on purchases overseas, you’ll need to consider other options.

Why not use a Wise debit card when making payments in international stores? Often, local banks charge high currency markups and currency conversion fees. With Wise, you’ll always get the mid-market rate on your purchases and pay just a small fee.

Open a free Wise account in minutes

  1. Afterpay - I want to shop - how do I sign up?
  2. Afterpay - How does Afterpay work?
  3. Afterpay - Is using Afterpay bad for my credit score?
  4. Afterpay - Is there a cost to using Afterpay?
  5. Afterpay - What happens if I can’t make a payment on time?
  6. Afterpay - How do payments work?
  7. Afterpay - How do refunds and returns work at Afterpay?
  8. Afterpay - Is Afterpay safe and secure?

All sources checked on 1 July 2021

*Please see terms of use and product availability for your region or visit Wise fees and pricing for the most up to date pricing and fee information.

This publication is provided for general information purposes and does not constitute legal, tax or other professional advice from Wise Payments Limited or its subsidiaries and its affiliates, and it is not intended as a substitute for obtaining advice from a financial advisor or any other professional.

We make no representations, warranties or guarantees, whether expressed or implied, that the content in the publication is accurate, complete or up to date.

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