Is Afterpay safe?

Panna Kemenes
05.05.21
5 minute read

Afterpay is an online platform that provides payment options, including the option to pay in installments.

This service is designed to help you finance your purchases by letting you buy now and pay later. It can be an option if you don’t have the funds available, but if it all sounds too good to be true, you may start to wonder; Is Afterpay safe?

This post will explore how Afterpay works, the risks with using the platform, and how safe it is to use.

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📝Table of contents

Is Afterpay safe?

On a technical level, yes, Afterpay is a secure service.

Afterpay protects personal data. The platform is a PCI DSS Level 1 certified compliant Service Provider.¹ This means that the Payment Card Industry Security Standards Council acknowledges a high level of data security.

In a nutshell, Afterpay has the payment industry’s highest level of quality when it comes to security.

Yet, some would say that good data security doesn’t guarantee that the service is safe to use.

This is because users can go into debt with the platform to finance their purchases. If the customer understands this and is sure of future income, this likely won’t be an issue, but it can still be risky.

To ensure you use Afterpay safely, here are some things you can do:

  • Budget and place a cap on your spending
  • Use a debit card instead of a credit card
  • Reach out to customer support if you think you'll miss a payment

Does Afterpay affect your credit score?

No, paying through the Afterpay platform won’t affect your credit score.

Your credit score can be affected by credit checks. Afterpay will not carry out credit checks or report late payments in the US.²

Does Afterpay do credit checks?

Afterpay states that it does not do credit checks.³

By signing up to the platform, you do grant Afterpay permission to assess your ability to make payments. Afterpay assesses this through a proprietary fraud and real-time repayment capability check.⁴

The algorithm-based technology identifies likely risk spots. As a result, 30% of order requests are not approved.

Afterpay can also approve or decline the purchase based on whether there are sufficient funds on your card, and the length of time you have been using Afterpay.

💡If you've recently moved to the US you can read some financial tips, including advice on building a credit score.

What are the risks with Afterpay?

The risks of Afterpay include high interest rates on credit card payments, late fees, and debt.

While you can avoid all these risks with smart money management and budgeting, it’s worth knowing about them before signing up to the platform.

High interest rate with credit card payment

There is no interest with Afterpay. If you sign up with a credit card, though, you could face a high interest rate if you miss a payment. You can mitigate this risk by signing up with a debit card.

Late Fees

If you miss a payment initiated through Afterpay, you can incur an $8 fee per installment.⁵

Late fees for shoppers in the USA are capped, which is good, but that’s money you should never have to pay. You can make use of the service’s payment reminders, and set your own to avoid late fees.

Risk of debt

The most significant risk with Afterpay is running into debt. If you use the platform to help you finance large investments, it can backfire on you.

The moment you miss a payment or don’t have the funds, you will face late fees, which will mount up over time. Make sure you have a steady stream of income before making a financial decision and try not to overstretch.

Afterpay does set initial spending limits that increase over time, which can help avoid overspending.

What happens if I miss a payment with Afterpay?

If you miss a payment with Afterpay, you will incur a late fee of up to $8 per installment.

The late fee can add up over time to a capped amount of 25% of the original order amount.⁶

Afterpay knows that sometimes life throws you a curveball, which can affect your finances and ability to pay off debt. For this reason, they have a hardship policy.

This policy states that customers can apply for relief if they believe they won’t be able to make a payment on time.

The relief can come in the form of an extension to the payment period, a postponement, or waiving late fees.

Refunds and disputes with Afterpay

Introducing a third party to your arrangement with a retailer can invite complications.

If within the 120-day installment period you want a refund, the retailer you deal with will have to first return the funds to Afterpay. After which, Afterpay can reimburse you.

This means you, as the customer, won’t have control over refunds since Afterpay requires the retailer to request the refund. This can be inconvenient, since you may still be making payments while the retailer gets around to processing the refund.

To make things easier, Afterpay provides you a reprieve if you notify them of the refund request. The service will delay the date your next installment is due, leaving the retailer more time.

The Afterpay dispute process is available if you can’t resolve payment issues.

Pros and cons of Afterpay

Afterpay has a growing base of customers and there are many glowing Afterpay reviews out there.

Here are some pros and cons to help you decide if it is right for you:

Pros of Afterpay

Pros
Convenient form of paymentAfterpay can be a convenient form of payment that allows you to finance purchases you otherwise might not be able to.
Can help you manage financesWith a service like Afterpay, you can learn how to manage money and budget so you can afford the things you most want.
Online store integrationAfterpay pops up as a payment option on many online stores alongside Mastercard and Visa.

Cons of Afterpay

Cons
May promote impulse buyingIf you’re trying to avoid impulse buys, you might want to steer clear of Afterpay. It’s so easy to buy something since you don’t have to worry about paying for it until later.
No option of payment planAfterpay picks the payment plan for you, which can result in missed payments.
Assigned account limitsAfterpay assigns account limits. This means Afterpay decides how much you can spend based on various factors. This can, of course, also work as a pro, as you are limited from overspending.

Save money on international purchases with Wise

When looking at the question 'is Afterpay safe?' from a technical point, the answer is yes - Afterpay is a secure service. But financial safety is also a factor.

If Afterpay sounds interesting, but like a lot of hard work, you can consider some ways of saving money instead, to minimize the need to spread costs.

For example, you can save money using Wise when you make purchases from foreign online shopping sites.

Local banks often charge currency conversion fees and can add a markup to the exchange rate. This means you could be paying more than you should for your purchase.

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Wise offers customers the real exchange rate and no currency markup. So you can buy from an online store in another country, without paying too much for the conversion.

Sources:

  1. Afterpay - PCI compliance
  2. Afterpay - Credit score
  3. Afterpay - Credit checks
  4. Afterpay - Repayment capability check
  5. Afterpay - Late fees
  6. Afterpay - Late fee cap

All sources checked 5 May 2021


This publication is provided for general information purposes only and is not intended to cover every aspect of the topics with which it deals. It is not intended to amount to advice on which you should rely. You must obtain professional or specialist advice before taking, or refraining from, any action on the basis of the content in this publication. The information in this publication does not constitute legal, tax or other professional advice from TransferWise Limited or its affiliates. Prior results do not guarantee a similar outcome. We make no representations, warranties or guarantees, whether express or implied, that the content in the publication is accurate, complete or up to date.

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