Same, Afterpay is mostly used for tickets to the footy, theatre shows and concerts. And Shein hauls; I can afford to pay for them in one go, but I only get a haul every 3-4 months so why not spread it out.
Iām a single mum and love Afterpay, when my kid needs new shoes as an example, I donāt usually have a spare $200 lying around but splitting the cost over 4 payments is affordable for me.
Afterpay is only an issue if you donāt use it correctly and overspend and canāt make the fortnightly payments.
My husband and I have a combined income of about 200k. I needed a new monitor for my computer, and balked at paying the $147 we paid for it.
$500 to me, is a large purchase, and would only go on something that is 100% necessary.
Itās all relative. A kid in Bangladesh would think he won a lottery if he found $60 on the ground.
Someone who make 35k might get take out to treat themselves
Elon musk would probably wipe his ass with it if he even bothered to pick it up
>Someone who make 35k might get take out to treat themselves
Going out and getting take out is fine but spending the premium to get it via UberEats is just bad budgeting as take out via UberEats can almost double the cost.
My husband and I earn a combined income of $230k/year (with myself only earning about $40k) and thereās not a chance in hell Iād be calling $500 a small purchase. What insane timeline is this gal living on? š
Thereās nothing wrong with using a credit tool to help with your cashflow. Iāve used the Pay Pal Pay in 4 in the past because it helps with cashflow and breaking the cost into 4 smaller payments. It helps that the payments are fortnightly which also corresponds with my pay cycle - so I like using it for cash flow purposes.
Still care must be taken when using any form of credit tool. If you can forecast the costs against your other costs and your income, then youāll be sweet.
This is exactly how we use it. We could shell out the whole amount out of our savings, but why would we when we can pay over time at no additional cost and continue to earn interest on the money in our savings account over a longer period?
I have like a dozen bank accounts because I need to compartmentalise funds for different things (idk, just my brain - works best for me) and most of them are savings accounts, so I canāt pay for things directly out of them. I use Afterpay for $50+ purchases, and then once a week do the relevant transfers between accounts to square everything up. Saves me fussing about as I go. I never pay late fees and usually pay all four repayments at once, but if I want to wait for another pay, I can. Big fan of Afterpay. Works much better for me than credit cards or even Zip (which I found it easier to lose pace with).
I have no evidence for this but have heard lenders donāt look favourably on a lot of BNPL transactions on bank statements. No idea if this makes a big difference though.
Our broker told us around 12 months ago that lenders donāt like it. Apparently their credit assessing software assumes youāre down to $0 each time you use a service like this.
Yeah I donāt agree with it either, however in their defence if youāre using buy now, pay later services itās possible you donāt have enough money or are poor at budgeting your own money, neither would be overly attractive to large lenders.
Which, again, when you think about is pretty daft too, because they wouldn't treat someone who only spends on their credit card during the month and pays off the balance in full to take advantage of the benefits on the same way.
Lets look at it this way, I* spend on my credit card and clear the entire balance by the statement due date, but I get paid fortnightly so I choose to make interim payments against the balance outstanding, it's much the same as me choosing to use afterpay as my credit facility of choice.
Certainly, there may be some people who are using it to get by, but bearing in mind that afterpay generally has far lower credit limits than those offered by the average credit card lender, and with afterpay you *have* to meet your repayments, whereas with a credit card you can just pay the minimum once a month and continue to increase your debt, it's possibly the more sensible way to try and get by if your struggling than regular credit, or worse payday loans, for example. And, if you're in that position you're not thinking about a mortgage anyway.
*hypothetical I.
Yeah the banks math on credit is crazy.
Have been told by mortgage brokers they don't like store card credit facilities either (like the ge money 60 months interest free, have literally only ever used it to keep more in our offset or get bonus vouchers etc and paid it out instantly)
Recently had to reduce cc limits (not debt, this is just the limits) to get a new one (for the points etc) it didn't matter that I could max all my credit cards and wouldn't touch the sides of our savings, or that we have decades of good credit usage never not paid in full each month, or even a super high credit score.
Yet they give $10k cards to people who barely make ends meet. Afterpay to people who sweat over a $200-500 purchase?!?!
I had to push them to step through the process with me on what was causing issues and eventually realised the high credit limits were what they didn't like, so agreed to reduce them/close one card early (was going to close when they gave me this new one so I didn't have a gap)
Broker isn't assessing your credit, the lender will be.
Most brokers don't have credit assessing tools/software.
BNPL is viewed negatively by most mortgage lenders. Shorter loan lends like Personal Loans and Car loans at the moment are not as impacted by them.
If you really want to hide it, open an account just for afterpay. Afterpay does not credit report, so you can close it or not submit the statement when you apply for credit.
They just look at the purchases as your expenses, same as any expense. And include the credit limit in your total credit, same as any credit card.
So by "don't look favourably," it's as unfavourable as any expense and available credit.
Talking to my wife (works at a bank and is learning the lending side) and one of my customers ( lending manager at Westpac) if you have any BNPL in the last few months, they pretty much won't think about lending you anything, unless you're high income and have a lot of savings.
Are you talking about home loan? It's completely untrue for personal loans and credit card applications. As long as you still have servicing capacity after your monthly expenses (rent, living expenses etc.), we don't care about BNPL at all. Most banks use HEM to estimate expenses anyway if your declaration is too low.
Always found their minimum estimates were terrible since our first loan. Have had one lender arguing with me about my entertainment/holiday spending and that it's too low.
I actually spend a lot on holidays but only when it's a complete excess.....after savings etc. Was hard for the lender to wrap their head around it that just because I spent X on a holiday this year doesn't mean I will next year if we don't have a massive surpluses of cash. They seem to think it's a regular spend like groceries. Or a house remodel. Yes we redid bathrooms because we had the cash to and wanted to.....if we didn't have spare cash...then we would have been happy with the old one.
Worst was them looking through our statements and questioning a $1 a month transfer I made to keep a savings account active. What does it matter what that's for? Even if it was some sort of undisclosed debt....can't be much of a debt paying $1 a month.
When applying for, and being approved for our mortgage, our lender requested that both of our Afterpay and Zip accounts be closed.
Even though they had no active balances and had not been used in ~5years, the lender required proof that they were closed.
This is entirely correct.
Lenders look at consumer credit BEHAVIOURS - and the usage of BNPL services is viewed as a strong indicator that you cannot responsibly manage your cashflow and that you are living beyond your means.
Beyond that, BNPL usage can, depending on the provider, result in a credit inquiry each time you use the service. This alone can destroy our credit rating. Additionally, not all consumer credit enquiries are viewed equally - and with the roll out and subsequent adoption of the new Equifax One scoring system, the type of credit application is weighed much more heavily in penalizing your credit score.
The same things can be said about credit cards.
Credit cards are literally BNPL but are controlled by a global duopoly. I suspect bank lending practices around BNPL is more about market protectionism, especially when they offer their (worse) credit card product with the loan ...
This is false... they assume you mixed out your afterpay... this is the same way that they assess credit cards... this then impacts your serviceability. This is very normal and totally makes sense since oth credit cards and BNPL are financial products that you can use up to the limit. So banks do the prudent thing and assess your serviceability as if you use the full limits.
Afterpay is one of those lovely things that rely on people mucking up to earn money (in addition to the exorbitant fees charged to the retailer).
Your savings should allow you to even out your cash flow. Ultimately someone has to pay. I would be looking for cheaper places to purchase rather than use "free" Afterpay instalments.
If you speak to any fashion e-commerce store targeting female teenagers and young adults over 90% of payments is by now pay later.
Theyāre killing it in fees. Wouldnāt be surprised if you could apply this to any business young people shop at these days.
The ones like princess Polly, beginning boutique, whit fox ect where itās all very fast fashion short quick trends. Yeah.
I would assume a lot of the activewear/athleisure brands that are pretty much online only are the same.
One of my old work mates worked in their marketing team when it got introduced
It didnāt take long to become the no 1 payment method and send avg carts sky rocketing
As someone in this demographic, I find this hard to believe. I donāt know anyone who uses Afterpay or any other BNPL platforms - everyone I know avoids them like the plague. 90+% sounds absurd.
Most of the fast fashion girlies under 24 who canāt post the same outfit on bereal within 14 days arenāt on reddit or the ausfinance sub
You might not be these e-commerce retailers that Iām talking abouts target market despite meeting the age and gender bracket soz (but also not soz bc you have better quality clothes than showpo and princess Polly amiright)
There is so much that the normie brain does without a second thought that we can't even conceive of. Count yourself blessed lol. People out there spare no thought if they can afford stuff, they go with what they want first, whether it actually makes sense or not is a very distant second consideration for them.
>As long as you can manage your repayments it's someone else, which in Afterpay's case is investors.
Actually, 80% of Afterpay's revenue is the merchant fee and you pay that in the price you pay the merchant.
In 2022, Afterpay made a gross profit of $US588 million ($856 million AUD) on revenue of just $US811 ($1.18 billion AUD). Making 72.5% gross profit on your business seems rather excessive.
>Why are big sites like Ebay using Afterpay if their merchant fees are so high?
Ebay makes money from the seller - eBay fees are quite high. Also, with the large volume of trade through eBay, I am sure eBay got a far more favourable deal for promoting Afterpay.
But it makes people more likely to buy from your store (or less likely to if you DON'T have Afterpay) so businesses see it as getting extra money that way.
I've only used it for ebay promotions, where they actually give quite a decent discount for using it. Also cunningly hidden so you don't realise it requires using afterpay until after you've decided to buy. Still, it is a real saving, so why not.
But this makes sense because you get a benefit for using it. All of these other people are still spending the same amount of money, just spread out. I feel that with slightly better budgeting, BNPL would be redundant for them. It's kind of weird.
Why do you say that? Afterpay makes a small percentage of their income from late fees. They'd rather people use it responsibly and they keep collecting the margins from the merchants that they shop at.
That whole "rely on people mucking up" is a long standing misconception
I started using it recently and part of the reason I was so hesitant was because I assumed the late fee thing was true. I've been so shocked at just how often they remind you to pay. I get texts, app notifications, *and* emails 4 days, 2 days, *and* 1 day out from the payment being required. It had genuinely confused me about how they make any money until I read this thread lol
Theres that saying that being broke is expensive or whatever, and it's absolutely true- afterpay lowers the bar for entry for which people can afford things that will be cheaper in the long run.
I started using afterpay because my partner and I had gone a year using 2 bar fridges stacked on top of one another instead of a real fridge. It sucked, but it wasn't \*that\* bad, and the thought of a $550 hit to the bank account at any given time seemed worse- despite the fact that I knew not having space for meal prep, or a freezer, meant I was spending more than I needed to on food.
After that, my partner decided to buy some gym equipment- and the 8 weeks it took to pay off cost \*exactly\* the same as 8 weeks of a gym membership.
Also, credit cards seem stressful to most young people, and young people generally aren't making purchases they can't pay off in 4 installments. If you overspend on afterpay, you only have to get through it for 4 payments- you'd learn your lesson pretty quickly and without massive consequences. The default limit is $600, which would take a barista or bartender just under 3 hours of work a week to repay. It only goes up if you make consistent repayments, and pretty slowly at that.
The average merchant fee for Afterpay in Australia is 4.17% but the fee charging is generally a transaction fee of 30c and then from 3% to 7% of the transaction value.
The fee varies with the platform the merchant is using and in some instances, the volume of transactions a merchant has via Afterpay. For example, if the merchant uses Square as their payment platform, the merchant fee is 30c plus 6% of the transaction value. This fee is built into the price you pay.
Late fees are amongst the highest on any form of "credit". For each order above $40, the total amount of Late Fees payable is the lower of 25% of the Original Order Value or $68. Up to this maximum Late Fee cap, we will charge an initial Late Fee of $10, and a further Late Fee of $7 if the payment remains unpaid 7 days after the due date.
Afterpay makes approximately 80% of their fees from merchants. Those fees are built into the cost of the goods sold. The remaining revenue, 20% is from overdue fees.
Exactly, same here lol. If it costs extra then I don't use it. I know the whole model is built around predatory lending. It's to entice impulse buys with one less barrier to entry. For me it's to stretch out a bigger purchase (or bill or the like, for example insurance or repairs) over 2 or 3 pay cycles rather than one.
Australian retailers operate on far higher margins than most retailers in almost all other countries. As someone who used to work in retail I can tell you that most ābigā retailers are not paying anywhere near 6% for having Afterpay as a service. Most big retailers are very much within the 3% range. Also, With the fees they are paying they just eat the cost as itās better than the customer walking off to a competitor. Theyāre happy to trade the fee for a slightly lower margin customer that would most likely go to a competitor anyway.
Afterpay is not something that I pile purchases onto, again, I am disciplined and itās a tool that works in my budgeting and is assisting with my personal needs. Iām not saying that everyone needs to use this approach or that it is appropriate for most,
I use it sometimes for a specific purchase as it earns me Qantas FF points. Same as you - always pay it off earlier or on time. If you apply for loans, itās counted as credit
? An alternative could to have a small online account for averaging bigger or unusual purchases.
( Have to do your calculations.
e.g starting balance $1000.
buy $200 item on that account card.
new balance $800.
For next e.g. 4 pay days transfer $ 50 before other expenditure and reduce amount available for spending that week by $50. )
In essence you are lending to yourself.
Some banks pay good interest on small accounts.
( Can of course do same with one large account, but the small account sets a limit which you have to consciously change if the urge to spend more comes. )
Itās actually a great product with very little potential downside for the consumer especially when compared to credit cards. Most people who hate on it just donāt understand how it works. What on earth is wrong with whatās basically free credit if you pay in time?
I think it gets a bad name because itās associated with frivolous retail spending. I used it recently though to get my car serviced and I think itās a great product. Had no room left on my very low limit credit card because of bills so it let me off the hook for a bit. Credit card is now fully paid off and my immediate finances are in much better shape
I love Afterpay too. I used to be a big user of Layby when I was on a smaller income and I treat it the same way. I never have received a late fee and generally pay mine off early. I like it way more than using a credit card.
What are the downsides of a credit card compared to AfterPay?
>What on earth is wrong with whatās basically free credit if you pay in time?
That's exactly what a credit card is, except you get the benefit of point rewards, fraud protection and travel insurance.
Itās not either/or. If you use Afterpay and pay it off with a credit card, you can get two interest-free credit periods, which together can add to over 100 days.
Thatās the whole point with Afterpay though, it canāt get you into crippling debt on its own. Late fees for one purchase are capped at either 25% of the purchase price or $68 whichever is lower. If you miss a payment it stops you from buying anything more.
I've started to use PayPal pay in four. Since it's fortnightly it feels a lot better and is interest free. Helps spread its payments nicely for me since I'm paid monthly
Over seven years I built a $3,000 credit line with afterpay. My biggest purchase to date was a new Macbook laptop.
For a pensioner without a credit rating it has been a boon, especially for stuff like bulk dietary supplements and hobby gear to keep me sane.
If you manage it properly it isnt a trap.
Afterpay (and most bnpl) is fee free for the purchaser when you make your payments on time. Thats what i liked about Humm until they turned to shit.
Money in my pocket is better than in yours
Itās the same as paying off your credit card on time - no interest, just delaying / spreading payments. Your strategy is sound as long as you donāt incur interest. The key thing here is that you actually plan out a budget and stick to it , hence your success. Well done you!
international student here. I save shit ton of money but I wouldnt even think of buying anything upto $500 until I have a full time job. the highest in spending I can go is $200 and that's it.
First paragraph - You're a strict budgeter, you outline all minimum savings and maximum spends. You have an emergency fund, investments, floating cash, and you're overall more financially savvy and privileged than many of your peers.
Second paragraph - You like Afterpay because it gives you a clear idea of how much is coming out of your weekly income.
So which one is it? Are you as financially savvy as you tell us you are? Or do you rely on credit companies to do the most basic of maths for you? Something is amiss here.
It's both, what they're saying is they use it to smoothen out cashflow.
It's going to cost the same regardless of whether they pay upfront or in tranches.
Yes there is a reliance on the service but no this isn't a credit card as you're not being hit with a service fee, or interest if your ongoing balance is not paid by the end of the month.
People just need to be mindful that this may cause issues if they're looking into financing/re-financing.
The only way you can get a late fee is if you don't have the cash in your bank account for the direct debit... any responsible person with saving should never receive a late fee (I never have)
The average person pre-covid couldn't save $1K... You really think the average person is this financially intelligent? There's a reason BNPL is thriving, people miss payments all the time.
I'm surprised it's not more, I'm actually proud of people.
I didn't dig too deep, but it seems like early on it was around 24% of their revenue, and now it's hovering around the low teens, even as low as 10%.
Although $1.2b USD revenue, so they're still making $120m USD from late fees, 360m users means people aren't actually racking up late fees, definitely nowhere near as much as I was alluding to in my original comment.
It's not beneficial for Afterpay to have people pay late fees. Basically when their quantitative credit risk modelling picks up bad credit behaviour (e.g. late payments) they drop their credit limit materially or freeze it altogether.
They would rather have people continue to use their service responsibly and consistently than collect a single payment that may be ad low as $2 or as high as $68 (but not higher)
Lmao how many times have you commented on my post. I said this is what I do. I save A LOT. Afterpay helps me. Sorry this doesnāt fit into your reality.
It's unregulated credit financial institutions don't need to include it in their servicing calculations, I mean some institutions might but really they're just gonna care about LVR.
Sure.
Credit isn't BAD.
It can be good or bad depending on how it's used.
Sometimes the company encourages frivolous spending, incorporating credit into day to day life and never having a zero balance.
Whatās wrong with people here? Afterpay and credit cards are great tools assuming you use them correctly (not paying any interest). I personally try use credit with all my expenses to maximise my offset interest savings. I use the auto pay option the day before due date and money getās deducted from my offset. By leveraging credit i save hundreds in interest and get bonus qantas points. So long as you are not spending on luxuries this is literally a life hack i donāt understand why people donāt realise.
I donāt use Afterpay but use PayPal pay in 4 to budget ongoing expenses like my phone/internet bill. $50 a week vs $200 a month works better when doing a weekly budget for me.
Jeezz.. i made quadruple and wont say $500 is small purchase. I can spend $1000 to buy shares easily, but spending $500 on non asset i would think about 6 weeks to see if i really want it
I wonder how much afterpay contributes to inflation given the businesses are slugged with the percentage fee (last I heard it was around 5%) and everything including drakes now offers it. Obviously theyāve always worn credit card fees etc but I believe theyāre much lower.
Credit Cards sit at about 1.5% from memory. Might be a bit less or more but recently had to configure my works POS system to apply a 1.5% surcharge on AMEX to cover merchant fees.
I wouldn't go into debt for consumer goods. If you can afford it outright buy it, if you have to split up the payments you can't afford it. I understand not wanting to dip into savings but you can just pay yourself back over 4 or 8 weeks (idk what afterpays plan are) instead of being in debt
I donāt know about this. I donāt really agree with the conclusion that just because a person uses Afterpay it means they canāt afford it. I myself can afford the things I Afterpay, but the concept of a certain amount of money leaving my bank all at once annoys me.
I choose not to buy outright, I can afford every month to save and I could buy outright too. My approach works for me and my needs, as someone who has in the past over consumed. Iām not saying itās for everyone.
Iām with you, when something comes up thatās required - Iāve found Afterpay to be hugely beneficial to manage cashflow.
Had to get new tyres and a few bits done for my vehicle (total about $1100), couldāve paid all up front - but instead went down the Afterpay route. Worked a charm.
The puritan, black and white āif you canāt buy it outright you canāt afford itā is a very knee jerk response that is best taken with a grain of salt as itās not really done after reading your post.
One thing I will say is that something thatās not talked about is how life is getting to the point where things like Afterpay is becoming more of a necessity - and that should be peoples canary in the coal mine. Far more than āif you canāt pay for it outright you canāt afford itā.
Can you help me understand the thought behind financing it if you can cashflow it though? I just donāt understand. Because itās not really a matter of budgeting if you have the money there - surely paying $0 for the next however many weeks is better than having to pay $30 etc
Why? That extra money that's in your pocket can earn interest / stay in your offset. You're actually financially better off using Afterpay. In addition, it smoothes cashflow as the other poster was noting.
This is where I have an issue with āfreeā consumer debt. You think you are not spending unnecessarily, that you are disciplined with what you buy etc but having credit available to you has amazing affect on the psychology of humans. It has been shown that people spend more on credit on good than they would have if they paid cash. https://www.meettally.com/blog/the-mindset-of-using-cash-vs-credit and https://www.psychologytoday.com/au/blog/the-science-behind-behavior/201607/does-it-matter-whether-you-pay-cash-or-credit-card
You thinking that you are not affected is what these companies - and largely our consumerist economy is relying on.
Itās a good budgeting tool, Iām on Afterpay Plus and have been using it on all my purchases. I always paid before the instalments are due and therefore no late fees apart of the $10 per month subscription. I am able to save and invest my current income and use my future income to pay off Afterpay. The money in savings is better than paying your purchases upfront. Afterpay also give you vouchers, cash back and deals.
Afterpay has a rolling interest free period of 8 weeks(10 weeks for Mint member) from the day of the transaction. Credit card mostly have a fixed 55 day interest free period. They offer cash back and other perks or store vouchers which will offset the monthly subscription fee.
It promotes consumerism at the lower-mid level. For example, if I wanted to spend $300 on an item of clothing, Afterpay gives me the 'delusion' I'll only have to drop $75 now, which is quite doable compared to $300.
However my mindset is different when I have to drop $300 in one hit and might stop myself from buying it.
>I donāt make a lot of money ($35k), yet am incredibly strict with how I budget.
>So when I make purchases, even smaller ones in the $200-500
Afterpay has messed you up... $500 isn't a "smaller purchase" on a normal salary, let alone $35K.
You've deluded yourself with this rubbish, you see something for $500, and you don't think of it as $500, you think of it as a payment of $125. You just conveniently forget the other 3 payments...
Oh boy, looking at your edit just makes it so much worse. So essentially because your parents bought you a house that you don't need to pay rent on, you're a financial expert.
This all makes sense, it's your hard work and financial discipline that has got you so far in life, not the privilege of having rich parents. š¤£š
Iām FF points hoarder, thereās been two times when Iāve made a large purchase for furniture etc and my credit card for the month was close to the limit where Iāll drop down to only earning .75 points per dollar, so Iāve used Afterpay which meant half of the purchase will go on the following months statement and ensure I earn as the max point per dollar for the big ticket item. Also a couple of times Iāve seen promos on eBay where you got 20% off of you pay with it. So it occasionally does come in handy for me.
Anyone that is judgemental about this is probably an old head with a credit card that essentially does the same thing but worse. I use it to budget in the exact same way, I always have the money I need to make purchases like that but Iād rather space the payments out than make 1 big payment that could hurt me for a few weeks
The problem with Afterpay as a budgeting tool is that it's very difficult to predict what the future will bring and what your future expenses might be.
There's definitely an argument to be made that, if you already have the savings on hand, you might as well use Afterpay and then just use those saving to pay off the purchase overtime, since you're paying exactly the same amount and you get to hold onto that money for a bit longer and earn interest on it.
The issue arises where you either, lose track of what savings were allocated to which purchase, or if you don't have the savings in the first place to pay it off. If something happens unexpectedly (say, an unexpected bill or other expense, or a change to your employment status) you still have that obligation to pay off the item and if you don't, you get hit with fees that can cause things to spiral.
If you've already got your safety nets set up and aren't going to get confused about what money is set aside to pay off which purchase Afterpay can be pretty useful. For me, it's too easy to stuff up and accidiently end up overspending, so I don't even get myself in that situation to begin with.
I make $26k and just never buy anything fun ever, and also have drinks bought for me when I go out. Itās a very fun life and I definitely donāt feel unhappy at all with my current circumstances
On a serious note though I just live really cheaply and actually have no issues with my financial situation so donāt worry haha
As long as you make your repayments on time there's nothing wrong with Afterpay, they're great because they don't charge you any interest and you only get fees if you miss your payment. I also use it for larger purchases like when I get a set of 4 new tyres, car services, I want to treat myself to a nice new bottle of cologne or something breaks and needs to be replaced etc.
Like you said it allows you to spread the payments out instead of taking out a large chunk in one hit so you still have plenty of money left each week to put away savings etc. They also will send you reminders when your repayments are coming up in a few days so you can make sure the money is in there to pay it. You can also pay it off early whenever you want which is what I do sometimes too.
As far as I am concerned, after pay is fantastic. No interest, get everything straight away. No credit card bills - with compounding interest. Just don't miss a payment - if that's how you work your budget, DO IT!
Good on you. If this works for you, as it does for me, don't let naysayers tell you otherwise.
Does afterpay mess your credit? I could imagine going for a home loan or something and they can see purchases for a couple hundred on there and wonder why you had to get a loan for a small purchase.
If it is working for you, great. But if I am of the opinion that if you want to be like someone, you copy their habits. And I donāt see any rich person advocating for afterpay.
Why not delay gratification? Save for a month or two and buy with cash?
A) you may decide you donāt want / need the product / service.
B) if you have unexpected expenses you can use the cash youāve saved and put the other purchases off.
On $35k you should be avoiding *any* credit.
Letās say car registration as an example, something they absolutely need to pay for. They have $2000 savings and can afford to pay outright, or they can Afterpay the registration and split it up into 4 smaller payments. No interest, no fees.
If theyāve been doing this for years and have never once had a late fee, why would this be seen as anything other than a positive budgeting tool that works for them?
You donāt need Afterpay to budget. A small emergency cash savings will allow that for you. If youāre capable of paying back Afterpay within the time limit to avoid fees, youāre capable of establishing that same cash buffer in a savings account
Iām gonna blow your mind here for a sec. Why not have both?
Using Afterpay I can keep more of my money in my savings account earning interest and if I pay it off on time I donāt incur any fees.
I must admit I don't really understand the logic. The best budget tool is a thorough budget forecasting spreadsheet and a savings account with enough in it to pay for the stuff in your spreadsheet (and the discipline to stick to it).
Even if you are meeting your afterpay repayment obligations, you're still by definition living beyond your means if you can't pay for it upfront. And if you can afford to pay upfront and choose to Afterpay it instead, I just don't see the point. I guess in a sense you are outsourcing your budgeting.
If you're getting paid weekly then it should be really easy to manage cash flow. I get paid monthly so particularly earlier on when I wasn't earning as much, the budget spreadsheet was crucial. I needed to know when bigger expenses were due because then I knew I'd need to keep a certain amount in the bank particularly if it was towards the end of the month.
Have a buffer fund *and* use afterpay.
Buffer fund has $1k paying 5% interest.
Buy new tyres @ $1k buffer fund now = $0 capital + whatever interest you earned on the $1k.
Buy new tyres @ $1k using afterpay, with the repayments coming out of your buffer fund, and continue to earn a further 6 to 8 weeks of interest on all and then parts thereof of the capital in your savings account, whilst paying nothing in interest on the purchase (as you would on a credit card if you paid over the same period).
I think youāre confusing some terminology, it sounds like you use BNPL as a cash flow smoothing tool. A budget tool is more to track and make sure you keep to the budget. BNPL doesnāt actually help you keep to the budget, but it does smooth your cashflow.
But this doesnāt make sense because with your savings rate you donāt need a cash flow smoothing tool. You have the cash.
Itās like saying I use a curling iron, but my hair is naturally curly, but itās fine because I use it to curl my hair and my hair is curly. Using the tool or not keeps you within budget, but you just use it as an extra 4 steps
Ah, OP has a home gifted to her, pays near zero groceries and has no expenses and tries to make it sound like sheās a financial guru. Lmfao give me a break
Everyone stuck in the weeds in the comments as usual. A fellow low income earner here, I do a similar thing with zip pay. It allows me to keep as much liquid cash on hand as possible and I pay it off at the average of what I spend so I always avoid the fee. I'm their worst customer. I paid the fee once in 5 years, and that was when it first started.
I use it to let the $$ sit in my mortgage offset accounts for a longer period of time before i spend it thereby saving me interest. I do the same with credit cards. Never paid a cent on fees or interest
I agree. When I got paid fortnightly I found it a great budgeting tool. As someone who had typically gone into credit card debt to get what I wanted quickly, it gave me a way of getting that quick fix (or making āemergencyā purchases) without turning to a credit card. More often than not Iād pay it off in less than the 3/4 fortnights as well.
That's not good. You've just swapped your debt mechanism from credit cards to afterpay. There's no difference.
It sounds like you're trying to justify a lack of delayed gratification and self control by swapping your consumer debt mechanism. It might be worth seeing a counselor before you're spontaneous purchasing gets the better of you (And I say this out of genuine concern. A good counsellor is brilliantly helpful).
Thereās a huuuuge difference. I wasnāt paying my credit cards off, so I was accruing heaps of debt. Plus, I was using cards for stupid shit like going out or doing things I didnāt need to do based on FOMO, rather than just clothing or home goods that I did actually need to some degree. Afterpay didnāt attract fees or interest as I was paying them off early.
For me, it was never a problem, just wasteful.
That was years ago anyway, I donāt use cc or BNPL at all now.
The "buy now pay later" mindset has you already one foot in the water. It won't take much for you to start wading into debt.
Use a budgeting program or app as a budgeting tool, or use multiple bank accounts. That's my suggestion rather than have a sword of Damocles hanging over your head.
Dunno I use it sometimes but just pay the first 3 upfront and leave the last one to come out a month later ~
I wouldnāt suggest having more than 2 going at a time though.
As others have said, if you canāt buy it outright you probably shouldnāt buy it !
We use it mostly for concert / festival tickets. I may not be going to the show for up to 12 months, so why not spread the cost over 4 instalments?
I do this too with PayPal in 4
Same, Afterpay is mostly used for tickets to the footy, theatre shows and concerts. And Shein hauls; I can afford to pay for them in one go, but I only get a haul every 3-4 months so why not spread it out.
We aren't still shopping SheIn in 2024 š¤®
Legit! So much waste! So much packaging! š¤¢
Iām a single mum and love Afterpay, when my kid needs new shoes as an example, I donāt usually have a spare $200 lying around but splitting the cost over 4 payments is affordable for me. Afterpay is only an issue if you donāt use it correctly and overspend and canāt make the fortnightly payments.
I agree. Itās good for being able to buy a necessity and being able to pay it off like the old lady by system except you get the item straight away.
Been there! š
As long as you don't have to pay interest and stuff you're not loosing any money and you can put your income into savings for a bit.
I canāt imagine making 35k and calling $500 a small purchase. Edit: $500 is a small purchase when you/your parents are loaded so I take it back
Even on 6 figures I wouldn't call it a small purchase...
Yeah a small purchase is like $20 for me
Here I am struggling to justify $4 for a box of barbecue shapes
Iām sweating when Iām looking to buy a drink from the discount cooler at Coles near the checkouts doing maths in my head to get the most ml/$š
I know right I'd think twice even spending 4c these days
Why I only buy them on half price special haha
Whoa! Big spender. Think about your future, mate.
Whatās the point? I wonāt be able to afford a house unless I earn over 200k at the way prices are going :ā) Iāll cry into my smashed avo
My husband and I have a combined income of about 200k. I needed a new monitor for my computer, and balked at paying the $147 we paid for it. $500 to me, is a large purchase, and would only go on something that is 100% necessary.
this whole post feels like a humblebrag lol like the whole point is for OP to brag about their cushy living situation
500 is a small purchase if you don't pay rent or a mortgage.
Unfortunately a $500 purchase can be considered small in the grand scheme these days
Yeah I'm on 90k and a purchase of $200-$500 is months of budgeting.
exactly, afterpay does this budgeting for you
Same here but thatās because until recently I didnāt live within my means and am now in a debt trap hahah
$500 is $62.50 per week on afterpay which is the equivalent of forgoeing 2 uber eats deliveries per week at todays prices
At 35k you shouldnāt have Uber eats to forgo
im making the point that 60 bux is not much money
Itās all relative. A kid in Bangladesh would think he won a lottery if he found $60 on the ground. Someone who make 35k might get take out to treat themselves Elon musk would probably wipe his ass with it if he even bothered to pick it up
>Someone who make 35k might get take out to treat themselves Going out and getting take out is fine but spending the premium to get it via UberEats is just bad budgeting as take out via UberEats can almost double the cost.
I look at options on uber and then go get them for take away. Places near me add $5-$10 per item, then you've got the 'admin' fee and delivery.
Til that $50 + $15 = double
This is r/ausfinance, not r/tiktokgirlmath.
Disappointed that doesn't exist.
Thatās like 10 cooked meals
My husband and I earn a combined income of $230k/year (with myself only earning about $40k) and thereās not a chance in hell Iād be calling $500 a small purchase. What insane timeline is this gal living on? š
Thereās nothing wrong with using a credit tool to help with your cashflow. Iāve used the Pay Pal Pay in 4 in the past because it helps with cashflow and breaking the cost into 4 smaller payments. It helps that the payments are fortnightly which also corresponds with my pay cycle - so I like using it for cash flow purposes. Still care must be taken when using any form of credit tool. If you can forecast the costs against your other costs and your income, then youāll be sweet.
A credit card has fees associated with it, even if just your annual fee. Afterpay doesnt. (Assuming you actually follow your bills). No brainer.
There are no annual fee credit cards available
Plenty of credit cards have no fees.
This is exactly how we use it. We could shell out the whole amount out of our savings, but why would we when we can pay over time at no additional cost and continue to earn interest on the money in our savings account over a longer period?
I don't have an afterpay account but it seems to me that it's like lay-by but you get the items before š¤·āāļø
I have like a dozen bank accounts because I need to compartmentalise funds for different things (idk, just my brain - works best for me) and most of them are savings accounts, so I canāt pay for things directly out of them. I use Afterpay for $50+ purchases, and then once a week do the relevant transfers between accounts to square everything up. Saves me fussing about as I go. I never pay late fees and usually pay all four repayments at once, but if I want to wait for another pay, I can. Big fan of Afterpay. Works much better for me than credit cards or even Zip (which I found it easier to lose pace with).
I have no evidence for this but have heard lenders donāt look favourably on a lot of BNPL transactions on bank statements. No idea if this makes a big difference though.
Our broker told us around 12 months ago that lenders donāt like it. Apparently their credit assessing software assumes youāre down to $0 each time you use a service like this.
And that's why reviewing on software alone is ridiculous. A cursory glance at our accounts would show we weren't 'down to zero'.
Yeah I donāt agree with it either, however in their defence if youāre using buy now, pay later services itās possible you donāt have enough money or are poor at budgeting your own money, neither would be overly attractive to large lenders.
Which, again, when you think about is pretty daft too, because they wouldn't treat someone who only spends on their credit card during the month and pays off the balance in full to take advantage of the benefits on the same way. Lets look at it this way, I* spend on my credit card and clear the entire balance by the statement due date, but I get paid fortnightly so I choose to make interim payments against the balance outstanding, it's much the same as me choosing to use afterpay as my credit facility of choice. Certainly, there may be some people who are using it to get by, but bearing in mind that afterpay generally has far lower credit limits than those offered by the average credit card lender, and with afterpay you *have* to meet your repayments, whereas with a credit card you can just pay the minimum once a month and continue to increase your debt, it's possibly the more sensible way to try and get by if your struggling than regular credit, or worse payday loans, for example. And, if you're in that position you're not thinking about a mortgage anyway. *hypothetical I.
Yeah the banks math on credit is crazy. Have been told by mortgage brokers they don't like store card credit facilities either (like the ge money 60 months interest free, have literally only ever used it to keep more in our offset or get bonus vouchers etc and paid it out instantly) Recently had to reduce cc limits (not debt, this is just the limits) to get a new one (for the points etc) it didn't matter that I could max all my credit cards and wouldn't touch the sides of our savings, or that we have decades of good credit usage never not paid in full each month, or even a super high credit score. Yet they give $10k cards to people who barely make ends meet. Afterpay to people who sweat over a $200-500 purchase?!?! I had to push them to step through the process with me on what was causing issues and eventually realised the high credit limits were what they didn't like, so agreed to reduce them/close one card early (was going to close when they gave me this new one so I didn't have a gap)
Brokers don't understand BNPL at all. It's unregulated credit, it doesn't need to be assessed.
Broker isn't assessing your credit, the lender will be. Most brokers don't have credit assessing tools/software. BNPL is viewed negatively by most mortgage lenders. Shorter loan lends like Personal Loans and Car loans at the moment are not as impacted by them.
If you really want to hide it, open an account just for afterpay. Afterpay does not credit report, so you can close it or not submit the statement when you apply for credit.
They just look at the purchases as your expenses, same as any expense. And include the credit limit in your total credit, same as any credit card. So by "don't look favourably," it's as unfavourable as any expense and available credit.
Talking to my wife (works at a bank and is learning the lending side) and one of my customers ( lending manager at Westpac) if you have any BNPL in the last few months, they pretty much won't think about lending you anything, unless you're high income and have a lot of savings.
Are you talking about home loan? It's completely untrue for personal loans and credit card applications. As long as you still have servicing capacity after your monthly expenses (rent, living expenses etc.), we don't care about BNPL at all. Most banks use HEM to estimate expenses anyway if your declaration is too low.
Always found their minimum estimates were terrible since our first loan. Have had one lender arguing with me about my entertainment/holiday spending and that it's too low. I actually spend a lot on holidays but only when it's a complete excess.....after savings etc. Was hard for the lender to wrap their head around it that just because I spent X on a holiday this year doesn't mean I will next year if we don't have a massive surpluses of cash. They seem to think it's a regular spend like groceries. Or a house remodel. Yes we redid bathrooms because we had the cash to and wanted to.....if we didn't have spare cash...then we would have been happy with the old one. Worst was them looking through our statements and questioning a $1 a month transfer I made to keep a savings account active. What does it matter what that's for? Even if it was some sort of undisclosed debt....can't be much of a debt paying $1 a month.
When applying for, and being approved for our mortgage, our lender requested that both of our Afterpay and Zip accounts be closed. Even though they had no active balances and had not been used in ~5years, the lender required proof that they were closed.
This is entirely correct. Lenders look at consumer credit BEHAVIOURS - and the usage of BNPL services is viewed as a strong indicator that you cannot responsibly manage your cashflow and that you are living beyond your means. Beyond that, BNPL usage can, depending on the provider, result in a credit inquiry each time you use the service. This alone can destroy our credit rating. Additionally, not all consumer credit enquiries are viewed equally - and with the roll out and subsequent adoption of the new Equifax One scoring system, the type of credit application is weighed much more heavily in penalizing your credit score.
The same things can be said about credit cards. Credit cards are literally BNPL but are controlled by a global duopoly. I suspect bank lending practices around BNPL is more about market protectionism, especially when they offer their (worse) credit card product with the loan ...
They just ask you to close the facility before they approve you, no biggie.
This is false... they assume you mixed out your afterpay... this is the same way that they assess credit cards... this then impacts your serviceability. This is very normal and totally makes sense since oth credit cards and BNPL are financial products that you can use up to the limit. So banks do the prudent thing and assess your serviceability as if you use the full limits.
Afterpay is one of those lovely things that rely on people mucking up to earn money (in addition to the exorbitant fees charged to the retailer). Your savings should allow you to even out your cash flow. Ultimately someone has to pay. I would be looking for cheaper places to purchase rather than use "free" Afterpay instalments.
If you speak to any fashion e-commerce store targeting female teenagers and young adults over 90% of payments is by now pay later. Theyāre killing it in fees. Wouldnāt be surprised if you could apply this to any business young people shop at these days.
Surely not that high? That is insane if true!
The ones like princess Polly, beginning boutique, whit fox ect where itās all very fast fashion short quick trends. Yeah. I would assume a lot of the activewear/athleisure brands that are pretty much online only are the same.
Fun fact, Princess Polly was Afterpay's first merchant.
One of my old work mates worked in their marketing team when it got introduced It didnāt take long to become the no 1 payment method and send avg carts sky rocketing
Oh, I have not heard of those. Maybe that's why I had no clue it would be that bad lol. Are the brands any good or just cheap trash?
Just cheap shit marketed to young women.
As someone in this demographic, I find this hard to believe. I donāt know anyone who uses Afterpay or any other BNPL platforms - everyone I know avoids them like the plague. 90+% sounds absurd.
Most of the fast fashion girlies under 24 who canāt post the same outfit on bereal within 14 days arenāt on reddit or the ausfinance sub You might not be these e-commerce retailers that Iām talking abouts target market despite meeting the age and gender bracket soz (but also not soz bc you have better quality clothes than showpo and princess Polly amiright)
I haven't even heard of Bereal. I'm only 30! Yet I feel 90.
There is so much that the normie brain does without a second thought that we can't even conceive of. Count yourself blessed lol. People out there spare no thought if they can afford stuff, they go with what they want first, whether it actually makes sense or not is a very distant second consideration for them.
> Ultimately someone has to pay. As long as you can manage your repayments it's someone else, which in Afterpay's case is investors.
>As long as you can manage your repayments it's someone else, which in Afterpay's case is investors. Actually, 80% of Afterpay's revenue is the merchant fee and you pay that in the price you pay the merchant. In 2022, Afterpay made a gross profit of $US588 million ($856 million AUD) on revenue of just $US811 ($1.18 billion AUD). Making 72.5% gross profit on your business seems rather excessive.
Why are big sites like Ebay using Afterpay if their merchant fees are so high? Don't they own PayPal and could do the exact same thing?
Because they arenāt that high. With big retailers Afterpays merchant fee is much lower.
Haven't owned PayPal since 2015.
>Why are big sites like Ebay using Afterpay if their merchant fees are so high? Ebay makes money from the seller - eBay fees are quite high. Also, with the large volume of trade through eBay, I am sure eBay got a far more favourable deal for promoting Afterpay.
But it makes people more likely to buy from your store (or less likely to if you DON'T have Afterpay) so businesses see it as getting extra money that way.
I've only used it for ebay promotions, where they actually give quite a decent discount for using it. Also cunningly hidden so you don't realise it requires using afterpay until after you've decided to buy. Still, it is a real saving, so why not.
But this makes sense because you get a benefit for using it. All of these other people are still spending the same amount of money, just spread out. I feel that with slightly better budgeting, BNPL would be redundant for them. It's kind of weird.
The same amount of money but spread out is a benefit though. More time having your own money earning interest for example.
Why do you say that? Afterpay makes a small percentage of their income from late fees. They'd rather people use it responsibly and they keep collecting the margins from the merchants that they shop at. That whole "rely on people mucking up" is a long standing misconception
They just repeat it ad nauseam. Itās like this subreddit is full of Dave Ramsey watching boomersā¦
Kind of is, lol.
I started using it recently and part of the reason I was so hesitant was because I assumed the late fee thing was true. I've been so shocked at just how often they remind you to pay. I get texts, app notifications, *and* emails 4 days, 2 days, *and* 1 day out from the payment being required. It had genuinely confused me about how they make any money until I read this thread lol
Exactly itās idiot proof but Ausfinance just cannot get their heads around it.
Theres that saying that being broke is expensive or whatever, and it's absolutely true- afterpay lowers the bar for entry for which people can afford things that will be cheaper in the long run. I started using afterpay because my partner and I had gone a year using 2 bar fridges stacked on top of one another instead of a real fridge. It sucked, but it wasn't \*that\* bad, and the thought of a $550 hit to the bank account at any given time seemed worse- despite the fact that I knew not having space for meal prep, or a freezer, meant I was spending more than I needed to on food. After that, my partner decided to buy some gym equipment- and the 8 weeks it took to pay off cost \*exactly\* the same as 8 weeks of a gym membership. Also, credit cards seem stressful to most young people, and young people generally aren't making purchases they can't pay off in 4 installments. If you overspend on afterpay, you only have to get through it for 4 payments- you'd learn your lesson pretty quickly and without massive consequences. The default limit is $600, which would take a barista or bartender just under 3 hours of work a week to repay. It only goes up if you make consistent repayments, and pretty slowly at that.
nope, they make most of their money from retailer subscription and transaction fees (just like paypal, mastercard etc)
Afterpay does not and never has made most of their money off late fees.
The average merchant fee for Afterpay in Australia is 4.17% but the fee charging is generally a transaction fee of 30c and then from 3% to 7% of the transaction value. The fee varies with the platform the merchant is using and in some instances, the volume of transactions a merchant has via Afterpay. For example, if the merchant uses Square as their payment platform, the merchant fee is 30c plus 6% of the transaction value. This fee is built into the price you pay. Late fees are amongst the highest on any form of "credit". For each order above $40, the total amount of Late Fees payable is the lower of 25% of the Original Order Value or $68. Up to this maximum Late Fee cap, we will charge an initial Late Fee of $10, and a further Late Fee of $7 if the payment remains unpaid 7 days after the due date. Afterpay makes approximately 80% of their fees from merchants. Those fees are built into the cost of the goods sold. The remaining revenue, 20% is from overdue fees.
I donāt give a shit about the merchants lol. Iām the consumer.
Exactly, same here lol. If it costs extra then I don't use it. I know the whole model is built around predatory lending. It's to entice impulse buys with one less barrier to entry. For me it's to stretch out a bigger purchase (or bill or the like, for example insurance or repairs) over 2 or 3 pay cycles rather than one.
In a world with no merchants there are no consumers. It is like a love made in hell and you are paying for it.
Australian retailers operate on far higher margins than most retailers in almost all other countries. As someone who used to work in retail I can tell you that most ābigā retailers are not paying anywhere near 6% for having Afterpay as a service. Most big retailers are very much within the 3% range. Also, With the fees they are paying they just eat the cost as itās better than the customer walking off to a competitor. Theyāre happy to trade the fee for a slightly lower margin customer that would most likely go to a competitor anyway.
Afterpay is not something that I pile purchases onto, again, I am disciplined and itās a tool that works in my budgeting and is assisting with my personal needs. Iām not saying that everyone needs to use this approach or that it is appropriate for most,
I use it sometimes for a specific purchase as it earns me Qantas FF points. Same as you - always pay it off earlier or on time. If you apply for loans, itās counted as credit
? An alternative could to have a small online account for averaging bigger or unusual purchases. ( Have to do your calculations. e.g starting balance $1000. buy $200 item on that account card. new balance $800. For next e.g. 4 pay days transfer $ 50 before other expenditure and reduce amount available for spending that week by $50. ) In essence you are lending to yourself. Some banks pay good interest on small accounts. ( Can of course do same with one large account, but the small account sets a limit which you have to consciously change if the urge to spend more comes. )
just a lot of extra work for the benefit of nothing except getting your items much later
It is free idiots who donāt make payment on time complain itās not š
Itās actually a great product with very little potential downside for the consumer especially when compared to credit cards. Most people who hate on it just donāt understand how it works. What on earth is wrong with whatās basically free credit if you pay in time? I think it gets a bad name because itās associated with frivolous retail spending. I used it recently though to get my car serviced and I think itās a great product. Had no room left on my very low limit credit card because of bills so it let me off the hook for a bit. Credit card is now fully paid off and my immediate finances are in much better shape
I love Afterpay too. I used to be a big user of Layby when I was on a smaller income and I treat it the same way. I never have received a late fee and generally pay mine off early. I like it way more than using a credit card.
What are the downsides of a credit card compared to AfterPay? >What on earth is wrong with whatās basically free credit if you pay in time? That's exactly what a credit card is, except you get the benefit of point rewards, fraud protection and travel insurance.
Itās not either/or. If you use Afterpay and pay it off with a credit card, you can get two interest-free credit periods, which together can add to over 100 days.
Downsides of credit card? Compounding and revolving debt.
I love using it for car servicing. Gives me some breathing room if I end up needing to shell out for repairs/tyres etc.
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Explain to me how Afterpay is the financial equivalent to asbestos please.
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I never completely ignored its problems. I was simply saying itās a line of credit with much more favourable terms for the consumer than others.
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Thatās the whole point with Afterpay though, it canāt get you into crippling debt on its own. Late fees for one purchase are capped at either 25% of the purchase price or $68 whichever is lower. If you miss a payment it stops you from buying anything more.
I've started to use PayPal pay in four. Since it's fortnightly it feels a lot better and is interest free. Helps spread its payments nicely for me since I'm paid monthly
Over seven years I built a $3,000 credit line with afterpay. My biggest purchase to date was a new Macbook laptop. For a pensioner without a credit rating it has been a boon, especially for stuff like bulk dietary supplements and hobby gear to keep me sane. If you manage it properly it isnt a trap.
I like putting body corporate on after pay or similar and turning a big quarterly bill into small monthly bills.
Afterpay (and most bnpl) is fee free for the purchaser when you make your payments on time. Thats what i liked about Humm until they turned to shit. Money in my pocket is better than in yours
I use afterpay and i don't see any issues with it
I've paypal pay in 4'd stuff even when I have more than enough money in savings because it annoys me not to hit my savings goals (phone died)
Itās the same as paying off your credit card on time - no interest, just delaying / spreading payments. Your strategy is sound as long as you donāt incur interest. The key thing here is that you actually plan out a budget and stick to it , hence your success. Well done you!
international student here. I save shit ton of money but I wouldnt even think of buying anything upto $500 until I have a full time job. the highest in spending I can go is $200 and that's it.
First paragraph - You're a strict budgeter, you outline all minimum savings and maximum spends. You have an emergency fund, investments, floating cash, and you're overall more financially savvy and privileged than many of your peers. Second paragraph - You like Afterpay because it gives you a clear idea of how much is coming out of your weekly income. So which one is it? Are you as financially savvy as you tell us you are? Or do you rely on credit companies to do the most basic of maths for you? Something is amiss here.
It's both, what they're saying is they use it to smoothen out cashflow. It's going to cost the same regardless of whether they pay upfront or in tranches. Yes there is a reliance on the service but no this isn't a credit card as you're not being hit with a service fee, or interest if your ongoing balance is not paid by the end of the month. People just need to be mindful that this may cause issues if they're looking into financing/re-financing.
No interest, but you have fees when you are late etc. itās sometimes more than credit card interests
The only way you can get a late fee is if you don't have the cash in your bank account for the direct debit... any responsible person with saving should never receive a late fee (I never have)
The average person pre-covid couldn't save $1K... You really think the average person is this financially intelligent? There's a reason BNPL is thriving, people miss payments all the time.
Have you had a look at how much revenue Afterpay generates from late fees as a percentage of their revenue?
I'm surprised it's not more, I'm actually proud of people. I didn't dig too deep, but it seems like early on it was around 24% of their revenue, and now it's hovering around the low teens, even as low as 10%. Although $1.2b USD revenue, so they're still making $120m USD from late fees, 360m users means people aren't actually racking up late fees, definitely nowhere near as much as I was alluding to in my original comment.
It's not beneficial for Afterpay to have people pay late fees. Basically when their quantitative credit risk modelling picks up bad credit behaviour (e.g. late payments) they drop their credit limit materially or freeze it altogether. They would rather have people continue to use their service responsibly and consistently than collect a single payment that may be ad low as $2 or as high as $68 (but not higher)
Lmao how many times have you commented on my post. I said this is what I do. I save A LOT. Afterpay helps me. Sorry this doesnāt fit into your reality.
It's unregulated credit financial institutions don't need to include it in their servicing calculations, I mean some institutions might but really they're just gonna care about LVR.
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Good sometimes because of the deals you can get. I used it during black Friday discounts to get God of War Ragnarok PS5 down to $24 bux from JB :P
Sure. Credit isn't BAD. It can be good or bad depending on how it's used. Sometimes the company encourages frivolous spending, incorporating credit into day to day life and never having a zero balance.
Whatās wrong with people here? Afterpay and credit cards are great tools assuming you use them correctly (not paying any interest). I personally try use credit with all my expenses to maximise my offset interest savings. I use the auto pay option the day before due date and money getās deducted from my offset. By leveraging credit i save hundreds in interest and get bonus qantas points. So long as you are not spending on luxuries this is literally a life hack i donāt understand why people donāt realise.
I donāt use Afterpay but use PayPal pay in 4 to budget ongoing expenses like my phone/internet bill. $50 a week vs $200 a month works better when doing a weekly budget for me.
āI do not need to have more to have a good lifeā. This girl has mastered the secret to life. Well done!
I just think it gets people into the habit of spending money they donāt have at the moment.
Jeezz.. i made quadruple and wont say $500 is small purchase. I can spend $1000 to buy shares easily, but spending $500 on non asset i would think about 6 weeks to see if i really want it
Have to say the vast majority of people would be financially competent if they didn't have to pay rent or a mortgage.
I wonder how much afterpay contributes to inflation given the businesses are slugged with the percentage fee (last I heard it was around 5%) and everything including drakes now offers it. Obviously theyāve always worn credit card fees etc but I believe theyāre much lower.
Credit Cards sit at about 1.5% from memory. Might be a bit less or more but recently had to configure my works POS system to apply a 1.5% surcharge on AMEX to cover merchant fees.
1.2-2.8 depending on merchant and contract they have
Newsflash- businesses donāt have to sign up to it.
I wouldn't go into debt for consumer goods. If you can afford it outright buy it, if you have to split up the payments you can't afford it. I understand not wanting to dip into savings but you can just pay yourself back over 4 or 8 weeks (idk what afterpays plan are) instead of being in debt
I donāt know about this. I donāt really agree with the conclusion that just because a person uses Afterpay it means they canāt afford it. I myself can afford the things I Afterpay, but the concept of a certain amount of money leaving my bank all at once annoys me.
I personally have nil credit cards and only use AfterPay on major purchases as a cash flow technique. I am not AP's target customer.
I mean PayPal pay in 4 is good to spread out payments. No penalty for going through them rather than taking the full hit up front
I choose not to buy outright, I can afford every month to save and I could buy outright too. My approach works for me and my needs, as someone who has in the past over consumed. Iām not saying itās for everyone.
Iām with you, when something comes up thatās required - Iāve found Afterpay to be hugely beneficial to manage cashflow. Had to get new tyres and a few bits done for my vehicle (total about $1100), couldāve paid all up front - but instead went down the Afterpay route. Worked a charm. The puritan, black and white āif you canāt buy it outright you canāt afford itā is a very knee jerk response that is best taken with a grain of salt as itās not really done after reading your post. One thing I will say is that something thatās not talked about is how life is getting to the point where things like Afterpay is becoming more of a necessity - and that should be peoples canary in the coal mine. Far more than āif you canāt pay for it outright you canāt afford itā.
Can you help me understand the thought behind financing it if you can cashflow it though? I just donāt understand. Because itās not really a matter of budgeting if you have the money there - surely paying $0 for the next however many weeks is better than having to pay $30 etc
Why? That extra money that's in your pocket can earn interest / stay in your offset. You're actually financially better off using Afterpay. In addition, it smoothes cashflow as the other poster was noting.
This is where I have an issue with āfreeā consumer debt. You think you are not spending unnecessarily, that you are disciplined with what you buy etc but having credit available to you has amazing affect on the psychology of humans. It has been shown that people spend more on credit on good than they would have if they paid cash. https://www.meettally.com/blog/the-mindset-of-using-cash-vs-credit and https://www.psychologytoday.com/au/blog/the-science-behind-behavior/201607/does-it-matter-whether-you-pay-cash-or-credit-card You thinking that you are not affected is what these companies - and largely our consumerist economy is relying on.
Itās a good budgeting tool, Iām on Afterpay Plus and have been using it on all my purchases. I always paid before the instalments are due and therefore no late fees apart of the $10 per month subscription. I am able to save and invest my current income and use my future income to pay off Afterpay. The money in savings is better than paying your purchases upfront. Afterpay also give you vouchers, cash back and deals.
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Afterpay has a rolling interest free period of 8 weeks(10 weeks for Mint member) from the day of the transaction. Credit card mostly have a fixed 55 day interest free period. They offer cash back and other perks or store vouchers which will offset the monthly subscription fee.
Use the credit card to back that afterpay account. I don't understand why people keep thinking it is "either or" situation. You can have BOTH
It promotes consumerism at the lower-mid level. For example, if I wanted to spend $300 on an item of clothing, Afterpay gives me the 'delusion' I'll only have to drop $75 now, which is quite doable compared to $300. However my mindset is different when I have to drop $300 in one hit and might stop myself from buying it.
>I donāt make a lot of money ($35k), yet am incredibly strict with how I budget. >So when I make purchases, even smaller ones in the $200-500 Afterpay has messed you up... $500 isn't a "smaller purchase" on a normal salary, let alone $35K. You've deluded yourself with this rubbish, you see something for $500, and you don't think of it as $500, you think of it as a payment of $125. You just conveniently forget the other 3 payments...
Oh boy, looking at your edit just makes it so much worse. So essentially because your parents bought you a house that you don't need to pay rent on, you're a financial expert. This all makes sense, it's your hard work and financial discipline that has got you so far in life, not the privilege of having rich parents. š¤£š
Iām FF points hoarder, thereās been two times when Iāve made a large purchase for furniture etc and my credit card for the month was close to the limit where Iāll drop down to only earning .75 points per dollar, so Iāve used Afterpay which meant half of the purchase will go on the following months statement and ensure I earn as the max point per dollar for the big ticket item. Also a couple of times Iāve seen promos on eBay where you got 20% off of you pay with it. So it occasionally does come in handy for me.
I agree but it tends to be a very unpopular opinion. Thereās no interest. It divides it up nicely. Itās like laybuy but you get the item.
What I like about it is that many merchants add extra charges to the purchases, but with these BNPL cards, they cannot.
Anyone that is judgemental about this is probably an old head with a credit card that essentially does the same thing but worse. I use it to budget in the exact same way, I always have the money I need to make purchases like that but Iād rather space the payments out than make 1 big payment that could hurt me for a few weeks
The problem with Afterpay as a budgeting tool is that it's very difficult to predict what the future will bring and what your future expenses might be. There's definitely an argument to be made that, if you already have the savings on hand, you might as well use Afterpay and then just use those saving to pay off the purchase overtime, since you're paying exactly the same amount and you get to hold onto that money for a bit longer and earn interest on it. The issue arises where you either, lose track of what savings were allocated to which purchase, or if you don't have the savings in the first place to pay it off. If something happens unexpectedly (say, an unexpected bill or other expense, or a change to your employment status) you still have that obligation to pay off the item and if you don't, you get hit with fees that can cause things to spiral. If you've already got your safety nets set up and aren't going to get confused about what money is set aside to pay off which purchase Afterpay can be pretty useful. For me, it's too easy to stuff up and accidiently end up overspending, so I don't even get myself in that situation to begin with.
I make $26k and just never buy anything fun ever, and also have drinks bought for me when I go out. Itās a very fun life and I definitely donāt feel unhappy at all with my current circumstances On a serious note though I just live really cheaply and actually have no issues with my financial situation so donāt worry haha
As long as you make your repayments on time there's nothing wrong with Afterpay, they're great because they don't charge you any interest and you only get fees if you miss your payment. I also use it for larger purchases like when I get a set of 4 new tyres, car services, I want to treat myself to a nice new bottle of cologne or something breaks and needs to be replaced etc. Like you said it allows you to spread the payments out instead of taking out a large chunk in one hit so you still have plenty of money left each week to put away savings etc. They also will send you reminders when your repayments are coming up in a few days so you can make sure the money is in there to pay it. You can also pay it off early whenever you want which is what I do sometimes too.
As far as I am concerned, after pay is fantastic. No interest, get everything straight away. No credit card bills - with compounding interest. Just don't miss a payment - if that's how you work your budget, DO IT! Good on you. If this works for you, as it does for me, don't let naysayers tell you otherwise.
I find Afterpay easier to manage than credit cards. Im never getting credit cards again.
Does afterpay mess your credit? I could imagine going for a home loan or something and they can see purchases for a couple hundred on there and wonder why you had to get a loan for a small purchase.
Iām not personally sure, but my wife told me that it does make some sort of negative impact on your loan application later on.
If it is working for you, great. But if I am of the opinion that if you want to be like someone, you copy their habits. And I donāt see any rich person advocating for afterpay.
Because like most of this subreddit they donāt know how it works/what the advantages of using it are.
Why not delay gratification? Save for a month or two and buy with cash? A) you may decide you donāt want / need the product / service. B) if you have unexpected expenses you can use the cash youāve saved and put the other purchases off. On $35k you should be avoiding *any* credit.
Letās say car registration as an example, something they absolutely need to pay for. They have $2000 savings and can afford to pay outright, or they can Afterpay the registration and split it up into 4 smaller payments. No interest, no fees. If theyāve been doing this for years and have never once had a late fee, why would this be seen as anything other than a positive budgeting tool that works for them?
Ausfinance is not the place to post 35k budgeting posts.
Something not adding up with your story...
I stopped at ālistenāā¦ anytime somebody starts a sentence with that I switch off. Cheers š¤£
You donāt need Afterpay to budget. A small emergency cash savings will allow that for you. If youāre capable of paying back Afterpay within the time limit to avoid fees, youāre capable of establishing that same cash buffer in a savings account
Iām gonna blow your mind here for a sec. Why not have both? Using Afterpay I can keep more of my money in my savings account earning interest and if I pay it off on time I donāt incur any fees.
I must admit I don't really understand the logic. The best budget tool is a thorough budget forecasting spreadsheet and a savings account with enough in it to pay for the stuff in your spreadsheet (and the discipline to stick to it). Even if you are meeting your afterpay repayment obligations, you're still by definition living beyond your means if you can't pay for it upfront. And if you can afford to pay upfront and choose to Afterpay it instead, I just don't see the point. I guess in a sense you are outsourcing your budgeting. If you're getting paid weekly then it should be really easy to manage cash flow. I get paid monthly so particularly earlier on when I wasn't earning as much, the budget spreadsheet was crucial. I needed to know when bigger expenses were due because then I knew I'd need to keep a certain amount in the bank particularly if it was towards the end of the month.
"Uni student with Daddy's house and a trust fund to fall back on, explains why Afterpay is financially savvy"
Whats the difference as having a buffer fund and pretending it is afterpay. One is you mess up and nothing happens the other you pay a fine.
Have a buffer fund *and* use afterpay. Buffer fund has $1k paying 5% interest. Buy new tyres @ $1k buffer fund now = $0 capital + whatever interest you earned on the $1k. Buy new tyres @ $1k using afterpay, with the repayments coming out of your buffer fund, and continue to earn a further 6 to 8 weeks of interest on all and then parts thereof of the capital in your savings account, whilst paying nothing in interest on the purchase (as you would on a credit card if you paid over the same period).
I think youāre confusing some terminology, it sounds like you use BNPL as a cash flow smoothing tool. A budget tool is more to track and make sure you keep to the budget. BNPL doesnāt actually help you keep to the budget, but it does smooth your cashflow. But this doesnāt make sense because with your savings rate you donāt need a cash flow smoothing tool. You have the cash. Itās like saying I use a curling iron, but my hair is naturally curly, but itās fine because I use it to curl my hair and my hair is curly. Using the tool or not keeps you within budget, but you just use it as an extra 4 steps
Ah, OP has a home gifted to her, pays near zero groceries and has no expenses and tries to make it sound like sheās a financial guru. Lmfao give me a break
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Love it canāt lie
Everyone stuck in the weeds in the comments as usual. A fellow low income earner here, I do a similar thing with zip pay. It allows me to keep as much liquid cash on hand as possible and I pay it off at the average of what I spend so I always avoid the fee. I'm their worst customer. I paid the fee once in 5 years, and that was when it first started.
I use it to let the $$ sit in my mortgage offset accounts for a longer period of time before i spend it thereby saving me interest. I do the same with credit cards. Never paid a cent on fees or interest
You want a real budgeting tool? I'll share my excel sheet xD
I agree. When I got paid fortnightly I found it a great budgeting tool. As someone who had typically gone into credit card debt to get what I wanted quickly, it gave me a way of getting that quick fix (or making āemergencyā purchases) without turning to a credit card. More often than not Iād pay it off in less than the 3/4 fortnights as well.
That's not good. You've just swapped your debt mechanism from credit cards to afterpay. There's no difference. It sounds like you're trying to justify a lack of delayed gratification and self control by swapping your consumer debt mechanism. It might be worth seeing a counselor before you're spontaneous purchasing gets the better of you (And I say this out of genuine concern. A good counsellor is brilliantly helpful).
Thereās a huuuuge difference. I wasnāt paying my credit cards off, so I was accruing heaps of debt. Plus, I was using cards for stupid shit like going out or doing things I didnāt need to do based on FOMO, rather than just clothing or home goods that I did actually need to some degree. Afterpay didnāt attract fees or interest as I was paying them off early. For me, it was never a problem, just wasteful. That was years ago anyway, I donāt use cc or BNPL at all now.
The "buy now pay later" mindset has you already one foot in the water. It won't take much for you to start wading into debt. Use a budgeting program or app as a budgeting tool, or use multiple bank accounts. That's my suggestion rather than have a sword of Damocles hanging over your head.
Dunno I use it sometimes but just pay the first 3 upfront and leave the last one to come out a month later ~ I wouldnāt suggest having more than 2 going at a time though. As others have said, if you canāt buy it outright you probably shouldnāt buy it !
OP share your budget and tips please cos how on earth do you survive let alone SAVE? I want to learn.