So, what exactly is Afterpay and how does it work?

It feels like just last month there was no such thing as Afterpay and now all of a sudden no one can stop talking about it. The company, which absolutely exploded in Australia, has finally made its US debut. A lot of people simply can’t get enough of Afterpay. So what exactly is it? And why are people so hyped about it?

What is Afterpay?

Afterpay is a bit like a layaway program, but you get to take home your purchases before you’ve finished paying for them. It's sort of like QVC or HSN for millennials, except there are less restrictions on what you're able to buy. You’ll begin to see this payment option at many of your favorite online stores. If you select to pay with Afterpay, your purchases will be shipped to you just like normal, but you'll have eight weeks to pay off the total purchase price.

What makes Afterpay great is that it’s all automatic. Once you create an account and purchase something, your payments will be charged to your credit card or debit card every two weeks for eight weeks. You'll be charged for your purchase in four equal parts. Afterpay will send you text messages before the funds are withdrawn, and unlike a credit card, you don’t have to worry about making payments, since Afterpay does it all for you automatically.

How does it work?

Afterpay is offered as a payment method in the checkout section of some online stores. To see which stores, you can check out our article about which stores offer Afterpay. Select Afterpay instead of paying with your credit card or using PayPal and then when you go to pay, you’ll be redirected to the Afterpay site. If this is your first time using Afterpay, you’ll be asked to make an account and give your phone, credit or debit card and address details. If you already have an account, you’ll just be asked to sign in.

If you’ve used Afterpay before, that’s it. You don’t have to make an immediate payment, and the payments will be automatically deducted in four equal amounts every two weeks. If this is the first time you’re using it, you’ll be required to make one of the four payments immediately and then one every two weeks after.

What about fees and interest?

Nope. No fees. No interest. Can you see why shoppers love it so much? The only potential additional charges come from failing to make a payment. You get several text messages before a payment is withdrawn, but if by some chance you miss them and there isn’t enough money in your account to cover the payment, Afterpay may charge you a fee.

Once the payment bounces, Afterpay will send you a reminder and you will have until 11:00 PM PST the following day to log into your Afterpay account and make the payment. If you don’t, you’ll be charged an $8 late fee. If you still haven’t made the payment after another 7 days, then you’ll be charged another $8 late fee. Late fees are capped at 25% of the total purchase value or $48, whichever is less.

Who can use Afterpay?

Since Afterpay isn’t a loan company or credit union, you don’t need to be approved for an account like you would to get a credit card or personal loan. The only criteria are that you must be 18 and have a credit or debit card you can link your account to. If you live in the state of Alabama, you must be 19 to use Afterpay. You must also have a working mobile phone to confirm your account.

Is there a limit to how much you can spend with Afterpay?

The spending limit varies customer by customer. Afterpay states that it considers a variety of factors when determining someone's spending limit, but doesn't specify what those factors are. The more times you use Afterpay and pay for your purchase successfully, the more you'll be able to spend. Each time you make a purchase with Afterpay, it makes a fresh decision about your spending limit, so there's always room for growth.

Does Afterpay run a credit check?

No. You’ll be automatically approved as long as you’re 18 and have a working credit or debit card. You must be 19 if you are a resident of the state of Alabama.

Where can I use Afterpay?

The list of stores that accept Afterpay is constantly expanding, so don't be surprised if you see it pop up as an option at your favorite online retailers soon. Currently, Afterpay is working closely with the URBN family of stores, which includes Urban Outfitters, Free People and Anthropologie. For a complete list of stores where Afterpay is accepted, check the store directory on the Afterpay website.