Do you use AfterPay? Tread carefully…
Can we have a little chat about AfterPay? – Lovely AfterPay – which has cropped up in the last couple of years and has now grown to 700,000 odd users. Unfortunately, this have-it-now-pay-later innovative credit option is causing all sorts of havoc for people financially.
I was inspired to do this video after a client discussion last week. Our client no longer has any credit cards or anything like that, no debt anymore, but she’d put a couple of things on AfterPay. And so I wanted to address this thing AfterPay because I see it gets people in a lot of trouble.
Is it really just another form of Laybuy?
AfterPay make out that it’s just like LayBuy. But it’s not really LayBuy – it’s quite different. With a LayBuy, you cannot take the items out of the shop until you’ve paid that final payment. With AfterPay, you can take it straight away and you get to enjoy it and then you’re left with this trail of fees that you have to pay.
That $100 pair of jeans on AfterPay could end up costing you $160-170 dollars if you miss any payments. That can be worse than credit card interest.
And the problem with it is that all of a sudden your cashflow gets squeezed.
The AfterPay Trap
So you make this spot decision to buy something on AfterPay because you think, “Oh yeah, I’m going to have the money. I don’t quite have it but when I hit payday, it’ll be there”. But with every decision to buy something on AfterPay, your cashflow gets squeezed… And if you don’t have a really clear idea of exactly what your surplus is, your real surplus – I’m talking about your real surplus over and above all of your predictable, regular expenses, your unpredictable expenses and, all of your weekly expenses, then you can’t really know whether you’ve got that extra to make that AfterPay purchase.
So you have to be super careful.
With our Spending Planner clients, we divide up expenses into three distinct areas. One is predictable, one is unpredictable and one is weekly. And from there they can see exactly how much they need to have in each of those accounts. And so, with an AfterPay expense, generally that type of expense is an unpredictable expense, so it would ordinarily come out of your unpredictable expenses account. You should be able to see exactly how much you’ve got accumulated in that unpredictable expenses account to pay for that item.
Would you still buy it if you had the cash in four weeks time?
You should be able to pay cash for that thing, is what I’m saying. If you have enough money accumulated in your unpredictable expenses account and you can see pretty quickly whether or not you’ve got the money for that dress or those extra Christmas presents or that item for the house or whatever, if you’ve got the cash, why not buy it with your cash, rather than putting it on AfterPay.
And then getting a surprise later when you don’t have enough to pay for the fridge when it blows up or the new car tyres or all of those sorts of things which we really do need to have money for.
AfterPay is just another form of credit. It’s using other people’s money to pay for your stuff, which can be okay if you’ve got a really tight money management system and you can see that you’re definitely going to have enough money to pay for those ongoing payments and ALSO enough for your unpredictable expenses.
But if you don’t, I really recommend you steer clear of AfterPay. It’s dangerous, in the heat of the moment, when you’re out and enjoying shopping and you want to make that purchase.
If you have a problem, sometimes abstaining completely is the best way
Sometimes our brain, our reptilian brain, gets in the road and starts to make these decisions for us. So if you feel like you have a problem with AfterPay, consider cancelling your account. Just like chopping up the credit cards or putting credit cards in the freezer, because it really is another form of credit.
I tried Afterpay just as a trial run on an $80 item that I intended to buy and I had the funds but I wanted to see if Afterpay would give me the same sense of satisfaction that I used to get from the old Laybuy system. But no 🙁 – I found the constant emails generated by the system really annoying. An email to acknowledge the purchase and explaining in detail how it worked and then an email before each payment would be deducted from your account and another to advise you the amount had been deducted and then a finalisation email, not to mention the further sales pitch emails encouraging you to use them again. It was soooo painful. So about 10 emails (at least) all up for what could have been 1 simple transaction, never to interrupt my busy life again. I am definitely not a fan. I am now a careful purchaser so I will visit the desired object a few times and do some research to find the best price. Then I do a final assessment – is this item worth the cost to me and will I get good use out of it. If so, purchase justified and done in one fell swoop!
Good grief, Julie. The unintended cons of AfterPay 🙁 Thanks for sharing your experience. Paying cash is so much easier. Not to mention gratifying when you only spend it on the things that you really want.
I enjoy using it they work real good with me when my payday was a little late they just extended the date I am pleased with them because if you need something right away and don’t have all the money it helps you to be able to still obtain the merchandise and just pay them later I have been a member quite some time now and I am well pleased
I agree. I use Afterpay and had no issues. I know my budget.
I have only good experiences with Afterpay. I need the reminders of the upcoming payments. And I usually pay them off pretty quick before the 6 weeks.
So I’d have to say it works for me!
I use Afterpay all the time and I haven’t had any problems with it at all. I am very pleased with using Afterpay. I just make sure the money is there. I don’t make the purchase if I know I won’t have the money to pay for it
Thank u for the article ive used afterpay once made the payment but I only ordered what I knew I could afford. It’s easy to get caught up n the idea of pay little down rest in payments and a unexpected bill comes along now I know the late fee could be deadly💯
I have to say that my experience with afterpay hasn’t been so bad because I’ve been really responsible and paying the timely installments so I haven’t really experienced late fees and as another user wrote it’s nice to get something when you need it right away and just pay later you just have to be responsible enough to make sure that you have the funds available to pay so it doesn’t cost you any extra money it’s just like paying a credit card on time so you won’t get the extra fees.
Love Afterpay! I use it exclusively for higher priced items. Got both of my daughters a pair of Uggs for Christmas. Totally work it.
I don’t get AfterPay at all. Mind you I have been living without credit cards for many decades now. But seriously, what is the point? If you don’t have the money, it probably means you can’t afford the item right now. Which is ok. Save. Its much more gratifying to reach savings goals. I’m guessing most afterpay purchases are non essential items anyway.
It’s incredible how many otherwise smart people are using these services. A testimony to how good the marketing is, I guess, Mina! Thanks for sharing your thoughts.