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What Is Afterpay and How Does It Work? Explained

Rebecca Lake • November 6, 2023

Need to buy something online but still waiting for your paycheck to hit your bank account? Thanks to Afterpay, you don't have to miss out!

So, what is Afterpay?

Here’s the TL;DR version: Afterpay is a buy-now-pay-later (BNPL) service that lets you make purchases online and pay them off over time. 

Also referred to as point-of-sale installment loans, buy now pay later is a type of short-term financing. But it’s not quite the same as using a credit card to shop online. 

Curious about how Afterpay works? Here’s a closer look at what it means to buy now, pay later. 

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What does Afterpay mean?

Afterpay is an online service that lets you shop now and pay off purchases later. But how does Afterpay work? It’s pretty simple, actually. 

You shop, check out with Afterpay, then pay off your purchases in four installments with no interest. The first payment of 25% of the purchase is due at checkout, with the other three paid biweekly over six weeks. 

Signing up for Afterpay is simple and fast. Here’s what you’ll need to create an account:

  • Email address
  • Phone number
  • Address
  • Date of birth
  • Debit or credit card information

FYI: Afterpay doesn’t check your credit score or credit history to get approved and it doesn’t report late payments to the credit bureaus. 

How does Afterpay work and how does it make money?

You might be wondering how Afterpay makes money if they don’t charge shoppers interest. And the answer is fees.

Afterpay partners with merchants to make it easier for their customers to pay. And in return, merchants pay fees to Afterpay for the service. 

Don’t worry: Shoppers only pay a fee if they pay late or miss a payment. The late fee starts at $10 but never goes higher than 25% of the purchase amount or $68, whichever is less. 

As long as you pay on time, Afterpay is free.

But you’ll need to be disciplined about paying by the due date to avoid fees.

The pros and cons of using Afterpay

Buy now, pay later plans like Afterpay have become more popular, especially because people have been shopping at home more during the pandemic. But is Afterpay a good way to shop and pay online? 

It can be, if you’re disciplined about paying off your purchases on time. Afterpay lets you shop and pay interest-free. So if you see something you want to buy online but your direct deposit is still a few days away, you can still make the purchase.

Again, you’d pay the first 25% upfront, then make three remaining payments of 25% each. So if you’re buying a $200 pair of shoes, you’d pay $50 at checkout. Then you’d pay $50 per week, every other week, for six weeks. 

Afterpay was founded with a goal of making online shopping accessible without causing people to rack up big piles of debt. In fact, the average purchase is around $150. Bottom line, Afterpay is designed to help you get the things you need now and pay them off in a way that fits your budget. 

But that doesn’t mean there aren’t some potential drawbacks. The specific situation where you can run into trouble with Afterpay (or any buy now, pay later service) is if you make more purchases than you can realistically afford to pay back. 

If you’re frequently using short-term installment loans to shop online, you could be digging a debt hole for yourself. Like any debt, paying it back can be challenging, especially if you’re paying interest and fees on top of it. And too many buy now, pay later balances could negatively affect your credit. 

Does Afterpay charge interest?

As mentioned, Afterpay never charges shoppers interest on their purchases. The only thing you’d pay is a late payment fee – and those are capped. 

Not paying interest is an attractive alternative to using a credit card to shop. While a credit card could help you earn cash back, points, or miles on purchases, interest charges can take away their value. With Afterpay, you won’t get rewards when you spend. But you won’t get hit with steep interest charges either. 

Does Afterpay affect my credit? 

Afterpay doesn’t perform credit checks when approving new shoppers. Nor do they report late payments to the credit bureaus.

So, in short, Afterpay won’t hurt your credit. But it won’t help it either. So if you’re trying to build credit, you may still need to get a credit card in your name or at the very least, be added as an authorized user to someone else’s account

Afterpay shopping

Wondering what stores accept Afterpay and where you can use it to shop? Afterpay’s store directory features a long list of retailers, includer smaller shops, Black-owned businesses and big-name brands.  

You can easily filter by category and search for top deals. Here are some of the places you can shop with Afterpay:

  • Adidas
  • American Eagle
  • Bed Bath and Beyond
  • DSW
  • Forever 21
  • Old Navy
  • Steve Madden 
  • The Children’s Place
  • Ulta Beauty
  • Urban Outfitters

Those stores are set up for online shopping with Afterpay. You can also use Afterpay in-stores at these top brands:

  • Anthropologie
  • Chico’s
  • Dick’s Sporting Goods
  • lululemon
  • LensCrafters
  • Michael Kors
  • Pandora
  • REEDs Jewelers
  • Skechers
  • Vera Bradley

How to use Afterpay

The first step is to download the Afterpay app. You can find it in the App Store or the Google Play Store. It’s free to download. 

Next, you can create your Afterpay account. Again, you just need to provide some basic information and your debit or credit card number for making your initial 25% payment on purchases. 

Tip: Think you’ll use Afterpay to shop in stores? You can also set up an Afterpay Card that you can link to Apple Pay or Google Pay for contactless payments

How to use Afterpay in stores

If you’re shopping in a store that accepts Afterpay, you just need to have your Afterpay Card set up and linked to your mobile wallet. When you’re ready to check out, just tap the Afterpay option in Apple Pay or Google Pay, then complete the transaction like you normally would. 

You’d pay the first 25% down at checkout, then pay the rest in three installments. It’s an easy way to go contactless with payments and still have the option to pay over time. 

How to use Afterpay online

Shopping online with Afterpay is just as easy as shopping in stores. When you’re ready to checkout, just select Afterpay as your payment option. 

If you haven’t created your Afterpay account yet, you’ll be able to do that prior to checking account. 

Keep in mind: To be eligible to use Afterpay, you must:

  • Be at least 18 (or 19 if you live in Alabama or a ward of the state of Nebraska)
  • Be a U.S. resident and live in the U.S. or District of Columbia
  • Be capable of entering into a legally binding contract
  • Have a valid email address and phone number
  • Have a valid delivery address
  • Be authorized to use the debit or credit card you link to your Afterpay account

If you don’t meet those requirements you won’t be able to shop with Afterpay. But you may be able to use another buy now, pay later service. 

Afterpay FAQs

By now, you should have a good handle on:

  • What is Afterpay?
  • How does Afterpay work?
  • Pros and cons of using Afterpay?

But if you still have questions, take a look at the top Afterpay FAQs: 

Does Afterpay charge fees?

Afterpay only charges shoppers late fees if they miss a payment due date. The late fee is 25% of the purchase amount or $68, whichever is less. 

Late fees may apply after an initial grace period, which typically lasts 10 days. Afterpay only ever charges one late fee per installment. 

How do returns work with Afterpay?

Afterpay shoppers must follow the return policy set by the merchant they make a purchase from. So if something you ordered is the wrong color or the wrong size, you’d need to contact the merchant, not Afterpay. 

If you return something and the merchant refunds your money, refunds are applied to installment payments you’ve already made. Any remaining payments are canceled. 

How does Afterpay differ from other payment installment plans?

Afterpay isn’t the only way to pay over time. There are other companies that offer buy now, pay later plans. One thing that sets Afterpay apart is its no-interest approach. 

Some short-term installment loans do charge interest. They can also charge fees, other than late payment fees. And some buy now, pay later companies will report late payments to the credit bureaus, which could hurt your score. 

Is Afterpay a credit card?

Afterpay is not a credit card or a loan. It’s an installment payment plan that allows you to make a down payment on a purchase, then pay the remaining balance off in three payments. 

You can use a credit card with Afterpay. But doing so may defeat the purpose of trying to avoid interest. Even though Afterpay won’t charge interest, the credit card company can. 

So you may be better off linking a debit card to your Afterpay account. The thing you have to be careful of is spending more than you can afford, since that could lead to overdraft fees

Is Afterpay safe?

Afterpay is safe, in the sense that the platform uses the highest level of security and safety measures available in the digital payments space. You can enhance security by locking your phone with a PIN or biometric identification and avoiding public WiFi when shopping with the app.

Now, is Afterpay safe in the sense that it can keep you from overspending?

The answer can depend on your spending habits. If you’re faithful about sticking to your budget and careful about tracking Afterpay purchases, then paying them back can be safer (and more affordable) than a credit card.

But if you’re not good at keeping to your budget or monitoring spending, there is a risk that Afterpay could lead to overspending.


Buy now, pay later apps like Afterpay are becoming increasingly popular among shoppers who want a convenient way to pay for things they need. Whether it makes sense for you to use Afterpay or a similar app can depend on your financial habits. Learning more about installment plan apps can help you decide if they’re right for you.

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