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Is Buy Now Pay Later from AfterPay Worth it?

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is buy now pay later from afterpay worth it

I am always looking for ways to optimize expenses in order to improve our savings. Recently I read an article about a new trend among millennial shoppers. There’s a Australian company called AfterPay which offers “buy now pay later” option to online shoppers. What this means is that you can buy something now but pay full amount in 4 interest free payments. As enticing as it appears I wanted to know if there is any catch for shoppers in this.

But before getting into that, let’s look at how this scheme works and where can you find it.

How Buy Now Pay Later schemes work?

I must admit that the idea of buying something on easy payment plans is not new. In fact, you will find lots of stores already offering such options to their customers.

Here’s, my personal experience with BestBuy. Couple of years ago, I bought a TV set. When paying at the cash register, I was given two options to either pay full amount and get 5% instant cash back or pay full amount in 6 monthly interest free installments.

Clearly Afterpay hasn’t invented interest free payment plans. In fact, such plans are all over the places. Some stores even offer more time to payoff the loan which I think is the key in such schemes.

In general the buy now pay later schemes work in a very simple way.

You just apply for a short-term loan at the time of checkout. From my personal experience at bestbuy, the process of applying for a short term loan is as simple as it could get.

At checkout, members are offered two options: get 5% instant cash back or pay in 6 monthly interest free payments. You just have to click on one of the buttons on the screen. That’s it.

Buy Now Pay Later Stores

Next obvious question is which are the stores which are offering buy now pay later options to their customers. As per AfterPay website, there are tons of international brands and more offering this on their respective websites.

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Below are some of the brands offering AfterPay on their websites.

buy now pay later stores list 2
buy now pay later stores list
buy now pay later stores list

Just to play around and see how it works in reality, I visited Levi’s website and checked-out a pair to jeans.

Levi’s offered me a AfterPay’s payment option as shown below at checkout:

how buy now pay later works

If I go with AfterPay’s payment plan, I can pay $67.45 in 4 interest free payments of $16.86.

I tried same on my favorite store – Bestbuy and got an option there too. It offered me to either pay full amount of $2,399.99 or $200 per month for 12 months (interest free). Which is better?

flexible payment options at bestbuy - makelivinggood

Personally I believe BestBuy option is better since it gives me more time to payoff.

Is Buy Now Pay Later Worth it?

As suspected, there’s always some catch with such schemes.

I found that AfterPay allows you to use your regular credit cards to make the purchase. It approves the transaction within seconds so you can get your order shipped on same day.

But the key difference between BestBuy or other stores offering same deals vs AfterPay is the payoff time period.

BestBuy offered 12 months of time to pay off billed amount at 0% interest.

But with AfterPay, I only got 6 weeks of total time to payoff the entire amount.

This is a big different.

Moreover, AfterPay debits first installment instantly on the day of purchase but with bestbuy you get 30 days to pay your first payment.

Rest of the 3 payments with AfterPay are due every 2 weeks from the order date.

So, my calculation says that it’s not as lucrative deal as it sounds in the end.

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Another catch applies to other stores like BestBuy. You need to apply for their store credit card in order to benefit from in store financing options.

It should be okay to get an extra credit card from a store as long as you don’t have to pay annual fee (which isn’t there for such stores). So, that was ok with me.

In my personal experience, I noticed my credit score boosting way faster when payments are made on time.

Since these are short and small loans, I believe it’s the fastest way to boost anyone’s credit score.

Should we go for instant discount or buy now pay later options?

Obvious answer to this question is instant discount is always good as you receive the cash back instantly and don’t have to wait for months.

The way I go with this is, I choose instant cash back option if the purchase amount is big and I can get $300+ cash backs.

With those $300+ in my pocket, I don’t usually go and buy more stuff with it. In fact I always follow my guidelines on how to avoid impulsive buyer instincts.

As always, I recommend investing any extra cash you receive. With my simple trick (which I always use), you can also maximize your cash back within 15 seconds.

As evident, weYou don’t need bulk of cash to start investing for future and generate huge returns.

When the item you have purchased will need replacement in couple of years, then follow the great strategy discussed in the post – how to buy anything for almost free in future.

I have opted for buy now pay later options from other stores such as best buy only in case when I knew that I could generate more returns by investing that same amount somewhere else in the meantime.

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When I was looking to purchase a MacBook few years back, I started monitoring for deals from BestBuy and got lucky one day when they were offering extended interest free financing option of 18 months instead of 12 months. So, without delay, I purchased my macbook from best buy store and got 18 months to pay it off which was a great deal at the time.

So, always evaluate whats best for you before you decide to go for buy now pay later kind of deals.

I don’t really think AfterPay is offering any great benefit to the customers. Moreover, it charges 4-6% to it’s merchants for payment processing against 2-3% charged by Visa or Mastercard which will be mark up cost customers will end up paying somehow.

Due to these reasons, I am not sure how future will play out for AfterPay, especially when merchants and customers start realizing the deals isn’t that great.

Lastly who is stopping Visa or MasterCard to not offer such schemes to their existing customers and merchants. Only future will tell, who wins.

As customers we should not fall for such deals because our friends or neighbors are going for these deals.

We should always look for alternatives like in my case I found great deal at a local BestBuy store.

I hope you will benefit from this insight and be careful while making future purchases. If you have personal experience with any such deals or with AfterPay, please enlighten us in the comments below.

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Is Buy Now Pay Later From AfterPay Worth It?

is buy now pay later from afterpay worth it

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