What is Afterpay? Your ultimate guide to modern layby.

By Roisin Kelly-Goldsmith ·

Online shoppers, you may have noticed some sites offering a new payment method called Afterpay at the checkout that looks similar to layby. So what is it, and are there risks involved with dodging the upfront cost of a shopping spree?

Well, we’re here to take you through some of the nitty-gritty details of this new payment feature. Let’s go…

Q: What is Afterpay?

A: Think of it like a modern version of layby. Afterpay breaks transactions into four equal, budget-friendly installments that are directly debited from your credit or debit card. So for instance, if you want to purchase a leather jacket worth $400, rather than forking out the total amount upfront, your first Afterpay payment would only be $100 (25% of the item amount).

And here’s another upside – unlike traditional laybys where you can’t take home your purchase until the end – Afterpay lets you have your items right away.

Q: Does it cost money?

A: It’s free, unless an automatic payment from your account is unsuccessful. More on fees later, but first to answer the next question on your lips…

Q: Will I be charged interest?

A: Nope, just like a traditional layby, you won’t be charged interest on what you owe.

Q: Who accepts Afterpay?

A: Hundreds of online retailers such as Myer, BIG W, General Pants, Glue and Tony Bianco. Topshop Topman, Cue, Veronika Maine and Dion Lee love Afterpay so much, they even brought the service into their bricks and mortar stores around Australia!

Q: Which cards are accepted?

A: At the time of writing, Afterpay accepts Mastercard and Visa credit and debit cards issued in Australia. If you’re an AMEX cardholder, unfortunately you’ll miss out. Travel prepaid cards, foreign debit and credit cards are also excluded (sorry backpackers).

Q: How do I use it?

A: Online, just select Afterpay as your payment choice at the checkout and you’ll be redirected to its website. If you haven’t used Afterpay before, a few extra details are needed, like your name and card details to set up an account. Place your order, then viola. Whether it’s a new handbag or iPad, your order gets sent in the mail, even though you haven’t paid for it in full. You only need to pay 25% of the total cost as a new customer, or nothing at all as a returning one.

At participating stores, the process is slightly different. Use your smartphone to visit the Afterpay website and login (or sign up and login). Next, choose how much you want to spend and Afterpay will generate a unique barcode for the merchant to scan when you make a purchase. In other words, you could be walking out of a store with that new outfit, while your wallet sits at home.

Nitty gritty on barcodes: Don’t create your payment barcode until you know exactly what you’re going to buy, so the numbers add up. Barcodes expire once they’ve been used, even if there’s money left over. Keep in mind, the lifespan of an Afterpay barcode is 12 hours, and once it dies you won’t be charged.

What your phone will look like when you set up a barcode.

Q: Is there a purchase limit?

A: With debit cards, the maximum amount you can spend is usually $500*. When it comes to credit cards, Afterpay calculates a limit based on what it knows about you and your account, and retailers may put a cap on credit card purchase limits. However, neither Afterpay nor retailers have access to your credit history.

*Debit card limits can vary between retailers. 

Q: Can I choose my payment schedule?

A: No, it’s set in stone. Once you’ve made your first payment, funds are directly debited each fortnight another three times, so every purchase will get paid off over 6 weeks, or 8 weeks as an existing Afterpay customer (who has cleared a first Afterpay purchase and 6 weeks have passed since).

Q: Can I make extra payments?

A: Yes, you can. Simply login to your account online, and authorise an early payment. There are no fees for bringing the balance down to zero before those payment due dates are up. Phew.

Q: So Afterpay is pretty much all online?

A: Right now Cue, Veronika Maine, Dion Lee and Topshop Topman offer Afterpay in their Aussie stores. It’s only a matter of time before other retailers jump on board, so watch this space.

Q: How safe is it?

A: Very. The official website said it has the “highest level of security in the payment industry”, so you can probably count on being protected. You might like to know too that Afterpay is an Australian born and bred company that launched in 2015. Of course, if you notice any unusual activity on your account notify your card provider and Afterpay as soon as possible. Note that if your card gets lost or stolen, you must login and change your payment details to an alternative card.

Q: What happens if an automatic payment doesn’t go through?

A: That’s when fees can kick in. Afterpay will notify you by email if a payment has failed. You have until midnight that day* to pay, whether that’s by choosing a different card or topping up your account and trying again.

If you don’t pay by the deadline, Afterpay will charge you a $10 late payment fee, and $7 on top of this if you still haven’t paid in a week. To avoid fees, the best thing to do is ensure your account has enough funds in it for payments to go through. After all, you don’t want debt collectors ringing you up!

*AEDT in summer months and AEST in winter months. Visit the official site for more Ts and Cs like this.

Q: And what if I want to return something, or get a partial refund?

A: Return your items as you normally would, following the retailer’s policy, and they will contact Afterpay for you. Future payments will get cancelled and you’ll be reimbursed for what you’ve paid so far. Sit tight, as you probably won’t see the funds cleared in your account until 48 hours have elapsed since Afterpay was first notified.

Q: Can an Afterpay transaction get refused?

A: If you have too many orders on-the-go or outstanding payments, you may not be able to place another order online or buy a product in store. Makes sense, budget-wise.

Afterpay is a convenient way to shop, especially if you want to get your hands on items that you can’t quite afford yet. Because payments are spread evenly across fortnightly installments, you won’t feel the full financial weight of a purchase in one hit.
While Afterpay is an innovative way to buy things and may be cheaper than your average credit card, it could get addictive for serious shopaholics. A $10 late payment fee here and there may not seem steep, until they start to add up!