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Afterpay and its advocates will tell you everything good about the “Buy now, Pay later.”
But… is it really worth your time, money, and above all, the much-touted hype?
There’s no doubt that you, just like everyone else, need stable finances to meet your money goals.
But this convenience in doing things or getting your favorite goods shouldn't come at the expense of your peace, financial security, and stability, right?
So, to assist you better understand Afterpay and its effects on your credit score, we have included some key points below.
Disclaimer: This guide will enable you to make wiser choices, like opting for secured credit, fixing your credit score, and building your financial future on strong foundations.
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Before getting into the details, let’s find out what this hype is all about. Or, more precisely, what exactly is Afterpay?
To put it simply:
Now, you might say, isn’t it something already happening in this ever-advancing world? Sure, it is.
But Afterpay takes pride in providing its services with easy installments, depending on the type of order you have confirmed.
This easily helps it stand out in the crowd and gain every other person’s favor. Lastly, the bonus fact behind the popularity is that:
So,
As explained earlier, a customer doesn’t have to do any hassle work to complete the “buying” process.
All it takes is a simple click on your mobile from the comfort of your dream home to confirm your order.
And “paying” process comes later in the form of small installments (buy now, pay later).
Still, you can’t decide if it’s all gloom and glory or if it is the right choice for your financial struggles.
You need to know how it can hurt your score or credit profile to fully understand whether or not it’s the take you should make.
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That was a bit about Afterpay and its services.
But the main question is, what is between Afterpay’s much-celebrated services and its impact on your credit score in the first place?
Well, it sure asks you to create a separate account and select “Afterpay” at “checkout” to keep your bank account from the said transaction.
However, when it comes to paying installments, this is where your credit score, and ultimately your Equifax credit report, might be compromised.
Now the question is:
The answer to this question might not be as simple as you thought because:
1. Afterpay doesn’t directly run a credit check on your account.
2. However, it reserves the right to do so in case of suspicious or negative activities.
3. Not running a credit check also means no improvement in your credit score.
4. Unlike secured credit cards in Canada, Afterpay brings zero brownie points for being a “good paying customer.”
So… it really is THAT complicated to understand!
But no worries, we will explain to you further on this so that credit building in Canada as a newbie or a regular customer becomes easy for you.
Below are detailed points on the good and the bad behind using Afterpay and its effects on your credit score.
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Don’t have enough cash? No worries, It will let you purchase your favorite bag in installments without grinding or waiting for the paycheck to arrive.
You buy now to pay later!
The best part!
You can pay your amount in four easy installments without worrying about any interest rate!
Yes, you can think of it as a grace period when you buy a new credit card.
You don’t have to worry about lengthy queues to pay the rest of your amount because they are automatically deducted from your account, making it super easy for you to manage your finances.
Buying an item with only a quarter of its payment doesn't involve complicated paperwork.
Simply add your Afterpay account at the checkout, and the company will take care of the rest.
Yes, you can say it’s an alternative option for people with bad credit in Canada.
Just like a secured card, it won’t cause any inquiries on your credit report, so there won’t be a credit check for the sign-up.
Since it doesn’t run a credit check or report the history to the credit bureau like Equifax, it has no direct link to downgrading your credit score.
However, the thing to note here is that the “direct link” implies that afterpay service won’t impact your credit score in a clear manner.
So, what’s the catch? Is there a downside to it? Well, here are your answers:
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Every good thing has a bad side to it.
You might have read this once or more in your life. Honestly, that’s not entirely wrong.
There’s a bad in every good. So, here are some cons you might have to compromise on while using the “Buy now, Pay later” service:
As afterpay doesn’t report any of your financial activity to the top credit bureaus in Canada - The chances of increasing your credit score quickly becomes zero with their service.
So, despite paying your payments on time, you can’t expect your credit score to go up by leaps and bounds.
People spend more when they don’t use their own money.
Yes, you are going to repay the amount later, but at present, you are spending the money you borrowed from the company.
So, as a result, it may lead you to overspend, thus ultimately affecting your financial habits and goals in one way or another.
You are bound to use more than what you can repay when you overspend.
Which leads to loans piling up one after the other, making it more difficult for you to pay them.
Yes, you can follow some debt relief tips to a certain level, but still, you might have to budget the loan payments for a long time.
It is important to note that lenders consider your BNPL spending before sealing the deal.
So, a somewhat distorted financial history could affect your good credit score to secure a mortgage.
As a result, achieving financial security and freedom in your present or future life will become harder.
Zero interest means you’re supposed to pay account maintenance and all the other related fees that come with using BNPL services, no matter what.
So, using a service unsuitable for the long run might not be the best idea if you are already struggling to manage your finances and credit profile.
You are here to read this guide because you are in dire need of money. We totally get it!
Not everybody has the privilege of using unlimited finances whenever they want. Heck, most of us still struggle to plan for early retirement.
So, what to do? Get a loan from the bank? That requires good credit history.
Look for private lenders? Argh, that can become expensive quickly with all the additional hidden fees. Then, what? Here are some options:
You can get all the benefits an afterpay account provides you with a secured credit card in Canada, then why choose the bad option?
Moreover, you won’t have to worry about bad credit as there’s no credit check. Lastly, it’s the best option with the lowest interest rate.
If you really need immediate money but don’t want to look into the secured cards or even afterpay, you can always get help from alternative lending in Canada.
Alternative lenders provide flexible terms and interest rates for bad creditors.
Lastly, you can always ask a good credit family member to become a cosigner to give a boost to your credit while scoring a better loan term.
Financial stability is not just about purchasing everything you put your eyes on. Instead, it is about building a long-term system that brings financial peace.
Therefore, we hope this article helped you weigh the pros and cons of using Afterpay without compromising your savings and spending.
Lastly, we have mentioned some alternatives for Canadians who don’t want to risk their credit score and history.