Is Afterpay Legit?

Is Afterpay legit? Or perhaps a scam? If you arrived on this article you are probably wondering after seeing the option to use Afterpay at a online store or retailer.

Is Afterpay Legit?

The answer is Yes, Afterpay is a legit financial company and is not a scam or anything. Afterpay offers Buy Now Pay Later loans to consumers to pay for good and items upfront. Then spread the cost over a short period of time with equal payment installments.

Afterpay was launched in 2015 in Sydney, Australia and has since grown quickly. The company now counts roughly 100,000 retailers and millions of customers across Australia, New Zealand, United Kingdom, Canada, and the United States. Afterpay also operates in Europe under the moniker Clearpay.

Afterpay allows consumers to use Buy Now Pay Later (BNPL) services by offering pay in 4-installment options over the course of a few weeks. Other Afterpay loans can be spread over 6 or 12 months. The best part about Afterpay is there is no interest on Afterpay loans, if you pay on-time.

Compared to purchasing the items upfront for the full cost or using a credit card which could carry high interest rates and fees. Afterpay has become a big player in the financial and retail industry due to it’s simple and straightforward BNPL services.

How does Afterpay make money?

You are probably wondering, “How can Afterpay make money without charging interest on a loan?” and/or “How does Afterpay make money?” Good questions, and we hear this a lot here at DimeScout about BNPL companies.

To use Afterpay the merchant or retailer pays a fee, not the consumer, to issue the loan.

BNPL companies typically charge a fee of the percentage of the purchase price to the merchant. This allows the company to sell a product they otherwise would not have and you to get the product today.

While a lot of BNPL companies, such as Afterpay, advertise “interest free” this is not entirely true. If you are late with payments Afterpay can charge late fees on the money you were loaned. You however will not incur more interest that stacks on the original purchase amount. Afterpay claims this amount is set.

Credit card companies charge interest that stacks. Meaning the longer you don’t pay, the more fees and interest you can incur on the original loan.

Afterpay acquired by Square

Afterpay has been a financial success not just for retailer and merchants, but for the founders of the company Anthony Eisen and Nick Molnar.

In the summer of 2021 it was announced the Square, aka Block, was set to acquire Afterpay for $29 billion US dollars. The deal was finalized and closed in 2022.

The acquisition allows Square, which was founded by Jack Dorsey of Twitter fame, to expand market offerings via Cash App. The popular payments app that Square also owns and operates.

It will be interesting to see how Square grows Afterpay and integrates and expands the products going forward.

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