Afterpay sounds like a great deal: You get the item you wanted and then get to pay it off in small increments and, unbelievably, there are no interest charges. It sounds like a dream come true.
Unfortunately, credit experts are begging you not to use it. If you want to keep your credit score high, here’s how to avoid the pitfalls of modern-day e-layaways.
Chase (@chasethecreditexpert) has been offering free credit advice to his TikTok viewers since 2021. His latest stitch video warns anyone trying to build their credit to avoid online layaway plans like Afterpay and Affirm, which allow users to pay off larger purchases in small increments. The video warning has amassed 387,000 views since it was posted on Nov. 17.
“Every single person who I see [that] has an Afterparty account on their credit report — it’s a negative account,” Chase tells his viewers. “Try not to use Afterpay. They want to charge you significant rates anytime that you miss one payment.”
“They are definitely going to report that to your credit report which is going to drop your score by 80 to 100 points,” he warns. “Stay away from Afterpay.”
According to Blackhawk Bank‘s website, if an Afterpay user “misses a payment, or if the payment is unsuccessful, they are charged an $8 late fee. If the customer is still unable to make the payment within seven days, an additional $8 fee is charged, and these fees will continue for each week the customer falls behind.”
Afterpay states that late payments are capped at 25% of the total order amount. It also states that it does not perform credit checks prior to use. The website does not indicate what the credit reporting protocol regarding late payments is.
@chasethecreditexpert #stitch with @Datura Jonez stay away from #afterpay or #affirm these companies will ruin your #credit and drop your #creditscores #creditrepair #creditrepairtips #creditrepairservice #creditscore #credttips #creditcards #credit #latepayments #interest ♬ original sound – Chasethecreditexpert
The Daily Dot has reached out to Afterpay via email for further comment.
Most of Chase’s viewers commented that Afterpay shouldn’t become a problem as long as it is used wisely.
Tinamarie Adorno (@tinamarieadorno) wrote, “My Afterpay is always paid off! I only buy one thing at a time so I don’t get overwhelmed with charges later.”
Chase replied, “Such a perfect way to handle that account. Always stay on top of them. I see them ruin clients’ credit every day and it’s so sad. Keep it up.”
Another reader said she limits her Afterpay use to two products at any time. “Those services only report to the bureaus if you don’t pay, unfortunately,” they wrote. ‘This is why I have a rule that only two things can be on Afterpay at once.”
“I don’t think it’s Afterpay that’s out hand is the people that can’t manage their money who are using Afterpay that are out of hand,” another viewer responded.
“It’s just like any other credit, keep track & don’t miss a payment & there won’t be a problem. Afterpay & affirm have been good to me,” wrote Shay S. (@quackaddict888).
In a message to the Daily Dot, a spokesperson for AfterPay claimed the company does not conduct hard inquiries with credit bureaus and clarified that consumer credit reports are not impacted.
The company maintains that it encourages “responsible spending,” and shares how 95% of all installments “were paid on time.”
The Daily Dot has reached out to Chase via TikTok message for further comment.