We delve into the buy-now buy-later area of finance with Afterpay – how do you use it? When SHOULD you use it? And how does it all work?
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I don’t know if you believe in Murphy’s Law, but I sure do – because the week I was on deadline to write this story, my car got broken into the morning we were leaving for Fiji.
We had been saving for a long-planned holiday to Fiji… and then, just as we’re leaving for the airport, I see it. A busted window on my poor little Subaru. Someone had broken into my car.
Cue a repair expense that was not in the holiday period budget.
Hello, Afterpay.
More than four million Kiwis and Aussies use Afterpay, and the conversation around how and why people use buy now, pay later services has become a lot more nuanced.
And that nuance is worth getting into, because when used thoughtfully, Afterpay can be a helpful spending tool. So how do you actually use it well? Let’s get into the ins and outs.
What is Afterpay, and when should I be using it?
Basically, Afterpay exists as an interest-free (if you pay on time) alternative to credit cards, which is why I began using it years ago. I’ve never had a credit card because, in the immortal words of Socrates, know thyself and me with an interest-trap high spending limit and a dash into the mall is not a good idea.
“Afterpay was built for people who want flexibility in how they manage their spending without the trap of interest,” says Francis Lovegrove, NZ Sales Lead of Afterpay. “When we started more than 11 years ago, we identified the trend of younger people prioritising their debit cards and avoiding the debt they saw their parents accumulate with credit cards.
“So Afterpay was designed around a simple idea: split the cost into four equal fortnightly payments, no interest, ever. It’s for people who are already good with their spending and just want a tool that works with them, not against them.”
How does it work?
When you buy something through Afterpay, the cost is split into four parts. You pay 25% upfront, and then another 25% every two weeks. Your purchase is fully paid off, with no interest, in six weeks.
If you make your payments on time, you pay no interest or any other fee. If you miss a payment, you’ll be charged a one-off late fee.
Yeah but isn’t Buy Now Pay Later just… buying stuff you can’t afford?
Here’s the thing: there’s a real difference between not being able to afford something and the timing being inconvenient.
The honest truth is that even people who are great with money sometimes find the spreadsheet out of whack. A last-minute car expense doesn’t care that you’re about to board a flight to Fiji. An ACC bill doesn’t care that it’s a five-week month. These aren’t purchases beyond your means – they’re just poorly timed ones.
And even Afterpay will tell you: if you have the cash, use it. “Cash flow is timing. And if you have the funds to buy everything with cash, we always recommend people do that. But Afterpay creates an opportunity for customers to align their spending to paychecks or other key moments without charging them interest,” says Francis.
But what happens with your credit score! What about getting stuck into debt cycles?
Look, these are valid concerns and ones I have also worried about during a late-night Google, especially when I was applying for things like mortgages. But Francis explains that these are two of the biggest myths they hear:
On credit scores: “Since the 2024 regulatory changes, Afterpay does conduct a credit check when you sign up – and that one is visible to other credit providers. Afterpay also now reports your payment activity to credit bureaus, which means paying on time can actually help build your credit history.
On debt cycles – “There are guardrails built into Afterpay that work against this. Your account is paused automatically if you miss a payment, meaning you can’t keep spending while you’re behind. There’s no revolving credit, and no minimum payment that lets interest compound in the background. Late fees are capped – they never exceed 25% of the order value, or $68, whichever is less. For smaller orders under $40 it’s a one-time fee of up to 25%. Either way, the worst-case cost is always visible upfront. And in Q3 2025, 98% of Afterpay transactions in New Zealand incurred no late fees at all, which tells you something about how Kiwis are actually using it.”
Supporting responsible spending – is this a thing?
When I first started using Afterpay, my spend limit was set to $600. As I made more purchases and paid them off on time, it gradually increased. It’s a non-negotiable, says Francis.
“[Responsible spending] is built into the product from day one. New customers start with a modest limit, typically $600, and that only increases as they build a history of on-time payments. You can’t sign up and immediately spend $2,000.
“The app shows every upcoming payment before you buy, so you’re never surprised by what’s coming out of your account. You get SMS and email reminders before each payment is due. And if a payment is missed, the account pauses, so there’s no further spending until you’re back on track. It serves as a protection, not a punishment, and it stops the situation from getting worse while you sort it out.
“And if someone is genuinely struggling, our hardship policy lets them apply for flexible arrangements without additional fees. The key is reaching out early, before things escalate. Our team works with people directly, and we take that seriously.”
“If you genuinely can’t cover something in the next six weeks, Afterpay isn’t the right tool. It smooths timing; it doesn’t solve a shortfall.”
So why would you use it? What’s the bigger picture?
Capsule reader and Afterpay customer Lucy is a self-employed physio. Her income doesn’t arrive on a set schedule – it comes in lump sums depending on how business has been, which means a big expense landing in a quiet month is just a fact of life she plans around.
When a new appliance or a surprise dentist bill comes up, she uses Afterpay to spread the cost across a few weeks rather than have it land all at once.
“It’s a peace of mind thing for me,” she says. “I don’t want a credit card – I don’t really see the value in it for how I manage my spending. “
It’s a use case a lot of people will recognise: not a crisis, just timing. A big purchase in the wrong week. An expense you knew was coming but not quite yet.
Afterpay doesn’t change what you spend – it just gives you a little more control over when. If you’re using it for things you’d buy regardless, just on a schedule that works better for you – that’s exactly the point.
Afterpay’s Pay-in-4 lets you split purchases into four fortnightly payments with no interest. If you’re struggling with payments, Afterpay’s hardship team can help – reach out early for flexible arrangements without additional fees.
Disclaimer: Late fees, eligibility criteria and T&Cs apply. Credit checks apply. See afterpay.com for terms
