How does Afterpay work in NZ? | Swoosh Finance

Afterpay is one of the top Buy Now Pay Later (BNPL) providers in NZ. If you’re looking to use the service for the first time (or you’re already a keen customer) and you’re wondering ‘How does Afterpay actually work?’ then you’ve come to the right place. We’ll explain everything you need to know about Afterpay and whether it is worth it.




How Afterpay Works in NZ | Swoosh Finance NZ


How Afterpay works in NZ

Afterpay is an interest free Buy Now Pay Later platform, similar to the traditional lay-by method where you don’t have to pay for goods right away. Instead, you can defer payments to a later date and pay them off in instalments.

It works like a small, line of credit loan, where you have a set limit of money you can use and pay off indefinitely. The more you use the service and make payments on time, the more you will be offered on your spend limit.

There are four points you need to know to understand the basics of how the Afterpay payment system works:

  1. You pay for your product or service upfront using Afterpay
  2. The total cost is split into 4 payments that you make every 2 weeks
  3. You can make early payment/s at any time
  4. Sometimes you will be required to make the first payment at the time of purchase.

Unlike other forms of credit, Afterpay is not covered under the Credit Contracts and Consumer Finance Act 2003 just yet. But there are plans in motion to change BNPL regulation in New Zealand very soon.

Now you get the gist of it, let’s explore some more important details about using Afterpay in New Zealand.


How Afterpay makes money

If Afterpay doesn’t charge interest then how exactly do they make money? Their income comes from a couple of places:

  1. Merchant fees charged to the business for each purchase
  2. Late fees on your missed Afterpay repayments


Afterpay payments

Afterpay payments | Swoosh Finance NZ

Do you have to pay right away?

You will need to pay the first 25% of the total cost at the time of purchase. The next 3 payments will come out every 2 weeks. You can pay more than the minimum, or pay off the whole amount, if you wish to at any time.

How often do Afterpay payments come out?

Afterpay payments are due every 2 weeks. After your first payment at the time of purchase, all remaining payments are made automatically. You can also make payments manually at any time.

If you only want to make manual payments, you will need to remove all cards from your account–just don’t forget to pay on time!

What time of day does Afterpay take money out?

Generally, payments will come out at the start of the business day.

Can you pay off Afterpay early?

You can pay off more than the instalment amount at any time. You can also pay off the whole amount at any time if you wish.

What happens if you miss payments?

You will be charged a late fee and you will not be able to make any more purchases using Afterpay until the payment and fee has been paid. Your spending limit may also decrease.


Afterpay fees for NZ

Afterpays fees vary depending on the particular country. For New Zealand, you should be aware of the following costs involved with using this BNPL business:



Purchase cost Total cost of purchase paid in 4 instalments
Interest None
Late payment fee Late fees are capped at 25% of the order amount with $68 set as the max amount you can be charged for each order.
Less than $40:

Late fee = Max of $10

(based on 25% of order amount)

More than $40:

Late Fee = $10


Additional Fee (if still unpaid after another 7 days) = Max of $7

(additional fee is based on 25% of order amount – initial $10 late fee)

Merchant fees Percentage of order cost + transaction fee


How do you know if Afterpay worked?

Check your account and email for verification. The payment for the product itself will not appear on your bank statements. Instead, the ongoing payments you make to Afterpay to pay off the purchases will appear, similar to any other loans you may have.

If you’re not sure if your payments to Afterpay are going through, check their status page to see if they are experiencing any technical issues.

How do you know if Afterpay worked? | Swoosh Finance NZ

Does Afterpay give a grace period?

Afterpay does not have a grace period per se. If you do not have enough for your upcoming payment then reach out to Afterpay. Let them know your situation ahead of time and they may able to hold off payments for a little bit longer without you having to cop a late fee and having your spending limit decreased.

You can also change the scheduled payment date once per order on your app or the website without contacting the business. But there are a number of restrictions to using this feature. So if you are having trouble and worried about missing a payment, contact Afterpay as soon as possible.


Is Afterpay worth it & is it a good idea?

Is Afterpay worth it? | Swoosh Finance NZ

The best part about Afterpay and other BNPL companies is also the worst part. Because Afterpay doesn’t charge interest and isn’t regulated by the Credit Contracts and Consumer Finance Act.

This can be a double-edged sword. On one hand, Afterpay provides an alternative finance option to people who can’t currently get finance through traditional channels. You also won’t be charged interest, so it can be a cheaper option.

But on the other hand, credit ratings exist for a reason–and it’s not just for the bank. Lenders are required to assess your creditworthiness not only to protect themselves but to protect customers from finance they cannot reasonably afford. When this factor is removed, vulnerable people are more open to getting trapped in the debt cycle.

Here are some ways to help manage your Afterpay responsibly:

  • Set your own spending limit based on how much you need and can manage
  • Use a debit card, not a credit card for repayments
  • Contact Afterpay before you miss a payment to work out an alternate arrangement if needed

Let’s explore some of the pros and cons to help you get an idea of whether Afterpay is a good idea for you.


Afterpay pros and cons



No interest on payments Potential to be addictive and cause overspending
Can spot you between paydays Increased temptation to impulse buy
Easy to use Not heavily regulated or covered by the Credit Contracts and Consumer Finance Act
Widely available payment method Late payment fees
Makes purchases more affordable Can only use at participating stores
Accessible to a wide range of borrowers who may not be eligible for traditional forms of finance Does not help build credit score
PayWatch has been introduced to help protect users from financing difficulty Potential to negatively affect credit score


Afterpay vs credit card

There are pros and cons to both Afterpay and credit cards. Like everything, it depends on how/what you want to use it for, plus your unique circumstances. If you’re looking to build up or improve your credit history then Afterpay won’t help you the way a credit card or personal loan could. But on the other hand, Afterpay does not charge interest and can be a cheaper option for some people.

If you don’t struggle with overspending or impulse purchasing, this might be a good no-interest finance option that suits you. But if you are already struggling to manage your existing repayment responsibilities, this might be just another way to accidentally rack up more debt.


Does Afterpay do credit checks?

Afterpay does not currently do credit checks in New Zealand or Australia, so you don’t need good credit. Part of Afterpay’s appeal is being accessible for people who would otherwise be ineligible for finance because of their credit history.

However, Paywatch has recently been introduced in New Zealand. It is designed to help BNPL companies share information about missed and overdue payments in order to help protect users in financial hardship.


Does Afterpay affect your credit?

Afterpay doesn’t currently report missed payments to credit bureaus or do ‘hard’ credit checks. Although it will not directly affect your credit score, it can still contribute to causing a negative effect.

For example, if your automatic payment causes your credit card to be overdrawn, then this information will appear on your credit report. Likewise, if you use your credit card to make Afterpay repayments and fail to make credit card payments on time that will also negatively affect your credit score.

How Afterpay can affect your credit | Swoosh Finance

The Australian Securities and Investment Commission did a review of the BNPL sector and found that ”a consistently higher proportion of buy now pay later credit card users incurred interest charges on their credit cards”. BNPL credit card users were about 26% more likely to incur interest charges on their credit cards than other credit card users.

About 22% of NZ BNPL customers make repayments using credit cards. So while the possibility of having your credit score negatively affected won’t apply to everyone, it’s something to keep in mind.


Does Afterpay affect your loan application?

Does BNPL affect your loan application? | Swoosh Finance

While Afterpay will not have a direct impact on your credit score, it can still be a factor used when determining eligibility and affordability in loan applications.

This is because lenders are required to assess your financial situation and existing financial commitments before they can approve any additional finance. Afterpay is still a form of finance and will need to be factored into your debt-to-income ratio by responsible lenders.

So if you’re planning on applying for a personal loan or home loan, take a look at your BNPL services. If you’re spending has been a bit high recently, consider cutting back for a few months before you apply.

If you’re unsure about your financial situation, get in touch with a finance expert or loan broker to get personalised advice and recommendations on your chances of loan approval.