Buy Now, Pay Later: Exploring the Difference Between Afterpay and Affirm‍

Buy Now, Pay Later: Exploring the Difference Between Afterpay and Affirm‍

Buy now, pay later services have become increasingly popular in recent years, making it easier for customers to purchase products without having to pay for them upfront. Afterpay and Affirm are two of the most popular buy now, pay later services on the market today. Both offer customers the option to purchase items online and pay for them in installments, but they have some key differences that you should be aware of before deciding which one is right for you. In this article, we’ll explore the differences between Afterpay and Affirm, so you can make an informed decision about which one is best for your needs.

What are the buy now, pay later services?

Buy now, pay later services, also known as deferred-presentment credit, allow customers to purchase items now and pay for them later in smaller, more manageable monthly installments. 

These services have become increasingly popular over the past few years because they make it easier for people with less than stellar credit to easily make purchases online, where many retailers require a credit card as a form of payment. While some buy now, pay later services require shoppers to put down a security deposit, others don’t require any upfront payment. There are a few different types of buy now, pay later services, including after-sale financing, installment plans, layaway, and rent-to-own.

After-sale financing and installment plans are both types of buy now, pay later services, while layaway and rent-to-own are different methods of buying now and paying later. After-sale financing is when a retailer will provide customers with financing after they make their purchase, and installment plans are when a retailer will offer to break down the purchase into several monthly payments.

Overview of Afterpay

Afterpay, which is a subsidiary of the parent company After Group, is a buy now, pay later service that lets customers purchase items now and then make interest-free repayments over the course of four weeks. Afterpay has become one of the most popular buy now, pay later services in Australia, and it’s available in the United States as well. Afterpay is partnered with multiple e-commerce retailers, including Amazon, Macy’s, and Walmart, where it is listed as Afterpay under each retailer’s payment options. Afterpay currently has an A+ rating from the BBB, and it has processed more than $1 billion in payments since launching in 2017. Afterpay is backed by Sequoia Capital, Floodgate, and GIC, and it has raised more than $150 million in funding.

Overview of Affirm

Affirm is a buy now, pay later service that allows customers to purchase items now and then make interest-free monthly repayments. Affirm partners with a wide range of retailers, including Amazon, Best Buy, Gap, J. Crew, Macy’s, and Walmart, to provide its services to customers. Affirm was founded in 2014, and it was acquired by PayPal in 2016. Affirm has an A- rating from the BBB and has processed more than $12 billion in payments since launching in 2014. Affirm has raised more than $250 million in funding, and it is backed by investors like Sequoia Capital, Founders Fund, and Thrive Capital.

Key differences between Afterpay and Affirm

Here are a few key differences between Afterpay and Affirm.

  • Repaymen

With Afterpay, customers will pay the full amount of their purchase in four weekly installments, whereas with Affirm, customers will pay the full amount of their purchase in one monthly installment.

  • Credit requirements

Afterpay doesn’t require any credit checks or income verification, making it easier for customers with limited credit to access its services. Affirm does require customers to submit their names, Social Security numbers, and incomes to initiate a credit check, so it will be harder for customers with limited credit to get approved for Affirm.

  • Minimum purchase amount

Afterpay requires customers to purchase items that are at least $60 in order to qualify for its services, while Affirm requires customers to purchase items that are at least $75.

  • Fees

Afterpay charges customers a $15 application fee and a weekly late fee of $2 if they don’t make their payment by the due date, while Affirm doesn’t charge an application fee and doesn’t have a late fee.

  • Credit line

Afterpay offers customers a credit line of up to $500 per person, and it is $15 per week for every $100 borrowed. Affirm offers customers a credit line of up to $2,500 per person, and it charges $10 per month for every $100 borrowed.

Eligibility requirements for Afterpay and Affirm

Afterpay and Affirm have different requirements to consider people eligible to use their services. Here they are:

  • Credit score

Afterpay doesn’t require a credit score, meaning that customers with limited credit will still be able to access its services. Affirm does require a credit score, so customers with limited credit will likely have a harder time getting approved for its services.

  • Incomes

Afterpay doesn’t require customers to submit their incomes, while Affirm does require customers to submit their incomes.

  • Debt-to-income ratios

Afterpay doesn’t require customers to submit a debt-to-income ratio, and it doesn’t report a customer’s use of its services to credit bureaus. Affirm does require customers to submit a debt-to-income ratio, and it reports a customer’s use of its services to credit bureaus.

Fees associated with Afterpay and Affirm

Application fees

Afterpay charges a $15 application fee, while Affirm doesn’t charge an application fee.

Late fees

Afterpay charges a $2 weekly late fee if a customer doesn’t make their payment by the due date, while Affirm doesn’t charge a late fee.

Interest rates

Afterpay doesn’t charge interest, while Affirm charges interest of between 19.99% and 29.99%

Pros and cons of Afterpay and Affirm

Let’s take a closer look at the pros and cons of both Affirm and Afterpay.

Pros of Afterpay

  • No application fee – Afterpay doesn’t charge an application fee, while Affirm does. 
  • Credit line amount – Afterpay offers customers a credit line of up to $500 per person, while Affirm offers customers a credit line of up to $2,500 per person.

Cons of Afterpay

  • Higher fees – Afterpay charges a higher application fee than Affirm, and it charges a weekly late fee and interest on any outstanding balance if a customer doesn’t pay their installments every week.

Pros of Affirm:

  • One monthly payment – Affirm offers customers one monthly payment, whereas Afterpay requires customers to pay their purchases in weekly installments.
  • Credit requirements – Affirm doesn’t require a credit check, meaning that customers with limited credit will still be able to access its services.

Cons of Affirm

  • Higher interest rates – Affirm charges higher interest rates than Afterpay.
  • Minimum purchase amount – Affirm requires customers to purchase items that are at least $75, while Afterpay requires customers to purchase items that are at least $60.

Conclusion 

Overall, Afterpay and Affirm are two of the most popular buy now, pay later services on the market today. Both of these services make it easier for people with less than stellar credit to purchase items online, where many retailers require a credit card as a form of payment. Afterpay and Affirm each offer customers a credit line, allowing them to borrow money to make their purchases. Although both services offer customers interest-free financing, it’s important to keep in mind that using Afterpay or Affirm can impact your credit score.

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Volha Belakurskaja

Volha Belakurskaja

Volha is an experienced copywriter with 10+ years experience writing for the information technology and services industry and a 5+ years sole proprietorship background. Passionate about all things tech, she is especially interested in topics lying at the confluence of business and technology.

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