Why You Should Think Twice Before Using Apple Pay Later
Last year, Apple introduced its own buy now, pay later (BNPL) concept –Apple Pay Later . The title is a play on Apple’s existing mobile payments service combined with the pay-later appeal of BNPL financing. Using Apple Pay Later is essentially taking out a loan, just like any BNPL service.
So how exactly does Apple Pay Later work and what makes it different from other BNPL programs – for better or for worse?
What is “buy now, pay later”?
Buy now, pay later is exactly what it sounds like: you can make a purchase immediately and then pay for it in installments over time. While BNPL has some advantages for sharing large expenses, there are also risks. Even if there is little to no interest on these loans, you are still incurring debt. This is why Lifehacker previously advised against making a habit of using these services. They’re useful if you really need to finance something big, but whenever possible, it’s best to avoid taking on debt for everyday expenses.
How is Apple Pay Later different from other BNPL services?
Apple Pay Later works in the same way as most other BNPL services such as Klarna , Afterpay , Zip and Pay in 4 with PayPal . Apple Pay Later splits your purchase into four equal payments, each due two weeks apart, with the first payment due immediately. All of these services offer only one loan option of four interest-free payments. The interest-free aspect is key and perhaps the most attractive aspect of any BNPL program.
Benefits: As Apple explains on its website , when you apply for an Apple Pay Later loan, it won’t affect your credit, and you’ll know if your loan is approved within seconds. Additionally, “to prevent users from taking on more debt to pay off loans,” Apple does not accept credit cards. This means you need to link a debit card to the service. Plus, if you’re already an avid Apple Pay user, you’ll find it convenient to have everything you do in one place.
There are restrictions: Apple Pay Later is only for purchases between $50 and $1,000 made on iPhones and iPads that support Apple Pay. So, if you want to make a $500 purchase, your first payment will be only $125. Then you’ll pay $125 three more times every two weeks.
The biggest difference between Apple Pay Later and competing BNPL services is that Apple doesn’t charge any fees. Klarna and Afterpay charge late fees, while Zip charges both a late fee and a per-payment fee.
What are the risks of Apple Pay Later?
As I mentioned above, Apple users may be attracted to the convenience of Apple Pay Later. However, this convenience may be the biggest risk – both for Apple Pay Later and perhaps for BNPL services in general. They can make it easier to spend more than you can actually afford. The Consumer Financial Protection Bureau released a report that shows that BNPL users are more likely to have higher credit card debt, delinquencies on other credit products, and lower credit scores than non-users.
Beyond the risks of BNPL as a financial practice, Apple Pay Later is downright sinister. Let’s say you’re not even afraid of the growing omnipotence of Apple as a company. For you as a consumer: Do you really want the company that makes your phone, your laptop, your watch and your TV to also be… your bank? Your creditor? Even if Apple Pay Later isn’t something uniquely nefarious, it makes sense to think twice before giving one company so much power.
Tips for using Apple Pay later
If you’re going to use Apple Pay Later (or any BNPL service), keep these tips in mind:
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Think about your current and future budget. When a larger payment is broken down into smaller parts, you may find yourself overspending in the long run because it “seems” you can afford it. Be aware of how much you’re actually spending and how it will impact your overall budget in the future.
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Stick to the essentials. In fact, BNPL should only be used for absolutely essential purchases that you can’t afford up front but can afford in six weeks.
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Keep track of your account balance. Apple Pay Later is not a credit card. Even if Apple doesn’t charge a fee for a missed payment, your bank will still charge you an overdraft fee. Additionally, if you fail to repay your BNPL loan, you risk damaging your credit rating.
The key is financial awareness: Before you use Apple Pay Later, consider why you’re taking on this debt in the first place.