Buzz
In the previous year, Apple launched its own version of 'buy now, pay later' (BNPL), called Apple Pay Later. The name cleverly combines Apple’s mobile payment system with the 'pay later' flexibility typical of BNPL services. Using Apple Pay Later is essentially taking out a loan, similar to any other BNPL option.
How does Apple Pay Later work, and how is it different from other BNPL services—both the positives and the potential drawbacks?
What exactly is 'buy now, pay later'?
A 'buy now, pay later' service lets you make an immediate purchase and pay for it in installments over time. While BNPL offers benefits for spreading out larger expenses, there are also risks. Even with little-to-no interest, you're still taking on debt. That’s why Mytour has previously advised against regularly using these services. They're useful for larger purchases, but it’s best to avoid debt for everyday items whenever possible.
How does Apple Pay Later measure up against other BNPL options?
Apple Pay Later operates similarly to many other BNPL services like Klarna, Afterpay, Zip, and 'Pay in 4' with PayPal. It divides your purchase into four equal payments, each due two weeks apart, with the first payment required immediately. All these services provide a single loan structure of four interest-free payments, which is perhaps the most attractive feature of any BNPL program.
The advantages: According to Apple's official site, applying for an Apple Pay Later loan doesn’t impact your credit, and you’ll know instantly whether you're approved. To prevent users from accumulating debt, Apple doesn’t allow credit card links, only debit cards. Plus, if you’re already a frequent Apple Pay user, the convenience of managing everything in one place is a major benefit.
The restrictions: Apple Pay Later is available only for purchases between $50 and $1,000 on iPhones and iPads that support Apple Pay. For example, if you make a $500 purchase, your first payment would be $125, followed by three more payments of $125 every two weeks.
The key difference between Apple Pay Later and other BNPL services is that Apple charges no fees. In contrast, Klarna and Afterpay impose fees for late payments, while Zip charges both late fees and additional fees for each installment.
What are the potential risks of using Apple Pay Later?
As mentioned earlier, Apple users may be attracted to the ease of using Apple Pay Later. However, that convenience could be its biggest risk—both for Apple Pay Later and BNPL services in general. These services can encourage overspending, leading you to spend more than you can afford. The Consumer Financial Protection Bureau released a report showing that BNPL users are more likely to have higher credit card debt, overdue payments on other credit products, and lower credit scores than non-users.
Beyond the general risks of BNPL as a financial practice, Apple Pay Later raises an interesting concern. Let’s say you’re not bothered by Apple’s increasing dominance. As a consumer, do you really want the company that makes your phone, laptop, watch, and TV to also control your banking and lending? Even if Apple Pay Later isn’t inherently harmful, it’s worth considering whether giving one company that much control is wise.
Suggestions for using Apple Pay Later wisely
If you decide to use Apple Pay Later (or any BNPL service), keep the following advice in mind:
Consider your current and future budget. Breaking a larger payment into smaller installments might trick you into overspending, as it can seem more affordable. Be mindful of how much you're actually spending and how it will affect your budget moving forward.
Prioritize essential purchases. BNPL should be reserved for purchases that are truly necessary—things you can't afford now, but can pay off within six weeks.
Monitor your account balance. Apple Pay Later isn’t a credit card. Even if Apple doesn’t charge late fees, your bank may impose overdraft charges. Additionally, defaulting on a BNPL loan could harm your credit score.
The key takeaway is financial awareness: Before using Apple Pay Later, carefully consider why you're choosing to take on this debt in the first place.
