As an ASX share investor, you'd have to be living under a rock to not have come across Afterpay Touch Group Ltd (ASX: APT) in the last 12-18 months.
The "buy now, pay later" service provider's share price has rocketed over 800% since its ASX IPO in June 2017 and has continued its strong run in 2019 to be among the top S&P/ASX200 Index (ASX: XJO) performers this year.
What is Afterpay?
Afterpay was founded by Nick Molnar and Anthony Eisen back in 2015 and prides itself on being a leading provider of BNPL services to its over 3.1 million users with a near-instant sign-up process for the service.
Customers can sign up at checkout (online or in-store) with one of the 23,200 active Afterpay merchant partners and be approved immediately, allowing them to receive their desired goods straight away while only paying a fraction of the price (usually 25% up-front).
The retailer receives full payment from Afterpay minus a 4-7% transaction fee and Afterpay takes on the contract between the customer for the remaining 75% of the purchase price, repaid via equal fortnightly instalments.
How can Afterpay help me level up my finances?
One of the biggest advantages of Afterpay and its near-instant sign-up model is the ability for regular consumers like you and me to access a cheap form of credit.
Following the Financial Services Royal Commission, the major banks are tightening lending standards and are introducing more stringent criteria in order to get that shiny new credit card and start spending.
However, by using Afterpay's service in a smart and conservative way, you can build up your rating with the company and increase your limit, allowing you to complete those smaller purchases ahead of time.
Of course, when it comes to personal finance the key is to always "underspend and oversave" where possible.
I find that Afterpay's real value for me is as an effective personal budgeting tool, whereby I can smooth my expenses with the income that I receive on a fortnightly or monthly basis.
The other key benefit of using the Afterpay service is that you can leave that money sitting in a high-interest savings account for a little while longer and still earn extra interest income on that principal while you wait!
