Klarna is a Buy Now Pay Later (BNPL) service provider. With Klarna, you can choose one of four payment options to make a purchase either online, in-store, or in-app.
Klarna was founded in 2005 in Stockholm, Sweden, and has since expanded to more than 147 million active customers and 400,000 merchants in 45 countries.
Klarna offers several plans to split up your purchase into smaller payments, or installments.
Choosing to Pay in 4? Here’s how it works. If you make a $100 purchase, you will owe $25 at checkout. The remaining balance of $75 would be divided into three equal installments of $25 to be paid with a debit or credit card every other week until the balance is paid off.
Payments are scheduled automatically, but if Klarna tries and fails twice to collect an installment, you will be charged a late fee of up to $7.
Klarna also offers a digital card housed in the mobile app. You can use it anywhere, anytime even if the merchant is not a Klarna partner. You owe nothing upfront, and Klarna splits purchases up into four interest-free installments due every other Friday.
There are several ways to use Klarna: in-store, online, or in-app.
There are a number of advantages and disadvantages to using Klarna.
Deciding to use Buy Now Pay Later is a very personal decision. It requires you to know deeply how you handle your finances and whether you are able to avoid temptation easily.
You do not qualify for a credit card or have a credit card with a low limit
Buy Now Pay Later affords you the opportunity to make purchases with credit even if you do not have the money in your account right this moment.
However, it is important to only make purchases with Buy Now Pay Later if you are certain that you will be able to pay off the installments as Klarna charges your account. Missing a BNPL payment can result in a late fee and damage to your credit score.
You want or need to purchase a large-ticket item
Mattresses, furniture, appliances, tires. Expenses pop up, and if you do not have the money in your checking or savings account, sometimes there is no choice but to put it on credit. Buy Now Pay Later gives you an extra financing option without the interest. But again, make sure that you’ll be able to pay off your installments when they roll around.
You have a tendency to overspend or can’t avoid the temptation
This requires a long, hard look in the mirror. The fact of the matter is that it’s easier than ever to want things that you see online — and then to turn those wants into purchases. Buy Now Pay Later makes that even easier.
You are trying to build credit
Buy Now Pay Later is not a traditional form of credit. Klarna, unlike credit card companies, does not report on-time payments to the credit bureaus. It only reports missing or late payments. This means that Buy Now Pay Later cannot help you — it can only hurt you.
Klarna can be used at more than 400,000 merchants around the world. The company partners with brands in the auto, beauty, fashion, electronics, home, luxury, and entertainment spaces (and beyond).
Popular brands that accept Klarna include:
Many creditors perform a hard inquiry on your credit report to determine your creditworthiness before issuing you a loan or credit card.
Klarna is considered a short-term financing option, so the company does not perform a hard inquiry on your credit. The company does, however, run a soft credit check to determine if you are eligible to receive financing, but the check does not hurt your credit score.
Once you’ve made your purchase and selected a payment plan, you must make on-time payments. If you miss payments, you will not only incur a late fee, but Klarna will report your missed payments to the credit bureaus. This can bring down your credit score and hurt your chances of getting approved for financing by Klarna and other lenders in the future.
Klarna works much like other Buy Now Pay Later services including Affirm, Afterpay, and Sezzle. The BNPL solution that you use often depends on which one is offered by the merchant.
However, if you do not want to use Klarna, there are other options.
Taking out a personal loan won’t make sense for everyone. However, it can enable you to make large purchases and pay them back over a longer period of time. The lender may run a hard inquiry to assess your creditworthiness, though, which could ding your credit score for a short amount of time.
You’ll also want to make sure that your interest rate is low, or competitive with Klarna, and that you have a payment plan in place to avoid late fees and credit score damage.
0% interest credit card
Alternatively, if you are making a large purchase, you can apply for a 0% interest credit card, which may make more sense than using Klarna. Like with a personal loan, the credit card company will likely run a hard inquiry to see if you qualify for the credit card. A low-interest credit card could make sense if you’re looking to take advantage of the introductory offer or earn rewards for your purchase.
Cushion helps you waste less money, save more, and live a financially healthier life. We monitor your bank and credit card accounts 24/7, find and alert you about pesky fees, let you know which fees are negotiable, which banks are cooperative, and can even automatically negotiate on your behalf.* To date, Cushion has secured customers more than $13 million in bank and credit card fee refunds—and we’re just getting started.
*Cushion only negotiates fees with high refund odds. We cannot guarantee any negotiations, a regular frequency of negotiations, or fee refunds—your bank makes the final call.