Klarna vs. Zip: What You Need to Know

Buy Now Pay Later, BNPL for short, has become one of the newest and most efficient ways for customers to get things now and spread their payments out over the weeks or months to come. Usually the BNPL provider that customers use depends heavily on which merchant they’re shopping through. Although some merchants, such as Target and Amazon, accept several different providers. So you’re trying to figure out: Klarna vs. Zip. Here are the major similarities and differences between the two.

What Are Klarna and Zip?

Klarna and Zip are BNPL providers that make it easier for customers to buy things from brick-and-mortar or online stores using short-term credit. When you pay with Klarna or Zip in-person or through e-commerce, you can get what you bought now and then repay the total cost of your order to the BNPL provider in installments, often interest-free, over the next several weeks or months.

From 30,000 feet up, Klarna and Zip have similar offerings; however, they differ when it comes to the nitty gritty.

How can Cushion help me?
Cushion Bill Pay gives you more visibility and control over your finances than ever before. Many people get hit with bank fees—such as overdrafts and late fees—due to cash flow problems. With Cushion, you can consolidate and track all of your bills and BNPL payments in one place, plan your budget by reviewing what’s coming down the pike, and avoid overdraft fees by temporarily pausing payments that might overdraft your account and resuming them when you are ready.

Major Differences Between Klarna and Zip

Founding

Klarna
Klarna was founded in Stockholm, Sweden, in 2005.

Zip
Zip is an Australia-based BNPL provider founded in 2013. It acquired US-based payment installment platform Quadpay in 2020.

Countries of operation

Klarna
Klarna is available in the U.S., Great Britain, Sweden, Norway, Finland, Denmark, Germany, Austria, the Netherlands, Belgium, and Switzerland.

Zip
Zip Pay operates in Australia, Canada, Czech Republic, India, Mexico, New Zealand, the Philippines, Poland, Saudi Arabia, South Africa, UAE, and the United States.

Accepted by

Klarna

More than 400,000 merchants around the world accept Klarna. Some merchant partners include Etsy, Macy’s, Sephora, and Lululemon. 

Zip
Nearly 26,000 merchants around the world—including Best Buy, Airbnb, and Sam’s Club—accept Zip Pay.

Installments

Klarna
Klarna offers several different payment options to divide up your purchases. 

  • Pay in 4: One of the most popular payment options, Pay in 4 allows you to split up your total balance into four equal payments to be paid automatically every two weeks, interest-free. The first installment is due at checkout.
  • Pay Now: Pay the total amount upfront either online or in-store using the mobile app.
  • Pay in 30 Days: Pay nothing upfront. Get your purchase now, then pay the full balance in 30 days, interest-free.
  • Pay Over Time: Ideal for larger purchases, Pay Over Time allows you to break up big balances into smaller installments to be paid over 6–24 months. Interest rates range from 0–29.99%.


Zip
Zip also offers a pay-in-four financing model, which is a standard payment system across most Buy Now Pay Later providers. With this model, customers divide the purchase price into four interest-free payments over six weeks, with the first, upfront installment due when they make the purchase.

Rescheduled payments

Klarna
Klarna allows you to reschedule your next payment date up to 14 days once per order. You can reschedule within the Klarna app by visiting the Payments page, selecting the order that you would like to reschedule a payment for, and tapping Extend Due Date.

Zip
Zip offers various repayment schedules. You can choose to pay your installments weekly, biweekly, or monthly depending on what works best for your cash flow. You can also allow Zip to automatically personalize your repayment schedule based on repayment behavior and spending habits. 

You can modify your repayment schedule from within the Zip app. However, modifications take 24 hours to go into effect. This means that if you need to reschedule an upcoming payment, you should do so more than 24 hours in advance in order to avoid a late penalty. The payment can be made up to 7 days late without penalty. When you move a payment date, future dates will also be adjusted.

Credit limits

Klarna
There is no spending limit when you shop with Klarna. However, when you make a purchase, Klarna determines on a case-by-case basis whether you are eligible to receive the short-term loan. 

To view your estimated spending amount, you can take a look at your Purchase Power in the app. This amount is subject to change and based on factors like your outstanding balance and your payment history with Klarna. 

Zip
Zip Pay is a short-term credit option with a credit limit of up to $1,000. You may be able to increase your credit limit to $2,000 on eligible purchases after being a loyal customer for a certain period of time.

Fees

Klarna
If an installment does not go through, Klarna will charge you late fees up to $7. Klarna will then try to reprocess the payment, and if it fails again, the amount will be added to your next payment. 

You should note that if you miss a payment, you will not be able to continue using Klarna until you’ve settled up your outstanding balance. Klarna will also report your late or missing payments to the credit bureaus, which can negatively affect your credit history and credit score.

Zip
Zip Pay is promoted as interest-free and does not come with a monthly fee. However, you will be charged a $1 convenience fee per installment. The company also charges late payment fees between $7–$10, depending on your state of residence, if you miss a payment.

Credit check

Klarna and Zip do not do hard credit checks when you make a purchase using the service. Both providers run a soft credit check to get a sense of your credit history, Soft credit checks provide enough information to give the BNPL services a sense of your creditworthiness without penalizing your credit score with a hard inquiry.

How to Sign Up for Klarna

You can sign up for Klarna using the Klarna app, at klarna.com, or selecting Klarna as your payment method at a participating online store. 

  • Go to the Klarna website, download the app, or click that you’d like to pay with Klarna when making a purchase
  • Provide the necessary personal information
  • Complete sign-up

How to Sign Up for Zip

There are a couple of different ways to sign up for Zip Pay: download the Zip app or choose Zip Pay as your payment method during the checkout process. 

  • Download the Zip app or select Zip as your payment method when checking out with a partner merchant
  • When prompted, provide proof that you live in the U.S., are at least 18 years old, have a valid mobile phone number, have a valid U.S. debit or credit card, and have a valid U.S. mailing address
  • Complete sign-up

How to Use Buy Now Pay Later Responsibly 

BNPL services allow consumers to make purchases online or in-store by breaking up larger ticket items into a small number of fixed installment payments. BNPL is attractive to consumers because purchases are typically interest-free and don’t involve many of the fees that come with bank accounts and credit cards.

The popularity of BNPL has grown exponentially in recent years—and for good reason. These payment options provide more opportunities for people of underserved and underbanked populations. However, there are also a number of potential risks involved.

Advantages of Buy Now Pay Later

  • You get easier access to goods and services
  • Customers pay low-to-no fees and interest charges on their payment plan
  • You can maintain and build your credit score

Disadvantages of Buy Now Pay Later

  • It is easy to overspend
  • There are potential fees or interest charges and credit score damage
  • Buy Now Pay Later can be difficult to manage

Frequently Asked Questions

Klarna vs. Zip: Which is better?

It is not a matter of which Buy Now Pay Later service is better. Rather, it is important to consider whether BNPL is the right choice for you at all.

The service that you use as a customer depends on which merchant or company you are purchasing from and in what country you are located. All brick-and-mortar and online retailers don’t partner with all BNPL companies.

Before deciding to make a purchase with BNPL, it’s important to consider: how much you really want or need the product or service, your budget, and cash flow.

What happens if I never repay Klarna or Zip?

If you fail to make your scheduled repayments through Klarna, Zip Pay, or any other BNPL provider, you can run into credit and financial issues. 

Klarna and Zip both charge you late fees if you miss an installment or your payment fails. Your account may also get disabled, meaning that you would not be able to make future purchases with the BNPL service. 

All Klarna accounts get reported to the credit bureaus, so if you have late or missing payments, it can negatively impact your credit history and credit score. Zip, alternately, does not report to the credit bureaus. However, if you consistently miss payments, your account may get reported to collections, which can negatively impact your credit report and credit score.

Are Klarna and Zip legit?

Klarna and Zip are both legitimate and secure services. Both keep customer data safe and sound and act much the same as credit cards, personal loans, and payday loans except with shorter-term repayment plans.

What is an alternative to Buy Now Pay Later?

Given that Buy Now Pay Later is a form of short-term credit, you have other financing options.

One option is to open a 0% interest credit card. This can be ideal for smaller, less expensive purchases. Typically, 0% interest credit cards come with an introductory, interest-free period, meaning that after a certain amount of time, the interest rates will increase from 0% on your minimum monthly repayment, often to above-average interest rates.

If you plan to open a 0% interest credit card for a specific purchase, it’s important that you have a payment schedule in place to regularly make the minimum payment or, better yet, pay off your entire purchase before the credit card provider begins to charge interest. If you don’t, you risk getting charged a late fee or accruing credit card debt.

As a business owner, should I accept Klarna or Zip Pay as payment options?

Whether or not you accept Klarna or Zip Pay as a payment method as a business owner is a personal business decision. By accepting BNPL, you can boost sales by giving customers one more avenue through which to make a purchase. For instance, Klarna’s Vend product is an electronic point-of-sale and inventory management system, which makes it easier for customers to pay and merchants to sell products, manage their sales, and grow their business. 

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.

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