Are you puzzled by the sudden decrease in your purchase power when it comes to Buy Now Pay Later apps like Klarna? If so, you’re not alone. Many users find themselves grappling with this confusion. Read on to learn about the primary reasons behind the decline in your Klarna purchase power, focusing on two crucial factors that play a significant role.
Reasons Behind The Decline in Your Klarna Purchase Power
1. Your Klarna purchase power may have decreased because of your credit score
One of the primary determinants affecting your Klarna purchase power is your credit score. Klarna assesses your creditworthiness based on various factors, including your credit history, outstanding debts, and financial stability. If your credit score experiences a decline, it can have a direct impact on your available purchase power. Maintaining a healthy credit score through responsible borrowing and timely repayments is crucial for sustaining and potentially increasing your Klarna limit.
2. Your Klarna purchase power depends on timely payments
Another critical factor affecting your purchase power is the punctuality of your payments. Klarna emphasizes the importance of making payments on time to maintain a healthy account. Failure to meet payment deadlines can result in a decrease in your purchase power. To ensure you don’t miss any payments and maintain a good standing, consider leveraging the power of Cushion—a valuable tool that helps organize your Klarna, Afterpay, Sezzle, and other payment schedules.
Learn more about Klarna
Founding
Klarna was founded in Stockholm, Sweden, in 2005.
Country of operation
Klarna is available in the U.S., Great Britain, Sweden, Norway, Finland, Denmark, Germany, Austria, the Netherlands, Belgium, and Switzerland.
Accepted by
More than 400,000 merchants around the world accept Klarna. Some merchant partners include Etsy, Macy’s, Sephora, and Lululemon.
Installments
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%.
Rescheduled payments
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.
Credit limits
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.
Fees
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.
Credit check
Klarna does 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 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
What happens if I never repay Klarna?
If you fail to make your scheduled repayments through Klarna, or any other BNPL provider, you can run into credit and financial issues.
Klarna charges 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.
Is Klarna legit?
Klarna is a legitimate and secure service. Klarna keeps 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 as a payment option?
Whether or not you accept Klarna 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.
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
