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Today, we’re going to take a look at the Klarna payment processor and how it can be used to make online transactions more convenient and affordable. The service is useful for those who don’t have a credit card and for those who want the comfort of a familiar payment system, but also want to have a short waiting period for purchases to be delivered. Learn more about how you can reap the benefits of buying now and paying later (BNPL) in this Klarna review for 2021.
Table of Contents
What Is Klarna?
Through its smartphone app, Klarna offers point-of-sale loans for both online and in-store transactions. Customers may use these loans to purchase now and pay later at stores including Macy’s, Etsy, Foot Locker, and Sephora.
The business was established in Stockholm, Sweden in 2005, although it is now based in Columbus, Ohio. In 17 countries, the buy-now, pay-later business has 250,000 retail partners and 90 million consumers. You may shop using the app, a Chrome extension on retailer websites, or a virtual Visa card in person.
Though it’s generally preferable to pay cash rather than take out a loan, point-of-sale financing may make sense for customers buying a large-ticket item from a retailer if the loan has low or no interest and the installments are manageable.
How Does Klarna Work?
Klarna allows you to shop online, via the app, and at partner shops. Klarna’s soft credit inquiry, your personal information, and your Klarna purchase history decide your spending limit and ability to shop.
When you make a purchase, you have three choices for financing: pay in four days, pay in thirty days, or take out a six- to 36-month loan. The Pay in 4 option offers a 0% interest rate and requires a 25% down payment at the time of purchase, followed by three equal biweekly payments for the remaining amount.
Pay in 30 installments gives you plenty of time to test out your purchases, return anything you don’t like, and pay the remainder in one lump amount. Monthly payments are required on longer-term loans until the amount is paid in full.
You may check your purchase history, monitor your shipments, and execute returns using the mobile app.
Customers may add goods to a wish list for future purchases or to share with friends and family as present ideas. If the price of any item on the wish list falls below a certain threshold, the app will notify you. Through the Vibe loyalty program, all purchases earn points that may be used to lower the cost of future purchases. This is one of the few BNPL applications that includes a customer loyalty program. Below are the 3 primary features of Klarna:
1. Pay in 4 Installments
This option allows you to pay for your purchase using your own debit or credit card. The first payment is charged to your card as soon as the merchant approves your order, and the next 3 payments are paid automatically every two weeks after that. If you adhere to the automated payment plan, you won’t have to pay any interest or fees.
2. Pay 30 Days After Purchase
This Klarna payment option is unusual in that it enables customers to test out their item before paying. The opportunity to pay 30 days after ordering your goods seems to be provided less often among partner merchants than other Klarna options – but it may be very useful if a merchant you like offers the option.
You will not be charged ahead for your purchase if you opt to pay later using Klarna. Instead, you’ll have 30 days to complete your payment or return the item once it arrives. Klarna will send you email reminders of your due date to make sure you don’t forget. Furthermore, there is no price or interest for utilizing this service.
If you don’t pay by the due date, the Klarna pay-later option, like installment plans, levies a late fee of up to $7.
3. Klarna Financing Account (6-36 Month Loan)
Klarna’s financing account is a kind of revolving credit that operates like a credit card but doesn’t need a physical card and is available at certain shops. You may finance your purchases for six to 36 months if you qualify for this option. However, you’ll be charged a greater APR than the typical credit card. You cannot pay your bill with a credit card if you have a Klarna finance account; instead, you must use your bank account or debit card.
How to Apply With Klarna
The Klarna app is straightforward to use. Follow these instructions to get started.
Install the App
Create a profile with your name and email address on the Klarna app after downloading it.
Connect using your credit or debit card.
In the Klarna app, add your credit or debit card details to your profile.
Make Your Online Purchase
The Klarna app allows you to shop. You’ll use a virtual single-use card to check out when you’re ready. Various payment methods, such as those listed above, may be available depending on the purchase.
Application Review
Each purchase you make via Klarna must go through the app’s approval procedure unless you qualify for a Klarna finance account, which you may use numerous times. If you make too many purchases in a short period of time, your application may be rejected.
Credit Checks
Every purchase you make is subject to review and approval. When you make a transaction with Klarna, they will do a soft credit check. If you pay in four installments, you’ll only be subjected to a light credit inquiry, which has no impact on your credit ratings. However, if you choose the Klarna financing account, you may be exposed to a hard credit check, which may result in a few points being deducted from your credit score.
Klarna Mobile App
Klarna has a free mobile app that can be downloaded from Google Play and the Apple App Store. You may also request a download link by text message by scanning a QR code on the company’s website.
The Vibe rewards program is also available via Klarna’s app, allowing you to earn and spend points. You’ll get a $5 Amazon gift card after you join up for the program and make your first Klarna transaction. After that, for every dollar you spend, you’ll earn one Vibe point, which you can redeem for benefits from big retailers like Starbucks, Best Buy, and Sephora.
There Are No Membership or Yearly Fees
Annual costs are charged by certain credit cards and charge cards, however with Klarna, you will not be charged any annual fees or membership fees.
You May Use Klarna To Make Purchases at Any Store in the United States
While other point-of-sale applications only enable you to make online purchases at a limited number of partner shops, Klarna allows you to shop at any store in the United States that takes credit or debit cards. This function offers consumers more options when it comes to where they buy.
With Klarna, You Don’t Get an Extended Warranty or Return Protection
Extra advantages, such as longer warranties or return protection, are available on certain credit cards. However, if you pay for your goods using Klarna, you won’t be able to take advantage of those benefits. Returns are instead governed by the store’s return and refund policy.
Fees and Interest
Pay in 4 loans from Klarna do not have an interest rate. You’ll never pay more than the initial purchase price if you make your installments on time. If you pay late, you will be charged a $7 fee each time you do so. A $35 late charge is assessed on loans with longer durations.
How Much Does Klarna Cost?
You don’t have to pay anything up front or pay an annual fee to use Klarna. With the Financing option, you’ll know the details of the financing agreement up front, including any interest charges. Financing has the highest APR rate of 18.9%. Varying retailers may offer different APR rates, but they will never exceed 18.9%.
Who Is Klarna Best Suited For?
Although using financing or credit to make a retail transaction isn’t ideal, there are occasions when you’ll have to buy something until you have enough money saved. Klarna may be able to assist you in purchasing what you need fast, whether it is a mattress for sleeping or a laptop for working.
Pros and Cons of Klarna
Variable payment plans offered by Klarna may be very beneficial for consumers seeking to spread out the cost of big purchases over time, but they come with their own set of advantages and disadvantages, just like any other payment option.
Pros
- Installment plans and buy-now, pay-later purchases allow you to spread out your payments without incurring interest or impacting your credit score.
- By shopping using the Klarna app, you may pay for any significant purchase over time. Other payment providers only operate with a certain group of merchants.
- Klarna accepts American Express and Discover cards, unlike some other installment plan businesses.
Cons
- Financing plans may result in a harsh draw on your credit report, as well as a higher interest rate.
- On an installment plan, you can’t change your payment due dates.
- If funds become available, you will not be able to pay a payment early.
- There are just a few alternatives for paying later.
- Prepaid cards are not accepted.
Klarna vs. Affirm
Klarna and Affirm are two of the buy now and pay later payment method applications that provide customers with longer-term financing options. While Pay in 4 financing is becoming more popular and one of the better payment solutions, many consumers are unable to pay off their goods in six weeks. Longer-term financing options of up to 36 months allow consumers to stretch out their payments over a longer period of time, making the payments more manageable.
Affirm might be a viable choice for consumers because many of its loans don’t need a down payment, and customers may be eligible for 0% financing over longer payback terms than Klarna. Customers who use Affirm can also utilize The Affirm Card (when it becomes available) to break down payments for purchases above $100 into four simple installments.
Klarna vs. Afterpay
Both BNPL applications, Klarna and Afterpay, provide a four-installment plan with a 25% down payment, interest-free purchase option. While there are some parallels between the two firms, there are also some significant differences:
Klarna has partnered with 250,000 merchants, whereas Afterpay has a network of 85,000 retailers.
Afterpay only gives one purchasing option, but Klarna offers three.
While Klarna’s rewards program is open to all users, Afterpay’s is only open to those who have been invited.
While Afterpay is a good buy-now-pay-later option on its own, Klarna offers a more complete and personalized purchasing experience to clients.
Customer Satisfaction
Klarna has a good rating on internet review sites. As you may guess, the firm, like any other finance company, has its share of bad reviews and complaints. Klarna responds to unfavorable evaluations within two business days on average, and has responded to over 90% of them.
Its app has received extremely good feedback from Apple and Android users. It has a 4.8-star rating in the Apple App Store and a 4.4-star rating on Google Play.
Customers may contact customer care in whatever way they choose with Klarna. Customers may chat online, send messages via the app, or phone customer support at any time, seven days a week. It’s simpler to handle difficulties and enhance customer satisfaction when you can contact customer care at any time of day or night.
Final Thoughts
I hope my Klarna review provided you more insights as to a good method to shop at an online retailer without worrying about paying for an item right away. Paying with Klarna is easy to do, so you can easily shop at thousands of online stores without worries using this BYPL service.
FAQ
Is Klarna a Secure Platform?
Leaving aside the issue of taking on unneeded additional debt, Klarna’s payment and data storage processes are secure. It has developed a reputation for not putting clients at danger by charging hidden fees or harming credit reports, and it can even improve security by allowing users to sign up for a Klarna account rather of providing their information to many online shops.
What Happens if I Don’t Make Payments on Time?
Klarna will attempt to collect money from the debit or credit card you supplied at checkout automatically. If this does not go through before the due date, Klarna will make another effort two days later to collect payment automatically. If this effort is likewise unsuccessful, Klarna will send you a statement for the entire amount of the outstanding order, which will be due 15 days later.
Customers will be alerted two days before Klarna attempts to collect a payment, but it’s important to know that utilizing Klarna’s “Pay later” products will have no influence on your credit score, even if you haven’t paid on time. If you make late payments on the Financing option, your credit score may suffer
Is a Credit Check Performed by Klarna?
If you pick Klarna’s ‘finance’ payment option, you will be subjected to a complete credit check. This thorough examination may have a detrimental influence on your grade.
Does Klarna Have an Impact on Credit?
In a nutshell, sure, it can, but that isn’t always the case. If you pick Klarna’s ‘Financing’ payment option, you will be subjected to a complete credit check, which will most likely damage your credit score. Your credit score will not be impacted if you pick ‘Pay 30 days later’ or ‘Pay in 3’ and make all of your payments on schedule.
When Is Klarna’s First Payment Due?
If you select the ‘Pay 30 days later’ option, Klarna will not charge you at the moment of purchase. If you want to pay in three installments, Klarna will take the first of these three payments after you complete your order. When you finalize your order using Klarna’s “financing” option, Klarna will collect the first of however many payments you specify.
Is Klarna Going To Accept Me?
Klarna conducts “affordability checks” before accepting orders for the “Pay 30 days later” and “Pay in 3” choices. Klarna will conduct a complete credit check before approving a customer’s order for its ‘Financing’ option. If Klarna determines that you are likely to be able to afford repayments and that you have paid off any prior Klarna purchases on schedule, your order will most likely be accepted.
Is It Possible for Klarna To Increase My Credit Limit?
Yes, Klarna’s credit limit rises based on your payback history and the length of time you’ve been a customer. The more Klarna transactions you pay back on time, the higher your credit limitation will get in the future.
Is Klarna a Genuine Company?
Klarna is a highly legal payment option and one of the most popular purchase now, pay later services in the world.
Are Klarna and Clearpay the Same Thing?
Both Klarna and Clearpay are “buy now, pay later” systems that allow customers to break down their online purchasing bills into manageable installments. Klarna and Clearpay, on the other hand, operate in quite different ways, with Klarna having three payment choices, including traditional financing, and Clearpay only giving one payment option of four equal installments.
