Klarna review: Buy-now, pay-later credit for online purchases

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In a Nutshell

If you want to make a purchase and pay for it later, the Klarna app lets you split your payments into installments. But keep in mind that there may be fees and interest charges depending on the repayment method you choose.
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Pros Cons
Can be used at any U.S. retailer accepting credit and debit cards Late fees and returned-payment fees
No membership or annual fees Longer financing terms might require a hard credit inquiry
Multiple repayment options available  

What you need to know about Klarna financing

Founded in 2005 in Stockholm, Sweden, Klarna is an app for borrowing money. Like competitors Affirm or Afterpay, it helps you finance retail purchases and pay for them over time.

If you’re thinking about using Klarna to pay for your next purchase, here’s what you should know.

You can use Klarna to make purchases at any U.S. retailer

While some point-of-sale apps only allow you to make online purchases at select partner retailers, you can use Klarna to make purchases at any U.S. retailer that accepts credit or debit cards. This feature gives shoppers greater flexibility in where to shop.

There are no annual or membership fees

While some credit cards and charge cards charge annual fees, you won’t pay any annual fees or membership fees with Klarna.

You can choose from four different repayment options

Klarna may offer more flexibility than other options like credit cards or traditional personal loans, which could make it a useful payment solution for some people.

  1. Pay in four installments — With this option, you use your own debit or credit card to pay for your purchase. The initial payment is charged to your card when the merchant processes your order, and the next three payments are automatically charged every two weeks after you make the first payment. There are no interest charges and no fees if you stick to the automatic payment schedule.
  2. Pay in 30 days — If you opt for the pay-in-30-days payment method, you’ll check out with retailers that partner with Klarna. Once the merchant ships your order, Klarna sends you a digital invoice, and payment is due in 30 days. You can keep the order or make returns and pay the final balance with a credit card, debit card or bank account. There are no fees or interest charges if you pay the invoice on time.
  3. Pay later by card — When you pay later by card, you can add your items to your cart and check out with Klarna. Enter your credit card or debit card details, and that card will be charged in 30 days for the items you decide to keep. Klarna may issue a small verification charge of up to $1 (that you’ll be credited back). Because this option charges your credit card directly, keep in mind that you may have to pay your credit card’s APR.
  4. Klarna financing account — Klarna’s financing account is a form of revolving credit offered at select retailers that works like a credit card, without the physical card. If you qualify for this option, you can finance your purchases over six to 36 months. But you’ll be charged an APR that’s higher than the average credit card. If you use a Klarna financing account, you can’t use a credit card to pay your bill — you must use your bank account or debit card.

Late fees or returned payment fees

While Klarna doesn’t have annual fees, you may face returned payment fees or late payment fees if you don’t pay the full amount required by the due date. Depending on which repayment option you have, late fees range from $7 to $35, and returned payment fees range from $25 to $35.

You don’t have extended warranty or return protection with Klarna

Some credit cards offer extra benefits, such as extended warranties or return protection. But if you pay for purchases with Klarna, you aren’t eligible for those perks. Instead, returns are subject to the store’s return and refund policies.

A closer look at Klarna

Here are a few more things you should know about Klarna.

  • App availability — You can download the Klarna app via the Apple iOS App Store and Google Play Store.
  • Promotional offers — You can get access to exclusive deals and promotional offers through the Klarna app. You can also save items to a wish list and receive notifications when prices drop.
  • Minimum spending requirement — The minimum spend with Klarna is just $10. But you should carefully consider if a purchase that small is worth financing.
  • Rewards — Klarna allows customers to join Vibe, its rewards program. You’ll earn one vibe — Klarna’s version of rewards points — for every $1 spent through the app. You can redeem your rewards for gift cards from Amazon, Best Buy, Sephora and other major retailers.

Who is Klarna good for?

While using credit or financing to make a retail purchase isn’t ideal, there are some cases when you may need to buy something before you have enough money saved. Whether you need a mattress so you have a place to sleep or a laptop so you can work, Klarna may be able to help you purchase what you need quickly.

Klarna can be less expensive than credit cards or personal loans if you opt for its pay in four installments or pay-in-30 days options. Those payment methods don’t charge interest or fees as long as you make your payments on time. But if you can’t pay off your financing that quickly, you may want to consider another option, such as a credit card with a longer 0% APR promotional financing offer.

How to apply with Klarna

The Klarna app is fairly simple to use. To get started, follow these steps.

  • Download the app — Download the Klarna app and create a profile.
  • Connect your credit or debit card — Add your credit or debit card information to your profile in the Klarna app.
  • Start shopping — You can shop through the Klarna app. When you’re ready to check out, you’ll use a virtual single-use card. Depending on the purchase, different payment options discussed above may be available.
  • Application review — Unless you qualify for a Klarna financing account — which you can access multiple times — each purchase you make through Klarna has to go through the app’s approval process. Attempting too many purchases in a short amount of time may result in your application being denied.
  • Credit checks — Each purchase you make goes through an approval process. Klarna reviews your credit when you make a purchase. If you choose to pay in four installments, you’ll only undergo a soft credit inquiry, which doesn’t affect your credit scores. But if you opt for the Klarna financing account, you could be subject to a hard credit inquiry, which could lower your credit scores by a few points.

Not sure if Klarna is right for you? Consider these alternatives.

  • Affirm: Affirm may help you make bigger purchases, and it’s accepted at some brick-and-mortar stores as well as online retailers.
  • Afterpay: Afterpay may increase your spending limit if you make your payments on time.

About the author: Kat Tretina is a personal finance writer with a master’s degree in communication studies from West Chester University of Pennsylvania. Obsessed with her many side hustles, she focuses on helping people pay down their … Read more.