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

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In a Nutshell

If you don’t want to pay for your online purchases upfront, Klarna offers three other payment options. You can apply to buy now and pay in 30 days, pay in four interest-free installments, or finance your purchase for three to 36 months.

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Pros Cons
Low minimum spending requirement of $35 Credit or debit card required to complete a purchase
Refund available on returns Returned-payment fee
Use the Klarna app at U.S. online retailers

What you need to know about Klarna

If you want to make an online purchase but don’t have the money for the full amount in your bank account, you may consider a buy-now, pay-later option like Klarna. Stockholm-based Klarna is a Swedish company that lets you make online purchases at participating retailers using your Klarna account or the Klarna app. The minimum spending requirement for a purchase is $35.

When you use Klarna to make a purchase on a retailer’s website, you can apply for one of three payment options when you check out.

  1. Pay later — With the pay-later option, you’ll have 30 days (starting from when your order ships) to test out the item. You can either return the item or keep it and pay the full amount within that 30-day time frame without facing interest or fees from Klarna. But since Klarna charges your credit or debit card for a purchase, you may still accrue interest or fees associated with your card, so check with your card issuer if you aren’t sure.
  2. Four-installment option — With this payment option, you can pay for an item in four interest-free installments every two weeks. Every other week, Klarna will automatically charge your debit or credit card until you’ve paid for the item in full. Keep in mind that you may accrue interest on your credit card if you carry a balance from month to month, or have to pay other fees associated with your card. And there’s also a return-payment fee.
  3. Three- to 36-month financing — Klarna also offers three- to 36-month financing, so you can buy an item and repay it over time with monthly payments. You’ll find out the interest rate upfront before you complete the transaction. And Klarna will remind you each month when your payment is due.

Credit or debit card required to make purchases

While Klarna advertises its no-interest payments, that doesn’t necessarily mean you won’t pay interest or fees. That’s because Klarna requires you to link a debit or credit card to your account.

If you opt to pay for your purchase in four installments, your debit or credit card will automatically be charged when each installment is due. If debit is your payment method, you could end up paying fees if there’s isn’t enough in your checking account to cover your Klarna installment. And if credit card is your payment method, you could end up accruing interest or fees if you don’t repay your full statement balance on your credit card on time.

A ‘ghost card’ facilitates purchases

When you make an approved online shopping purchase with Klarna, you’ll get a “ghost card” for one-time use. That ghost card will include account information to enter at checkout, just like a regular debit or credit card. Klarna will then charge your personal card based on your agreed-upon repayment schedule.

Refund available for returns

If you don’t like an item you paid for via Klarna, you can return it and get your money back. The refund will be issued according to the retailer’s return policy — so if the store issues refunds to your original form of payment, the money will be deposited back into your bank account or refunded to your credit card.

But if the store’s return policy only allows store credit, note that you’ll still be responsible for your Klarna payments associated with that purchase.

Klarna suggests returning your order or reporting cancellation to the store you bought it from. Once the store registers this information, the Klarna refund process is usually completed within the next 14 days.

Returned-payment fee

If you decide to pay via the four-installment option and your automated payment doesn’t go through successfully, you’ll have to pay a returned-payment fee of up to $27. Though Klarna says the fee won’t exceed your total purchase price.

A closer look at Klarna

Here are a few more things to know before making purchases with Klarna.

  • No prepayment penalty You can pay off your purchase early without a fee.
  • Repayment history considered — Once you establish a positive payment history with Klarna, you may be approved for a higher spending limit if you’d like more credit in the future.
  • Hard inquiry required — Klarna will perform a hard credit inquiry if you apply for financing, which may lower your credit scores by a few points.
  • No annual fee — Unlike some credit options, you don’t have to pay an annual fee to use Klarna.
  • Buyer protection — You may qualify for a refund if you made a purchase that you never received, received an item you never ordered, or received a damaged, incomplete or inaccurate order.

Who is Klarna good for?

You may benefit from Klarna if you want to make an online purchase immediately but don’t have the cash on hand. Klarna may be a good option if you use the “pay later” option and can save enough to pay off your balance in full by the due date. It may also make sense if you opt for the interest-free installments and can afford to pay them every two weeks.

But if the item you have your eye on isn’t something you need to buy right away, it may make more sense to look at your budget and save for the item you want instead of financing it.

How to apply with Klarna

As long as you’re at least 18, you can use Klarna by creating an account online or downloading the mobile app. Here’s what you’ll need to do to create an account.

  • Select your country.
  • Read the terms of use and privacy policy — if you agree, click “Sign up.”
  • Enter your email address.
  • Go to your email and click on the log-in link.
  • Enter your full name, date of birth, phone number and address.

If you shop with the app, you can apply to buy from any participating retailer and, if approved, pay for your purchase through four interest-free installments.

You’ll be …

  • Asked how much you’d like to spend
  • Shown an overview of your payment schedule
  • Requested to plug in a debit or credit card number to fund your ghost card

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

  • Affirm: Affirm has partnerships with thousands of retailers and offers loan terms that are usually three, six or 12 months.
  • Afterpay: Afterpay is a similar buy-now, pay-later e-commerce lender that may be a good option since it offers a financial hardship policy.