Klarna is a Swedish buy now, pay later (BNPL) company that was founded in 2005 and has since grown rapidly. It operates in 17 countries, has 15 million U.S. customers, and was used to buy $53 billion worth of products in 2020. Klarna offers two interest-free short-term payment plans and other plans that charge interest.
Key Takeaways
- Klarna is a BNPL service that offers two interest-free payment plans: one that lets you pay in four installments over six weeks, and one that lets you order an item and pay up to 30 days later.
- Klarna also offers financing options from six to 36 months, generally with a 19.99% APR.
- Klarna can be used at more than 7,500 retailers in the U.S., including Amazon, Nike, and Sephora.
How Does Klarna Work?
Klarna's most popular products are two interest-free payment plans:
- Pay in 4: This plan lets you split your purchase into four equal payments. The first payment is due when your order ships and the next three are due every two weeks, for a total repayment period of six weeks.
- Pay in 30: This plan lets you order an item without making any upfront payment. When the item ships, Klarna will send you an invoice due 30 days later.
For purchases too big to pay off in 30 days or even six weeks, Klarna offers paid financing options, most of which are structured as lines of credit. The plans you're offered will vary based on your personal details and the retailer selling the product, and monthly installment plans range from six to 36 months. Merchants may also run special promotions on certain purchases, such as offering reduced or deferred interest.
Is There a Minimum Purchase Size When Using Klarna?
Yes. The minimum purchase you can make with Klarna is $10.
Is There a Maximum Purchase Size When Using Klarna?
Yes, and it depends on how you plan to pay. The maximum purchase using Pay in 4 is typically $1,000. If you're financing a purchase, the maximum is $10,000. Since plans vary based on your financial details, your limit may be lower.
Do Products Bought with Klarna Ship After the First Payment?
It generally works the other way around: When you buy something with Klarna Pay in 4, you won’t make any payments until after the order ships. Since online orders can sometimes take a few days to process, you might not make a payment until a couple of days after placing the order. If you choose Pay in 30, you won’t receive an invoice until the product has shipped.
Can I Use Klarna to Pay Bills?
No, you cannot use Klarna to pay bills.
Is There a Credit Limit to Use Klarna?
Yes, when you create an account, you will be assigned a Klarna-specific credit limit. Klarna determines this credit limit based on factors such as your credit score, how long you've been using Klarna, and how well you've paid back previous Klarna loans.
If you sign up for a Financing account, Klarna will send you an email with your credit limit. You can also find this number on your monthly statement and on the home screen of your Klarna app. The Klarna browser extension may also show you how much you're approved to spend on a particular retailer’s site.
How Can I Increase My Credit Limit?
Klarna doesn't accept requests to increase your credit limit. You can work on increasing your Klarna credit limit by using Klarna for purchases and making sure you don't miss any payments. After you’ve used Klarna responsibly for a while, you can try to make a purchase that’s over your limit and see if it’s approved
Does Klarna Affect Your Credit Score?
While interest-free payment options sound great, you might be wondering how using Klarna might affect your credit score.
Does Klarna Check Credit?
Klarna checks your credit each time you use the service to make a purchase, but the kind of credit check depends on the payment option you choose.
For the interest-free Pay in 4 and Pay in 30 plans, Klarna runs a soft credit check, which doesn't impact your credit.
For some financing plans, Klarna runs a hard credit check. This type of credit inquiry will show up on your credit report and can cause your credit score to drop a bit, although the effect usually only lasts for a year or so.
Does Klarna Report Your Activity to Credit Bureaus?
Klarna won't report your payment information to the credit bureaus, even if you pay late. That means late payments won't hurt your credit score, but it also means that using Klarna doesn’t help you build credit.
However, if you don't pay up after several months, Klarna will refer your account to a collections agency. Collections agencies can and do report delinquent amounts to credit bureaus, which could damage your credit score.
Note
If you use a credit card to make payments on your Pay in 4 or Pay in 30 plan, remember to always pay your credit card bill on time. Your credit card issuer will likely report any on-time or late payments to the credit bureaus, which will affect your credit.
What Credit Score Do You Need to Use Klarna?
Klarna’s public relations representative declined to say whether the company requires a minimum credit score for approval. However, the company does consider your credit history, credit age, and other factors when deciding whether to approve you for payment plans or financing.
Does Klarna Charge Interest?
On Pay in 4 and Pay in 30 plans, Klarna does not charge any interest, even if you pay late.
Financing plans are a different story, though. If approved, you'll likely pay a 19.99% APR, even if you have an excellent credit score. However, Klarna may partner with certain merchants to offer promotions like lower interest rates or deferred financing on certain products, and interest rates may vary from 0% to 24.99%, a Klarna representative told The Balance. You can save money by paying off your loan early, instead of paying the minimum each month.
Klarna's financing interest rate of 19.99% is comparable to the current average credit card interest rate of 20.28%, according to data collected by The Balance. but it's double the average 24-month personal loan interest rate, which was 9.46% as of February 2021.
Does Klarna Charge Fees?
Klarna doesn't charge many of the annoying fees, such as origination fees or prepayment fees, that come with some lending products.
However, if you don't make your payments on time, you’ll be charged a late fee; for Pay in 4, the late fee is up to $7. You may also be able to change your payment due date for a fee.
Is Klarna Safe?
Yes, Klarna offers the same industry-standard protections as other lenders. However, using BNPL services comes with a few general risks.
BNPL lenders make it more affordable to go shopping today. That's fine if you really need an item before you're able to pay for it in cash, and it can feel good to spend money on something that makes you happy—within reason.
The danger with any BNPL service, though, is that it might encourage you to spend more than you can actually afford. Even though you might be "saving money" by not paying interest, you can still easily go over your budget and hurt your progress toward your financial goals.
For example, if you use an interest-free loan to buy a $450 piece of artwork that you otherwise wouldn't have purchased, you didn't really save any money. You spent $450 more than you'd planned, and you could have put that money toward a goal like an emergency fund, down payment, or getting out of debt.
Which Retailers Accept Klarna?
Klarna has partnerships with more than 7,500 stores in the U.S., including popular retailers like:
- Amazon
- Lenovo
- Nike
- Overstock
- Sephora
How to Use Klarna Online
Shopping with Klarna’s partner retailers is easy. Simply search for stores that partner with Klarna on its website or through the app. From there, just add your items to your shopping cart and select Klarna while you're checking out to apply for a payment plan.
If you want to make a purchase from a retailer that isn't a Klarna partner, you can opt for a one-time card. Request this card through the Klarna app or website. If approved, you'll get a single-use digital card number you can use to complete your purchase.
How to Use Klarna In Stores
If you’d prefer to shop in a bricks-and-mortar store, Klarna allows you to create a digital card you can load to your Google Pay or Apple Pay wallet. Apply for this card through the Klarna app, and if approved, use your smartphone to pay for in-store purchases.
How Do Returns Work When Using Klarna?
If you’re not happy with your purchase, you can return products to the retailer as usual. Then you can report the return on the Klarna app or website to pause your payments while the return is processed. Depending on your payment plan and the amount of your return, you might receive:
- A full return: All of the money for the purchase will be refunded back onto your original payment method.
- A partial return for financing accounts: Your minimum payments will stay the same, and you'll simply pay off the balance sooner than originally planned.
- A partial return for Pay in 4 accounts: Klarna will credit the return against your remaining balance. If the return is greater than your remaining balance, you'll get the rest back on your original payment method. If the return is less than your remaining balance, it'll be distributed equally across your remaining payments so each one will be smaller.
How Do I Pay Klarna?
Klarna offers several options for paying your debt, depending on what kind of payment plan you chose:
- Pay in 4 or Pay in 30: You'll make payments with a credit or debit card. These payments will be automatically scheduled when you accept the loan, so you won't have to worry about remembering to make them.
- Financing: You can turn on autopay or remember to make payments on your own. You can use a debit card or link your bank account with Klarna to make your payments, but you won't be able to use a credit card.
Note
Klarna accepts all major credit cards, although you can’t use an American Express card to purchase a one-time card. You also can't use prepaid debit cards.
Be careful about using credit cards to make your payment. If you don’t pay off your full balance each month, you're essentially trading an interest-free loan for a loan with a much higher interest rate.
What Happens If I Don’t Pay Klarna?
If you're having a hard time coming up with the money to pay back your Pay in 30 plan, Klarna allows you to postpone your payment for a fee.
Otherwise, late or missed payments will incur fees. On a Pay in 4 plan, you'll be charged a late fee of $7. For financing accounts, you’ll pay a $35 late fee, although Klarna won't charge a fee that's bigger than your minimum payment due.
Other downsides of not paying include being denied future loans and potential damage to your credit score if Klarna refers your past-due account to collections.
Note
If you’re facing financial hardships, reach out to Klarna’s customer service team to ask for help planning your payments.
Frequently Asked Questions (FAQs)
How does Klarna work for merchants?
Klarna offers options for both small to midsize and large businesses. Merchants pay a flat fee per transaction, as well as a percentage of each transaction. In return, they are paid in full by Klarna when a customer makes a purchase, and Klarna takes on the customer's credit risk.
How does the Klarna app work?
The Klarna app allows you to make purchases and track orders from within the app. You can use it to make a Pay in 4 purchase at any merchant that accepts Visa. To make a purchase with the app, search for a store and select what you want to buy. When you're ready to check out, select the "Pay With Klarna" option. The app will create a one-time card. You can enter the card number at checkout to complete your purchase.
