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Online shopping has grown in popularity since the start of the pandemic, and it’s still on the rise. In fact, e-commerce payments could grow 55% by 2026, according to a January study from Juniper Research. As consumers move away from cash and reduce their credit card use, an increasing number of these payments will consist of “buy now, pay later” payment plans.
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One of the largest BNPL providers to emerge from this trend is Klarna, a Swedish company founded in 2005. Klarna has 150 million active customers, of which 25 million reside in the United States. While Klarna lacks the name recognition of PayPal or Mastercard, it has the backing of financial powerhouses Visa and Sequoia Capital, not to mention a network of over 450,000 merchants who accept Klarna as a payment method.
What is Klarna and how does it work?
Klarna is a free buy now, paid mobile app and browser extension that lets you pay for your purchases over time. There’s no application to complete – Klarna treats each payment plan application as a separate credit decision made at the time of purchase.
The Klarna app also serves as a dashboard where you can track your orders, manage returns and payments, and access 24/7 customer service. You can even join Klarna’s rewards program and set up notifications to alert you when prices drop on your saved items.
3 ways to buy now, pay later
Klarna gives you the option to pay instantly through the app using your debit or credit card, or you can choose one of three BNPL plans.
The first is Pay in 4, a standard BNPL plan that splits your purchase into four interest-free payments. You use your own debit or credit card at checkout and make the first payment at the time of your purchase. Three additional payments, one every two weeks, are automatically debited from your card or bank account. Alternatively, you can apply for the Klarna Card, which offers interest-free, no-down payment in 4 days for a fee of $3.99 per month. The first 12 months are free.
30-day payout is available at merchants offering the “Pay Later in 30 Days with Klarna” option. Klarna will send you a digital invoice 30 days after the merchant confirms shipment of your order. You will pay the bill using a debit or credit card or bank account. There are no fees or interest charges, and you can return any part of your order you are unhappy with and pay only the final balance.
The monthly financing plan is a credit account, similar to a credit card. Depending on the purchase and the merchant, you may have a choice of 6, 12, or 18 month financing. The plan offers a 23-day grace period for new standard purchases you finance. After that, your balance bears interest. The annual percentage rate as of September 20 is 19.99%.
Unique cards are available for use with Klarna payment methods. Single-use virtual cards are available on the Klarna user portal, where you specify the store where you will shop, the amount you want to spend and the payment method you want to use.
Where is Klarna accepted?
Over 450,000 merchants accept Klarna, so you’ll be spoiled for choice when you’re ready to shop. You can use the app to pay for in-store purchases at any of Klarna’s partner retailers, which you can find in the app. Retail giants Target and Walmart are notably absent.
To make purchases at any online store in the United States that accepts prepaid cards, use either the app or the browser extension, which is compatible with Chrome. Not all online stores list Klarna as a payment method – Amazon, for example, has its own BNPL program called Monthly Payments. However, you can still use Klarna at these stores by generating a single-use card.
Online stores that accept Klarna
You can use the Pay in 4 option with any online store that accepts prepaid cards. The Pay in 30 Days plan, on the other hand, is only available through Klarna partner merchants who offer “Pay later in 30 days with Klarna” as an option. Here are 30 online stores that offer Klarna as a payment method at checkout, along with the Klarna payment plans they accept:
- Aeropostale: Pay in 4
- Anthropology: Pay in 4
- Beauty creations: Pay in 4
- Citizen: Pay in 4
- Converse: Pay in 4
- Dr Martens: Pay in 4
- French connection: Pay in 30 days, monthly financing (three installments in 60 days)
- Fret: Pay in 4, Pay in 30 days
- Fully: Pay in 14 or 30 days, pay in 3 or 4 interest-free installments (plan options vary by country)
- Furman Goods: Pay in 4
- Goat: Pay in 4, Pay in 30 days, Monthly financing
- H&M: Pay in 4, Pay in 30 days
- Honest: Pay in 4
- James Avery Handcrafted Jewelry: Pay in 4
- KonMari: Pay in 4, Monthly Financing
- Microsoft Store: Pay in 4, Monthly Financing
- Nadula: Pay in 4
- Nautical: Pay in 4
- Nike: Pay in 4
- petco: Pay in 4
- Psycho Rabbit: Pay in 4
- Rack room shoes: Pay in 4
- Road racing sports: Pay in 4
- Rooms to take away: Pay in 4, Monthly Financing
- Scandal Candles Co.: Pay in 4
- Sephora: Pay in 4
- Steve Madden: Pay in 4
- Urban Outfitters: Pay in 4
- Vans: Pay in 4
- Wayfair: Pay in 4
How to get approved for Klarna payment plans
Since you won’t know if you’re eligible to buy now, pay later with Klarna until you’re ready to pay, it’s a good idea to know what Klarna is looking for when assessing your payment requests:
- 18 or older
- On-time credit payment history
- Low debt balances
- Bank account linked to Klarna account
If your request is denied, remove the items from your cart and try again. You may qualify for a lower purchase.
Does Klarna do a credit check?
Klarna performs a smooth check, which will not affect your credit score, when you opt for Pay in 4 or Pay in 30 Days or when you apply for monthly financing. It does not check your credit when you sign up for Klarna or download the app.
How to register with Klarna
The easiest way to sign up for Klarna is to download the app and tap “Create Account” on the first screen. Then follow the prompts. Once your account is up and running, go to “Settings” to add payment methods such as credit and debit cards and bank account.
You can buy directly from the app, but if you’d rather not, you’ll still use the app to create a unique card with a card number that you can use to pay. Otherwise, you will simply select the “pay with Klarna” option and choose a payment plan from the available options.
Is using Klarna a good idea?
Klarna’s buy now, pay later plans could be a good idea for buyers who want to spread out their payments without having to pay interest on their balance. Refund terms are simple, and because payments are automatically charged to your preferred payment method, you don’t have to worry about forgetting to pay. Additionally, Klarna won’t perform hard credit extraction – the soft verification it bases its decisions on isn’t visible to other creditors and won’t affect your score.
That said, buy now, pay later has some drawbacks that you should consider. The most important is the risk of accumulating too much debt. And although Klarna’s BNPL options are interest-free, you will incur a late fee after two unsuccessful attempts by Klarna to collect payment.
Another downside is that BNPL programs typically lack the purchase protections offered by credit cards. It can be a real burden if you have a problem with an order after you’ve accepted and paid for it.
Klarna is a nice convenience, especially for those who don’t qualify for a credit card. But it’s best reserved for disciplined spenders who carefully track their purchases and are confident that funds will be available when payments are due.
Information is accurate as of September 20, 2022.
Editorial note: This content is not provided by any entity covered by this article. Any opinions, analyses, criticisms, evaluations, or recommendations expressed in this article are those of the author alone and have not been reviewed, endorsed, or otherwise endorsed by any entity named in this article.