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You’ve likely heard of buy now, pay later options by now. They are everywhere you look whether you’re shopping in person or online. A service you likely come across often is Klarna. Around since 2005, Klarna partners with 400,000+ merchants, has 147 million active customers, and processes 2 million transactions a day.
But is Klarna legit and safe? How does it work?
Here’s everything you must know.
In This Post:
- How does Klarna work?
- Is Klarna legit?
- Is Klarna safe?
- Klarna and Your Credit Score
- How does Klarna make money?
- Can you use Klarna in-store?
- Final Thoughts
- Online Stores That Accept Klarna To Buy Now, Pay Later
- Why We're Loving Klarna Right Now: Comparing Klarna vs Afterpay
- 5 Best Buy Now Pay Later Apps We Love
How does Klarna work?
Klarna offers a few ways to pay for purchases, but the most common is the ‘pay in 4’ model. With this payment method, you split your purchase into 4 payments, each equal to 25% of the purchase price.
You pay 25% when you make the purchase and then 3 equal payments of 25% of the purchase price every 2 weeks.
It’s easy to get approved and you’ll have an answer instantly when you apply through the app. If approved, you can instantly shop through the Klarna app, online, or in-store by using your Klarna QR code or by adding it to your digital wallet.
If you pay your Klarna balances off on time, it increases your chances of securing future Klarna financing in the future as well.
Is Klarna legit?
Klarna is a legit buy now, pay later service. You don’t pay interest if you use the buy now, pay later model and there aren’t any fees as long as you make your payments on time. So, when you wonder is Klarna legit, it is.
Even if you choose one of their other financing options, including pay in 30 or monthly financing, it’s still a legit option to finance your purchase. You might pay interest with any plan other than the buy now, pay later model, but the rates and fees are usually less than most other plans and they are from a legit FDIC insured bank called WebBank.
Is Klarna safe?
You may also wonder is Klarna safe?
It is safe, as far as keeping your information private and helping you afford a purchase. However, like any loan or credit card, there is a risk in using it. If you use Klarna to make purchases you can’t afford, it’s not safe.
Before you buy something using Klarna ask yourself if it’s something you can afford. You are just splitting payments up; you aren’t deferring them. You must pay the total off within 6 weeks, so don’t let yourself get in over your head in debt and be unable to pay it.
If you don’t pay the balance when it’s due, you won’t be able to use Klarna in the future, but this is a safeguard for both you and Klarna so you don’t spend money you can’t afford to spend.
What is the highest Klarna limit or Purchase Power?
The highest Klarna limits vary based on how you’re borrowing. If you’re using the Pay in 4 methods, the most you can borrow is $1,000. If you’re financing a purchase for longer periods (and paying interest), you may be able to borrow up to $10,000.
The amount varies based on your payment history, Klarna usage, and where you are shopping. Not everyone will have access to a $1,000 credit limit.
Can you have 2 Klarna orders at once?
You can have multiple Klarna orders open at one time, but the more you have outstanding, the harder it is to get approved when you need to use Klarna again. Try to keep your outstanding Klarna balances to no more than 2 accounts.
The key is to pay the balances on time and to wait until they are paid off to apply for a new Klarna Purchase Power.
What is the minimum and maximum Klarna payment?
With the Pay in 4 Method, you’ll pay 25% of your purchase upfront and 25% for each additional purchase every 2 weeks. Your minimum payment depends on the amount you charge. There isn’t a maximum amount you can pay, though. If you want to pay your debt off early, as opposed to every 2 weeks as it’s set up, you can.
What happens if I don’t pay Klarna?
If you miss a Klarna payment, they’ll charge you a fee of $7. The amount you missed will be added to your next installment payment. If Klarna still can’t collect the payment due at that time, they may send your account to collections.
While Klarna doesn’t report to the credit bureaus, if you don’t make your payments and they send your account to collections, the collection company will likely report to the credit bureau. This can hurt your credit and your chances of securing future credit or even Klarna Purchase Power.
Klarna and Your Credit Score
Like any personal finance tool, you should consider how Klarna affects your credit score. In most cases, it won’t have an effect like traditional credit cards do. Here’s what you should know about it.
Does Klarna build credit?
If you use Klarna’s pay in 4 model, it won’t build credit. They don’t report on time payments to the credit bureaus. However, if you miss payments, they may report that so while you can’t build credit with the pay in 4 model, you can hurt your credit if you don’t pay it.
If you use one of Klarna’s financing options, though, they do report to the credit bureau so it can help you build credit. Initially taking out the new financing will lower your credit score, but if you make your payments on time, the timely payment history can help you build a better credit score.
Does Klarna check credit?
Klarna does not check credit for the buy now, pay later payment model. They might do a soft credit check, but this doesn’t show up on your credit report as an inquiry. It’s just for Klarna’s information to help them decide if they should approve your application.
However, if you apply for any of the financing options, they will do a hard credit check. This means the inquiry will show up on your credit report and it may lower your credit score a few points initially.
Does Klarna report to the credit bureaus?
Klarna only reports its monthly financing programs to the credit bureaus. This means whether you pay on time or not, it gets reported to the credit bureaus. All other programs, though, are not reported unless you don’t make your payment on time.
How does Klarna make money?
It might seem like Klarna doesn’t make money since they don’t charge interest or fees on their most popular program, however, there are plenty of ways they make money.
First, they make money through the retailers that use their program. Each time a transaction is made at a retailer, that retailer pays Klarna a percentage of the sale – sort of like a commission. They also make money on late fees and interest charged on monthly payment plans.
Can you use Klarna in-store?
You can easily use Klarna in-store if you’d rather shop in person than online. Before you head out, choose the store you’ll shop at in the Klarna app. Get your limit for spending, and create a one-time card that you can add to your Google or Apple wallet for contactless payment at the register.
Final Thoughts
If you’re like most people and wonder is Klarna legit? It is. It can help you afford larger purchases by splitting up the payments into 4 equal installments. While you only pay 25% upfront, make sure you can budget for the remaining 3 payments which occur every 2 weeks and are automatically withdrawn from your linked bank account.
When used right, Klarna can be a safe and affordable way to make larger purchases without paying interest or racking up credit card debt.
Kim is a personal finance expert with a Bachelor’s degree in Finance from the University of Illinois at Chicago. Kim enjoys helping people take charge of their personal finances and has been doing so with her freelance writing for 15 years. She loves helping people break down difficult personal finance topics, helping them make smart financial decisions that make them feel empowered.
