Klarna Review: Split Up Big Purchases Into More Affordable Payments

Bottom line: Klarna is an easy-to-use buy now, pay later app. It gives users a simple way to split up payments on purchases without impacting their credit score.

At a glance

What is Klarna and how does it work?

Klarna is a buy now, pay later app. You can use it with any online U.S. retailer that accepts debit cards and credit cards. It's also available for in-store shopping with participating Klarna partners.

There are three main types of financing plans available with Klarna:

• Pay in 4: Split the cost of a purchase into four interest-free payments, paid every two weeks (every 15 days for California residents).
• Pay in 30 days: Receive your order and pay it later. Once the merchant confirms shipment of your order, Klarna sends you a digital invoice due in 30 days. This option is available with some Klarna partner merchants.
• Monthly financing: Use Klarna Credit to pay off a purchase over installments for up to 36 months. The annual percentage rate (APR) for standard purchases is 19.99%.

Klarna also provides a "Pay Now" option if you want to pay in full upfront. In some cases, there may also be other financing options available, such as "Pay over 6 months" with a fixed interest rate.

For purchases made using payment plans, Klarna accepts all major debit cards and credit cards for payment. Automated payments are scheduled when you make the purchase, and you'll get an email from Klarna with your payment schedule.

For monthly financing plans, Klarna accepts debit card and bank account payments. You can make manual payments or turn on automatic payments after enrolling your bank account with Klarna.

Top perks

No-interest financing

The best part about Klarna is its no-interest financing plans. If you choose the "Pay in 4" or "Pay in 30 days" option, you can make your order right away and pay it off over time.

This is perfect for those expensive purchases that you'd like to make ASAP but could stretch your budget if you paid in full. However, use this option sparingly so you don't end up with debt you can't pay off. And before you place the order, make sure you'll be able to complete the payments on time.

Available at most U.S. retailers

You can use Klarna to pay for purchases with any online U.S. retailer that accepts debit and credit cards, as well as in stores at participating Klarna partners.

Klarna lists quite a few online merchants in its app. Even if you can't find the merchant you want, you can enter the URL in the app to visit its site and place your order using Klarna.

Multiple financing plans

Klarna gives you a few different financing plans. It's nice to have flexibility about how you pay for your purchase, and not every buy now, pay later service gives you so many options.

Earn rewards

Klarna offers a free rewards club called Vibe. After you sign up and complete your first purchase as a member, you get a $5 welcome reward.

You earn 1 vibe for every $1 you spend with Klarna, and you can choose a reward every time you collect enough vibes. Klarna normally offers a reward every 250 vibes. Reward options include a $5 gift card from a popular merchant or a one-time discount voucher.

Shop with a virtual card number

The Klarna app lets you create a one-time card, which is a single-use, virtual credit card number. You set the amount you want to spend, and then you can use your one-time card for your purchase.

Virtual card numbers are beneficial from a security perspective. Even if your payment information is compromised during the purchase, there's nothing a scammer would be able to do with a virtual card number.

READ MORE: What Is a Virtual Credit Card?

Applying doesn't hurt your credit

Klarna runs a soft credit check on you when you decide to use any of its financing plans. A soft credit check doesn't impact your credit score at all.

LEARN MORE: What's the Difference Between Hard and Soft Credit Checks?

There's only one way that Klarna could negatively affect your credit. If you don't make your payments, Klarna could eventually turn the account over to a collection agency. A collection agency will typically report unpaid debt on your credit file.

What could be improved

Doesn't build credit

Unfortunately, using Klarna won't help you build credit. Klarna doesn't report payment information to the credit bureaus. Since your payments won't appear on your credit history, they also won't do anything for your credit score.

LEARN WHAT YOU CAN DO: How to Increase Your Credit Score

Late fees

Klarna charges a late fee of up to $7 if you miss a payment on a "Pay in 4" plan. Late fees will never exceed 25% of your order value. Although there's no late fee for "Pay in 30 days" purchases, you'll be in default and unable to use the service in the future.

Get an extension

Klarna lets you extend your payment due date once per order on "Pay in 4" and "Pay in 30 days" purchases. Ask for an extension if you need more time to pay.

The late fee can cost up to $35 per missed month on monthly financing plans. The amount of your late fee won't exceed your minimum payment due.

High APR on monthly financing

Monthly financing on standard purchases has a 19.99% APR (annual percentage rate). Depending on your credit score, you may qualify for a far lower rate if you get a personal loan. Consider all your options before choosing long-term financing with Klarna.

CHECK RATES FROM TOP LENDERS: Best Personal Loans

Short no-interest period

The longest no-interest financing Klarna offers is its "Pay in 4" plan. With that, you make your first payment when the merchant completes your order, and the next three in two-week intervals (or every 15 days if you're in California). That's six weeks to pay off your purchase.

While that's not bad, it's much less than some other no-interest options. If you have a high credit score, 0% APR credit cards would likely be a much better choice. These cards offer a 0% intro APR on purchases, and many of them have an intro period that lasts 12 months or longer.

COMPARE TOP PICKS: Best 0% APR Credit Cards

If you want an app that gives you more time to pay off your purchase: PayPal offers no interest on purchases of $99 or more that you pay off within six months. You need to use PayPal Checkout and select PayPal Credit to choose this financing option. While PayPal is a popular checkout option, Klarna is available at a much greater number of merchants.

If you want an app that doesn't charge fees: Affirm doesn't have any fees, including late fees. It also offers financing plans similar to those of Klarna. Unlike Klarna, Affirm may report payment activity to credit bureaus, so paying late could hurt your credit score.

Klarna is free to use. It doesn't charge any fees for making purchases or using its "Pay in 4" or "Pay in 30 days" financing plans. If you miss a payment on a "Pay in 4" purchase, Klarna will add a late fee of up to $7 to your outstanding balance. The late fee won't exceed 25% of your order value.

On monthly financing plans, Klarna charges interest. There's also a fee of up to $35 for late payments and returned payments.

Shoppers who want to split up large purchases into multiple payments or try before they buy for 30 days.

Klarna is a convenient option if you're looking for a buy now, pay later service. It has a user-friendly design, so anyone can jump right in and choose the payment option they want.