Can You Trust Klarna? Is It Safe to Use?

klarna app on smartphone in miniature trolley in front of macbook

Online shopping is more popular than ever, but not everyone can afford to pay for products and services upfront. This is where Klarna can come in handy. You might have seen the logo when you go to pay for something online, or perhaps someone has suggested you try the service. So, what is Klarna, and can you trust it?

What Is Klarna?

Klarna (officially known as Klarna Bank AB) was founded in 2005 by Sebastian Siemiatkowski and Niklas Adalberth. The company was initially named Kreditor, but was renamed to Klarna in 2009, and officially became a bank in 2017 after achieving its banking license.

In the mid-to-late 2010s, things began ramping up for Klarna. After some rebranding, the company began teaming up with hundreds of online merchants to offer a buy-now-pay-later (BNPL) option for customers. According to the Klarna website, the company was valued at $10.65 billion in 2020.

Today, Klarna has over 150 million customers and over 7,000 employees. What’s more, Klarna works with over half a million online merchants in 45 different countries to provide people with the choice of buying now and paying later. But how, exactly, does this all work?

How Does Klarna Work?

In short, Klarna lets you shop online without having to pay the full transaction amount upfront. Say you’re buying a new pair of shoes, and they’re a little pricey. If the merchant you’re using is partnered with Klarna, you can opt to either pay the full amount later on, or pay off the total in installments.

Klarna has two options: pay later or pay in installments.

Pay in 4 is available within the US, whereas a similar Pay in 3 option is available in the UK. With the Pay Later option, you can pay the full amount for your item(s) 30 days after making your purchase. The latter options allow you to pay off the purchase in three or four installments.

If you’re paying in three installments, each payment will come out of your bank account every 30 days. If you’re paying in four, each installment will be taken every two weeks. These payments do not come with interest (as typical credit installments would), which is a big pull for Klarna customers.

When you check out with Klarna, you’ll be given a brief explanation of how the payment process works, as well as the date on which you’ll need to pay the first or only amount.

screenshot of asos website klarna payment window

You’ll need to provide Klarna with your date or birth to confirm your identity. All Klarna customers must be 18 or over. After providing this information and confirming that you want to pay with Klarna, you’ll be taken to a separate window, hosted by the Klarna website.

screenshot of klarna payment plan confirmation window

Here, you’ll be asked to confirm how you want to pay for your purchase. If you’re only conducting a small transaction, the pay-in-installments option won’t be available to you. Generally, orders between $35 and $1000 qualify for installments.

klarna payment confirmation window screenshot

After this, you’ll be asked to confirm your Klarna payment(s).

Missed Payments and Late Fees on Klarna

When you use Klarna, you’re expected to pay your installments on time. If you need a little more time to pay an installment, you can push the payment date back by 14 days in the Payments section of your Klarna account. You can also get in touch with the Klarna team if you’re having trouble paying due to financial issues.

If you do not extend your payment or get in touch with Klarna, a second attempt will be made to collect your payment. If this fails (i.e. if the provided payment card does not have sufficient funds), the payment will be added on to your next scheduled installment (if you have one).

If you keep missing payments, you’ll likely incur a late fee. Klarna charges a fee of up to $7 per missed installment. Late payments are handled by the debt collection team. If you’ve missed payments, you won’t be able to use Klarna again until you have cleared your debts. If missed payments are a recurring issue, you may be blocked from using Klarna in the future.

What Is the Klarna Card?

Klarna also has its own Visa card, available in the US, UK, Sweden, and Germany. This is a virtual card that customers can use to make purchases on websites via Klarna.

With the Klarna card, you can automatically split your purchases into interest-free installments. Any merchants that accept Visa will accept the Klarna card, which gives you a lot more options than if you were simply using the Klarna payment processor. You can track all your Klarna card payments via the Klarna app, which you can download for free.

Download: Klarna for Android | iOS (Free)

But this card isn’t free. Using the Klarna card incurs a monthly fee of $4.99, so keep this in mind if you’re considering signing up.

What Are Klarna Rewards?

Using the Klarna app, you can also enjoy perks via the Klarna rewards club. As a member of the rewards club, you can earn points each time you make a purchase using Klarna. Each dollar you spend gives you one point, which you can use to unlock deals, content, and other perks. You can track your points in the Klarna app.

While Klarna can certainly be useful in helping customers spread out payments, is it really safe? Can you trust this company?

Is Klarna Safe to Use?

klarna logo in front of person online shopping
Logo Credit: Klarna Bank AB/Wikimedia Commons

Klarna is a legitimate company that millions use in their day-to-day lives. It is by no means a scam, and offers customer service, payment extensions, and other kinds of support to its customers.

However, though Klarna is legit, it can prove to be a problem in terms of handling your finances. While you can manage your money more easily by spreading out payments, not having to pay the full price for items upfront may lead to some unhealthy shopping habits. For example, an individual could end up making multiple purchases, and then having to deal with a wave of payments all at once, further down the line.

Though Klarna doesn’t charge interest for distributing payments over time, you can incur fees and even a ban for consistently missing installations.

Klarna has faced a lot of criticism over the years for putting customers in cycles of debt, similarly as large scale creditors have. Though Klarna payments and credit card payments aren’t exactly the same, both can land you in debt if you do not keep track of payments.

Along with other buy-now-pay-later companies like AfterPay, Klarna has also been blamed for fueling shopping addictions, especially during the pandemic. As Anna Aufbäume points out on Medium, these payment services are enabling the unhealthy behaviors of shopping habits and can fuel emotional spending.

Klarna Has Its Perks but Poses Dangers to Shoppers

While Klarna is used by millions to ease the hit of upfront payments, giving users the option to delay payments can also encourage harmful spending habits. The safety of Klarna really depends on the person using it. The company itself is legitimate, but the service it offers poses financial risks.

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