What is Klarna Buy Now Pay Later & How Does It Work?

What is Klarna Buy

If you’ve shopped online recently, you may have been met with a payment option you haven’t seen before – Pay Later with Klarna.

Klarna is actually a bank – but one that’s brought arevolutionary new payment method to the masses. Although it’s relatively new tothe UK market – Klarna is now one of Europe’s largest banks – with 60 millionend-customers, and currently handling 40% of all online transactions made inits native Sweden. The company are hoping to replicate and grow on that successthe world over.

Here, we’ll look at what Klarna actually is, how it works – and cover a few other essentials that you’ll want to know before you start using the service for your online shopping…

How can I use Klarna?

The beauty of Klarna is its simplicity.

Let’s assume you’re shopping on a site that offers Klarna as a payment method. You add the item you’d like to purchase to your basket, then checkout in exactly the same way as you would if you were going to use a card or PayPal to complete your purchase.

When you reach the checkout screen, you’ll be asked to complete your name, address, mobile number and email address. Crucially, you don’t need to register for Klarna as you checkout – so there’s none of the hassle that sometimes comes with registering for accounts when you’re trying to complete a purchase.

The Klarna Checkout system automatically completes the rest of your information – and that info’s saved should you choose to use Klarna again in the future – making things even quicker.

When you press confirm, your order is complete – but isn’t yet paid for. Even though the retailer hasn’t taken payment, your order will be shipped and will land with you in the normal time. Despite the fact you’re not paying straight away, there’s no credit application – and no interest or fees added.

This Pay Later service is likely to sound especially appealing to anyone who’s had to wait a long time for a refund to be made for an order they’ve returned. Since payment isn’t taken straight away, you won’t need to make payment at all if you decide to return an item you don’t want. You’ll need to be mindful of your payment due dates when you’re returning an item – but, if there’s any delay with the merchant registering any part of your return, Klarna will actually issue a new payment due date so you’re not punished for a shop dragging its heels.

Pay Later with Klarna is just one of the company’s services – they also offer a payment scheme called ‘Slice it in 3’. As the name suggests, Slice it in 3 means you can pay for your purchase over 3 equal payments. The first payment is made when you place your order – with the 2nd and 3rd made 30 and 60 days later.

To use any of Klarna’s services, you must be 18 or older with a billing and delivery address within the UK.

What Is Klarna Checkout?

Klarna checkout is the name of the service that you’re directed to when you choose a Pay After Delivery option.

If you’ve ever paid for an item you’ve bought with PayPal, you’ll be familiar with this way of working. You click to say that you’d like to use Klarna – and you’re immediately whisked to their site to enter your details. This means you’ll never share your Klarna details with any third-party store – keeping your data as safe as possible.

How do I pay my Klarna bill?

Klarna’s Pay Later service offers 14 and 30 day options – and which you’re offered will depend on the retailer you’re shopping with.

Of course, those 14 or 30 days are optional – you can actually pay whenever you choose up to those limits.

When you do decide to pay, you’ll log in to Klarna, either through their website or their app – then you’ll see a list of items you still need to pay for. You can then make payment using your credit or debit card.

Does Klarna run a credit check?

Like all other companies who provide financial services,Klarna must abide by responsible lending rules set out by the Financial ConductAuthority (FCA). This means they will need to run a financial background check– but when you use their Pay Later option, it’s not the same kind of creditcheck you’d expect to receive if you were applying for a loan or credit card.

Instead, Klarna will run a ‘soft’ credit check – a look at your credit rating that isn’t visible to other lenders. This soft check considers your previous credit, your age – and some other factors, including the time at which the order is placed.

If you choose to use Klarna’s ‘Slice it’ payment option, they will run a full credit check – which will be visible to other lenders.

Does Klarna affect my credit?

Lots of people want to know if using Klarna will affect their credit rating. The answer, quite simply, is that it depends.

If you use Klarna Pay Later as intended, then no, your credit rating will not be impacted. The soft credit check will not show up to any other lender – and your repayment will not trigger any additional action from Klarna.

If you choose to use Slice it in 3, a full credit check will be made against your name. While this doesn’t automatically reduce your credit score, it may be something that companies will base any future lending decisions on – especially if it’s a service you use frequently.

Like with other payment options; including credit cards and store cards, failing to repay Klarna in the agreed 14 or 30 days (or as part of a Slice it agreement) will affect your credit. Klarna, like other lenders, will begin a collection process which will be reported to credit referencing agencies. Depending on the steps Klarna takes to recover the amount you owe them, you could seriously affect your credit rating for a number of years.

The good news is, Klarna will do a good job of making sure you don’t forget that you’d due to pay for the items you’ve already received. They’ll send reminders when your payment is coming up – and again on the day that it’s due.

Does Klarna have a limit?

Klarna, like all other responsible lenders, has a credit limit that they will extend to their customers. This credit limit is the maximum amount you will be offered at any one time – so, if you try to use Klarna and you’re already at your limit, you’ll be redirected to use another payment method.

Your limit will be decided by Klarna and will depend on a number of factors – including your credit history, your repayment record with Klarna – and your general ability to afford repayments.

The first time you use Klarna, you’ll be expected to sign an account agreement – when this is signed, you’ll receive an email that details how much credit you’ll be offered. This credit limit will be shown to you each month on your statement.

List of shops using Klarna

Even though Klarna is quite new tothe UK market – it’s well established elsewhere – so over 100,000 online storesalready use it as a payment method. There’s a long list of UK stores that useKlarna – and some of the most popular retailers include:

  • Topshop/Topman
  • Schuh
  • ASOS
  • Burton
  • Clas Ohlson
  • Daniel Footwear
  • Dorothy Perkins
  • JD Sports

Klarna’s Pay Later option is the most popular choice for stores – but retailers who offer more expensive products sometimes include ‘Slice it’ options for larger purchases.

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