Klarna Review 2023: Buy Now, Pay Later With This Service

As a buy now, pay later service, Klarna lets you break up large purchases into manageable payments — often with no interest.
Key Features
  • Varying payment plans
  • Limited in-store use
  • Soft credit check with two plans
Overall Rating 4
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The Penny Hoarder Overall Rating
Interest rates starstarstarstarstar
Late fees starstarstarstarempty star
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This is a review of Klarna, a buy now pay later service. It's overall rating is 4 stars.

If you’ve ever found yourself staring down a large purchase without enough money on hand, Klarna is a Swedish fintech company that may be able to help you.

Possibly the greatest thing out of Sweden since IKEA and those delicious tiny meatballs, Klarna allows you to make large purchases and split them up into smaller payments — most of the time without interest.

So, if that new pair of expensive shoes or flat-screen TV is just calling out to you, Klarna may be the solution. In this Klarna review, we’ll explore what exactly the service is and how it works, explain how it affects your credit report, as well as address some other common questions.

What Is Klarna?

Klarna is a buy now, pay later service. You can think of it as an upgrade to layaway plans of the past. With buy now, pay later services like Klarna, you can separate purchases into smaller, more manageable payments. The best part is that you get to walk away with or have your product shipped imminently to you — no waiting around.

Klarna gives you a few options for obtaining your shiny new toys, including the ability to split your purchase into four interest-free payments, pay in full within 30 days without interest, or divide your purchase using monthly financing (interest is included).

When shopping online, Klarna is limitless, as you can create a virtual credit card for your purchases. When it comes to in-store purchases, Klarna partners with select brands, but it’s not as widely available as we wish it were at this time.

How Does Klarna Work?

All right, so we’ve caught your attention, and that solid-gold, diamond-studded poodle statue seems like the perfect addition to your minimalist living room.

But how exactly does Klarna work? Was it easy to use in our testing, and would we recommend it? In short — yes, it’s easy to use, and yes, we would recommend it to nearly everyone.

Shopping With Klarna

To get started, you’ll want to download the Klarna app, which is available for Android and iOS devices. From there, you can launch the app and create an account easily. Once your account is all set up and good to go, you can start shopping to your heart’s content.

The Klarna app instantly suggests ways to pay with the service at the top of the screen, including shopping online or paying in-store. Again, that in-store feature is only available with select brands, so we suggest you check out Klarna’s website for more information on its current partnerships.

To make our purchase, we simply tapped on the Shop Online option and then selected our website of choice. Once at the checkout page with our cart loaded, we tapped the Pay button at the bottom of the screen to create a one-time virtual card.

Selecting a Financing Option

After entering the amount of our purchase, we were given different payment plan options to select. In our case, our order was $200, so we had the option to either split the purchase into four payments of $50 (billed every two weeks at 0% APR) or pay over time with six monthly payments starting at $33.33 (APR ranging from 0% to 28.99%).

Once you make your selection, you’ll be asked for credit card or debit card details that you wish to use for your future payments. Then, you’ll be presented with a virtual credit card number that you can use to make your purchase.

That’s it. Your order is placed and your new object of desire is on its way to you without much effort.

Making Your Payments

Remember, as fun as Klarna might seem (and it is), you do need to make your required payments. Klarna will remind you in the app when due dates on your payment plan are coming up, but the service will automatically bill your bank account according to the agreed-upon monthly payments.

There is a consequence for late or missed payments; Pay in 4 customers will find a late fee of up to $7 applied to their account after two unsuccessful payment attempts. Failing to make a “Pay Later in 30 Days” payment will result in your account being defaulted (which may appear on your credit report, affecting your credit history) and the inability to use the service in the future — so stay on top of those payments!

The typical bank-style fees come into play with multi-month financing, where a late or returned payment will trigger a fee of up to $35. This is likely due to the fact that Klarna uses a credit plan offered by WebBank and is subject to the institution’s late fees.

Alternatives to Klarna

The Klarna app may not be the perfect option for everyone. Below, we’ve highlighted two similar buy now, pay later services so you can see the similarities and differences between these three popular options.

Buy Now, Pay Later Services Compared

Features Klarna Afterpay Affirm

Payment schedule

Pay in 4, Pay in 30 Days & Monthly Financing

First of 4 payments immediately, then every 2 wks.

Affirm Pay in 4 (every 2 wks) or Monthly Financing

Interest rates

0% for Pay in 4 and Pay in 30 Days; 0%-29% Monthly

0% interest

0% on Affirm Pay in 4; 0%-36% on Monthly

Late fees

Up to $7 on Pay in 4

$10, followed by $7 if payment isn’t made

No late fees

Credit score effect

Soft credit check for Pay in 4 and Pay in 30

No credit check

Soft credit check; may report history to Experian

Where it’s accepted

Everywhere online & select in-store retailers

Everywhere online & select in-store retailers

Everywhere online & in-store w/ wireless pay
Check out our in-depth reviews of Afterpay and Affirm.

Additional Klarna Alternatives

If you don’t wish to use a buy now, pay later financing service, you may want to look into other ways to make a purchase.

Possible alternatives include taking out a personal loan or using a low-interest credit card.

Learn more about the basics of credit cards in The Penny Hoarder Academy: Credit Cards 101. Both of these options would allow you to finance larger payments, but their pros and cons may differ from Klarna.

The Pros and Cons of Klarna

  • Break big charges into more manageable chunks
  • 0% interest financing with some payment plans
  • No hard credit check with Pay in 4 and Pay in 30 Days options
  • Choice in payment plans

  • Hard credit check with Klarna’s monthly financing plan
  • Klarna doesn’t report to financial bureaus, so you can’t build credit with the service
  • Late fees apply to missed or late payments

Frequently Asked Questions (FAQ)

How Trustworthy Is Klarna?

Klarna is a business based in Sweden and founded in 2005. At one point, 40% of all e-commerce sales in Sweden went through the company. Now, Klarna is available in a number of countries, including the U.S., where it partners with FDIC member WebBank for financing.

Does Klarna Affect Your Credit?

It depends. Klarna will perform a soft credit check, which does not affect your score, when using the majority of its services, including Pay in 4 and Pay in 30 Days. However, Klarna will perform a hard credit check when you apply for a Klarna Financing Account. Klarna does not report on-time payments to credit bureaus and will not help you build credit.

Can You Pay Off Klarna Early?

Yes. While Klarna’s system is set up with automatic billing, you can make additional manual payments at any time. As a result, you can pay off Klarna early without any consequences.

Michael Archambault is a senior writer for The Penny Hoarder focusing on technology.