Klarna Review 2022: What’s The Deal With Buy Now, Pay Later Companies?

Adam K.

3 min read

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Klarna is a Swedish fintech firm that offers its customer the ability to make purchases and pay over time with 4 interest-free payments.

Key Takeaways

  • Multiple payment options: Pay in 4, Pay in 30 days, Klarna Financing
  • Every new purchase must be approved
  • Pay in 4 offers 4 interest-free payments
  • Pay in 4 repayment plan does not affect your credit score
  • Late fees up to
  • No prepayment fees
  • Available at 250,000 merchants online and in-person

Pros & Cons

Interest-free financing X Late fees
No prepayment fees X Does not report on-time payments to credit bureaus
Multiple payment options X Reports delinquencies to credit bureaus

Who Should Use Klarna?

Klarna is a good option for:

  • You do not qualify for a credit card or you do not want to use your credit card
  • Looking to spread out the cost of a gift for special occasions e.g Holiday or Birthday
  • You can afford to pay off the purchase over 6 weeks

Klarna is not a good option for:

  • If you are looking to build your credit
  • Have generally poor repayment habits
  • You want to use the financing option, as it has a high-interest rate

What Is Klarna?

Klarna is a Swedish Fintech company founded in 2005. This company allows customers to make purchases online and in person with 4 interest-free payments, among other ways. This type of payment option is commonly known as Point of Sale loans and is similar to services offered by competitors such as Affirm, Afterpay, and Sezzle.

Klarna provides purchase experiences to 90 million active customers in 17 countries across 250,000 merchants worldwide and processes nearly 2 million transactions per day.

How Does Klarna Work?

Klarna’s most popular payment plan is the ‘Pay in 4’ option. With ‘pay in 4’ purchases are split over 4 equal installments. When you purchase an item through Klarna, 25% is due upfront and the remaining balance is split over 3 payments, paid every two weeks.

For example, you purchase a 0 winter sweater at your favorite store. When you checkout using Klarna, is due at checkout, and a additional payment is due every three weeks until the sweater is paid in full.

With Klarna, there are no fees or interest charges if you pay on time. Furthermore, Klarna does not charge any prepayment fees should you decide to pay off your balance ahead of schedule.

However, there are late fees if of up to if any scheduled payment remains unpaid after 10 days. It’s good to note that late fees will never exceed 25% of your installment payment amount.

Step-By-Step: How A Pay In 4 Will Work

  • Get the Klarna app
  • Set your budget. Create a one-time card with the amount you want to spend.
  • Make your purchase selection; choose the Pay 4 option at checkout.
  • Make the purchase using your debit or card. You cannot use prepaid cards.
  • The first payment is charged when the merchant completes your order (this is usually the shipping date for online orders).
  • The following 3 payments are automatically made every 2 weeks after your first payment (every 15 days for California residents).

Pay in 30 Days

Klarna’s pay in 30 days option allows you to receive your order upfront without any interest or fees. Klarna then provides up to 30 days to make the full payment. This is a great option if you want to try something before you buy it without using your debit or credit card.

Klarna Financing

Klarna offers 6-36 months of financing through its partnership with WebBank, member FDIC. Klarna financing comes with an average annual APR of 19.99%, which is quite high!

This financing option is similar to opening a store credit card from with department store. I wouldn’t recommend this option given the high-interest rate.

Payment Option Terms Fees Good For: Credit Check That May Impact Score?
Pay in 4 4 interest-free payments, paid every 2 weeks Late fee up to A purchase that you can pay in full over 4 payments. No
Pay in 30 Days No payment upfront, payment is due in 30 days No Fees A purchase you want to try before you buy without any upfront charges. No
Klarna Financing Average APR 19.99% with 6 -36 month terms Late Fee up to I don’t recommend this option Yes

Frequently Asked Questions

So How Does Klarna Make Money If It Doesn’t Charge Interest?

Retailers pay Klarna a transaction fee of 2-8% of the transaction cost every time a customer makes a purchase using Klarna. This is similar to the way credit and debit cards work.

  • Pay In 4: What makes Klarna appealing to retailers and customers is that customers can extend payments without being charged interest. And Retailers make additional sales that the potential customer may have otherwise passed up.

  • Pay In 30: Offering customers the option to pay in 30 days without being charged makes a person more inclined to make a sale knowing they won’t have a significant charge on their credit card or debit card. By doing this, Klarna is taking market share away from other card issuers while earning the transaction fee charged to the retailers.

Is Klarna Legit?

Yes, Klarna is legit. Klarna was founded in 2005 and has over 90 million customers and 250,000 partner merchants. Furthermore, well-known investors such as Visa, Sequia, Soft Bank, and Alibaba provide venture capital funding to Klarna.

In fact, Buy-Now Pay Buy-Now Pay Later companies are already quite popular in Europe. They account for 23% of online transactions in Sweden, 19% in Germany, and are prevalent in Norway and Finland (15% and 12%, respectively.)

Does Klarna Guarantee Approval?

No, Klarna does not guarantee approval. According to their website, “our aim is to support responsible, ethical, and sensible spending habits.”

In addition to your credit score, Klarna considers a multitude of factors before approving an order:

  • Internal data such as past payment history
  • Unpaid balances
  • Length of time you have been a customer
  • The total amount in your shopping cart
  • Too many purchases in a short amount of time e.g., fraud prevention

Helpful Information

  • Each purchase is considered a new decision, so rejection does not mean all future purchases will be declined
  • A rejection does not impact your credit score

If I Am Approved, How Much Am I Eligible To Spend?

Klarna evaluates each new purchase to determine whether or not to approve.

There is no set spending limit. Factors Klarna takes into consideration include:

  • Time of the day of the purchase
  • Size of the purchase
  • How long you have been a customer
  • Number of purchases paid back

There are more restrictions on newer customers until Klarna can “get to know you.” According to their site, “If you have used Klarna before, you will be able to see your estimated amount available to spend as your’ Spending Limit.’

There is a minimum spend of , and your estimated limit may be higher or lower depending on the store and payment method.

Who Accepts Klarna?

Klarna is accepted at nearly 250,000 merchants online and in-person. Stores such as Macy’s, Foot Locker, and Adidas accept Klarna.

High-end retailers such as Gucci, Bloomingdales, Ralph Lauren, and Hugo Boss also accept Klarna.

Additionally, some retailers offer discounts when completing a purchase through Klarna. A big plus!

Does Amazon Accept Klarna?

Yes, Klarna is one of the few Buy Now Pay Later companies that is accepted at Amazon. Note, you need to go through the Klarna app or Klarna marketplace to purchase from Amazon. The Klarna option will not be available if you go directly to the Amazon website directly.

Is Klarna Safe?

Yes, Klarna is safe! Klarna holds very high standards when it comes to personal data. Their legal experts are CIPP/E Standard of the International Association of Privacy Professionals (IAPP)

Does Klarna Do A Credit Check?

When deciding to ‘Pay in 4’ or ‘Pay in 30’ days, Klarna does a soft credit check, which does not impact or appear on your credit report.

However, applying for Klarna financing will likely be a hard pull on your credit and may impact your score.

It’s important to note that Klarna does not help build your credit if you pay on time. Klarna does not report on-time payments to the credit bureaus when using the ‘Pay in 4’ or ‘Pay in 30’ services.

But if you fail to pay per the agreed-upon terms, Klarna may report your delinquency to the credit bureaus, which will negatively impact your credit score.

Alternatives To Klarna

There seems to be an endless number of Buy Now, Pay Later companies popping up every time I shop online. They all offer slightly different features, but that goes beyond the scope of this article. A few other BNPL firms include:

  • Affirm (Known to have higher spending limits, can impact credit, offers fixed fee loans, can use for in-store purchases.
  • AfterPay (No hard credit checks, 0% loans, ontime payment history does not help build credit)
  • Zip (Quadpay) Online in and person purchases, available at many retailers.
  • Sezzle Available for online purchases only in the US and Canada. Not available at as many big box retailers compared to competitors.

In addition to using a BNPL service, you may want to consider using a credit card with a 0% introductory APR.

The Bottom Line: Should You Use Klarna?

Klarna is a fantastic interest-free financing option when used appropriately. I would generally see this used when buying a gift for a birthday or holiday; particularly so if your budget may be stretched due to unique circumstances. I do not think purchasing through Klarna should be used if you generally have poor spending habits, which could negatively affect your overall financial health.


I find comfort in that Klarna requires each purchase to be independently approved and uses various controls to approve purchases that they feel you will be likely to pay back in full and on time.

Do you use Buy Now Pay Later services? Comment below and let the Real World Personal Finance audience hear your experience!

Real World Investor


Adam is the founder of realworldpersonalfinance.com, an investing website dedicated to helping discerning individuals make the best investment decisions.

Before starting Real World Personal Finance, he was a Senior Vice President at one of the country's largest investment banks. He has over 10 years of experience working in financial services. His experience includes working with complex derivatives while spending many years working on a trading floor.

He has a bachelor's degree in Business Administration, majoring in finance.