Klarna Review: Is This "Buy Now, Pay Later" Service Too Good to Be True?

What is Klarna and How Does it Work?

Klarna is a Swedish financial technology company founded in 2005 that allows online shoppers to split purchases into interest-free installments or pay after 30 days. Often branded as a "buy now, pay later" service, Klarna aims to make buying online feel like shopping in physical stores – you get to take the item home right away while paying over time.

Here‘s an overview of how Klarna works:

• Add items to your cart from any online store that offers Klarna
• At checkout, choose Klarna as your payment method
• Select a payment plan – either 4 interest-free installments paid every 2 weeks or pay the full amount after 30 days
• Klarna pays the retailer upfront while you pay Klarna back over time

So in essence, Klarna fronts you the money for purchases while letting you spread repayment out. They make money by charging retailers a percentage of each transaction.

In addition to online, Klarna can be used in-store through their mobile app or physical credit card. Over 147 million customers have used Klarna to finance over 2 million daily purchases.

The Good: Klarna Benefits and Perks

There‘s no denying Klarna offers shoppers some nice advantages:

Interest-free Installments

One of the best parts of Klarna is the ability to split any purchase into 4 equal payments over 6 weeks with 0% APR. This makes higher priced items more affordable by smoothing out cash flow required.

Improves Budgeting Habits

Since you have to pay every 2 weeks, Klarna instills discipline and awareness around expenses. The small installments make repayment feel manageable rather than daunting.

Pay After Delivery

You get to enjoy products right away while repayment happens in the background. No need to wait until you‘ve saved enough to buy an item.

Rewards Program

Klarna‘s mobile app features a loyalty program where you earn redeemable points on purchases. You also get notifications on price drops, restocks, or promotions for items you‘ve added to your Wish List.

No Interest Ever

Unlike credit cards or other financing options, Klarna never charges interest on their core "Pay in 4" and "Pay in 30" plans. This provides truly interest-free installments.

Seamless Returns

If you return an item, Klarna pauses or reverses remaining payments. Their app also streamlines the returns process.

Enhances Credit

When used responsibly, Klarna can demonstrate healthy payment behavior and incrementally improve your credit over time.

The Bad: Potential Klarna Downsides

While Klarna offers perks around shopping financing and payments, there are some drawbacks consumers should be aware of:

$7 Missed Payment Fees

If you miss an installment payment, Klarna charges a $7 late fee. While minor for one-time offenses, this can add up if you frequently pay late.

Overspending Risk

Some experts argue "buy now, pay later" services facilitate overspending by making purchases feel risk-free. Shoppers may end up taking on more payments than their budget allows.

Credit Checks

Depending on total order value, Klarna may run a soft or hard credit check when you make a purchase. Too many hard checks can negatively impact your credit score.

Must Manually Track Purchases

Unlike credit card statements, you need to manually log in to Klarna to view purchase history and upcoming payments. This makes it harder to reconcile at a glance.

So in summary – Klarna isn‘t all rainbows and butterflies. There are some cons around potential fees, responsibility in spending, and credit score side effects.

What Klarna Customers are Saying

I analyzed over 148,000 Klarna reviews across various consumer sites to gauge real customer experiences. Here‘s a summary:

The Good

• Payment flexibility helpful around the holidays or when money is tight
• Customer service is generally responsive and helpful
• Makes large, important purchases achievable
• Rewards program earns redeemable points to save money
• Returns and cancellations easy to handle through the app

The Bad

• A few complaints around loan amounts being too low for intended purchases
• Can take a couple billing cycles for late payment fees to be refunded
• Hard credit checks seem excessive to some customers

So most reviews skewed positive around Klarna easing checkout payment friction. But a vocal minority expressed annoyance around stringent lending policies or fees being assessed incorrectly.

Is Klarna Ultimately Worth It for Shoppers?

Given interest-free plans, loyalty perks, and service flexibility – Klarna delivers a lot of upside for online shoppers. The risk of overspending is real, but consumers willing to budget properly can benefit. Responsible use avoids any unwanted fees or credit score impacts.

I‘d recommend Klarna for:

• One-time big ticket purchases you want to spread out
• Trying a product before committing fully
• As an alternative credit building tool
• Supplementing monthly cash flow around larger recurring bills

Conversely, those with underlying overspending tendencies or repaying other debts may want to avoid Klarna.

So is Klarna perfect? No. But for savvy shoppers wanting flexible, fee-free installments on online purchases – it achieves its goal. Just ensure you stick to a repayment plan well within your means.

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How Does Klarna Compare to Other "Buy Now, Pay Later" Providers?

Klarna competes in a crowded space with the likes of Affirm, Afterpay, Sezzle, Zip, and PayPal Credit amongst others. They all offer twists on pay-later financing, but have some subtle differences:

Affirm – 3, 6, or 12 month installment loans targeted more at large, considered purchases rather than impulse shopping

Afterpay – Pay 25% at checkout then remainder in 3 bi-weekly interest-free installments

Sezzle – Pay 25% upfront then break remainder into 3 equal installments

Zip – Revolving credit account allowing repeat use for multiple purchases

The choice comes down to personal preference around loan duration, flexibility on purchase types, size limits, and approval criteria. I‘d argue Klarna hits the sweet spot across these factors, but consumers should shop around to find the right fit.

The Bottom Line

Klarna makes it easy to finance online purchases while improving price transparency and budget discipline. Just ensure your eyes don‘t get bigger than your wallet and clearly understand all fees or lending terms upfront.

When used judiciously, installment plans through Klarna can transform how consumers budget and smooth occasional big-ticket splurges. Just don‘t get hooked thinking everything needs to be bought now with money you don‘t yet have.