How Does Klarna Work?

Wondering how to use Klarna and how it works? 

Simply choose the Klarna option at checkout and Klarna will show your options. 

Once you’re signed up, you have three ways to pay with Klarna:

  • Pay in 4

  • Pay in 30 days

  • 6 to 36-month financing

Pay in 4 is Klarna’s interest-free payment option. When you choose Pay in 4, your purchase is split into four payments. The first payment is due at checkout. The remaining three are made biweekly over a six-week period. You can log into the app to schedule payments or set them up automatically using a linked debit card.  

Pay in 30 days allows you to complete your purchase and pay off the balance in full within 30 days. There’s no interest and no fees to use Pay in 30. 

You can also take longer to pay off purchases with Klarna. Financing options from six to 36 months are available through Klarna’s partner, WebBank. But if you choose this buy now, pay later option you may pay interest and fees. 

How does Klarna make money?

You might be wondering how does Klarna make money if it doesn’t charge customers interest (unless they’re using the long-term financing option). The simple answer is fees.

Klarna charges fees to the retailers who use the platform to offer financing to shoppers. It’s almost like the card processing fees retailers pay to accept credit card payments. Klarna can also charge customers fees as well. 

Specifically, you might pay a late fee if you don’t pay on time. If you choose Pay in 4, the late fee maxes out at $7. For monthly financing, the late fee can be up to $35. The good news is, Klarna offers the flexibility to change your payment due date if needed. 

How to use Klarna in stores and online

You can use Klarna Pay in 4 when you’re shopping online or in stores. How Klarna works can depend on how you’re shopping. 

To use Klarna online, you can download the Klarna browser extension for Chrome. Once you have the extension installed, you can shop anywhere online. To use the extension when you’re ready to check out, you just click the ‘K’ symbol in the top right-hand corner of your browser window. You’d enter in your debit or credit card information to make the first installment payment and check out. 

Klarna allows you to create a one-time card to use for online purchases. This is a unique card number that’s tied to a single transaction. Each one-time card in your Klarna account represents an individual payment plan. That can make it easier to track your purchases and stay on top of payment dates. 

If you’re shopping in a store, you can use the Klarna app to check out and pay. You’d simply open the app, choose Pay in 4 as your payment option and check out with your linked debit card or credit card. It’s just like using your mobile wallet to pay, only you’re choosing to buy now, pay later for part of the balance instead of paying it all at once. 

Klarna Pros and Cons

Short-term installment loan platforms like Klarna can offer advantages and disadvantages. Understanding some of the main pros and cons can help you decide if using them makes sense. 

Here’s a quick rundown of Klarna’s pros:

  • Convenient and easy to use

  • Works with a wide variety of retailers

  • Flexible payment options, including Pay in 4

  • No upfront fees

  • Earn a $5 reward when you sign up

And here are some of Klarna’s cons:

  • You may pay interest for 6 to 36-month financing

  • Late fees can apply to missed payments

  • Approval for buy now, pay later financing isn’t guaranteed

Does Klarna charge interest?

Klarna does not charge interest for its Pay in 4 and Pay in 30 financing options. So you can buy things now, pay for them later without paying high interest the way you might with a credit card. If you link a credit card to your Klarna account, however, your credit card company could still charge you interest unless you pay your balance in full. Interest may also apply for six to 36-month financing plans.