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How Klarna Works – Is It Safe to Use?

How Klarna Works – Is It Safe to Use?

What Is Klarna and Should You Use It?

Breaking into the consciousness of online shoppers via popular retail brands such as Asos, Klarna has quickly become a preferred way to buy now and pay later.

Once accepted for the service, customers are basically given either a 14 or 30 day window to pay for their order. And the best part is – you only pay for what you keep. In short, Klarna is a way for those who can’t wait until payday to get the items they need – not too dissimilar to payday loans.

How Klarna Actually Works

Klarna is partnered with thousands of merchants here in the UK. The business model is essentially a spinoff of installment loans but for good and services. Meaning, you can spread the cost and don’t have to pay upfront for the items you desire online. Klarna makes it money by charging the retailer for each transaction via it’s service.

Klarna now has a diverse payment portfolio giving customers more choice on repaying, these loan options consist of:

  • Pay in 3 with Klarna – your total cost will be split into 3 months worth of payments.
  • Klarna card – this is basically a credit card, the invoiced must be paid in 30 days.
  • Pay over 30 days – no need to pay upfront but will be required to pay for the goods after 30 days.
  • A one-time card – use the card to pay the total amount you want to spend on an item/items.
  • Klarna financing – like a personal loan – you can borrow larger amounts and repay over longer terms.

 

What is Klarna?

Is Klarna Good to Be True?

Anyone can apply for Klarna, but due to lack of disposable income and an increased trend of shopping online, Millenials are deemed to be the perfect target. With no interest, fees or late charges, surely it’s a win win situation for all those involved.

It’s only when you consider that up to a quarter of Millenials in England struggle with debt that a problem arises. Giving them the option of purchasing in vast quantities with the illusion of no repercussions may lead to unpaid bills. This won’t only affect their credit score, but their details can be passed onto collection agencies too.

What’s in It for Klarna?

If Klarna aren’t charging fees or earning interest, then you may be wondering how they make any profit at all. It turns out that they rely on merchant transaction fees from the retailers themselves. In return, Klarna promises around 30% of extra ecommerce orders and an enviable boost of the average order value by 34%.

Popularity for Klarna

Yes, Klarna has become a popular method of buying now and paying later. You only need to look at the 15,000 plus merchants who have already jumped on board to see the effect it’s having on the online market. Used in moderation, and with a full intent of paying back the amount in the designated time frame, it’s a great tool for both retailers and customers alike.

Who wouldn’t like a nice new outfit for that party you’re looking forward to. However, it could also be a snowball debt trap for those who divulge in the availability and easy impulse buying with Klarna.

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