Rhiannon Philps
Individuals wanting to buy now and pay later have a new option available, as Klarna becomes the first major buy now, pay later (BNPL) provider to launch a physical card in the UK.
Klarna announced the launch of its Klarna Card on 26 January 2022, after already rolling it out in Sweden and Germany.
The use of Klarna and other BNPL providers has boomed over the past couple of years, so it was only a matter of time before they expanded beyond the world of online shopping.
With the Klarna Card you will now be able to pay via Klarna at the checkout in physical shops, not just online, and then have up to 30 days to make the required payment.
This will give customers a new way to pay in a more flexible way at no extra cost.
As with other online forms of BNPL there are a number of things to be aware of before considering this type of credit, which we will cover off in this article.
What is the Klarna Card?
So what exactly is the Klarna Card? Essentially, it’s a new way to buy now and pay later, without facing any interest payments or fees. However, other BNPL providers may charge fees, so it’s always worth checking their terms and conditions.
Available in either black or pink, the Klarna Card is a contactless Visa credit card, which you can use like any other payment card. Whether you want to buy something in store or online, the Klarna Card allows you to make the purchase and then defer payment for up to 30 days.
You can also integrate the card with Apple Pay and Google Pay.
How does the Klarna Card work?
If you’ve paid with Klarna before, you may have used the ‘Pay in 30 days’ service. This is exactly what the Klarna Card offers.
You use the card to buy something now, and then you have up to 30 days after the purchase date to repay the full amount. It’s completely interest-free, so you only need to repay the amount you paid with no other charges to consider.
If necessary, you can extend the due date of the payment by up to 10 days at no extra cost.
Klarna aims to add more payment options in the future.
For anyone planning to go abroad, there are no foreign exchange fees when you use the card in other countries.
You can manage your Klarna Card in the Klarna app, with features such as:
- Notifications every time you use your card and when payments are due.
- An estimate of how much you can currently spend.
- The ability to freeze or block your card, or control which payment methods are allowed.
When you apply for the card, you will be given a credit limit. This is the maximum amount you will be able to spend using Klarna, and this limit is decided on an individual basis. Your limit can change depending on your credit and payment history.
» MORE: How does BNPL work?
How can I apply for a Klarna Card?
If you want to get this card, you need to get in line. According to Klarna, the Klarna Card already has a waiting list of 400,000 people, so it will take a while for it to be rolled out to everyone who wants it.
You can apply for a Klarna Card on its website or through its app. Only certain customers will be eligible to get a card, so if you don’t see an option to apply for it, you may not qualify.
To apply for a Klarna Card, you need to meet the following criteria:
- Be at least 18 years old.
- Be a UK resident.
- Have a good credit score and credit history.
Klarna will conduct a soft credit check as part of the application process for their card. This won’t affect your credit score.
It will take five to seven business days for your card to arrive once your application is approved.
Before applying for a BNPL card, make sure you’re aware of all the terms and conditions. NerdWallet research in 2021 highlighted the length and complexity of BNPL terms and privacy policies, but it’s important you fully understand the product you are signing up for.
Is there a catch?
Like any BNPL service, if used properly and responsibly, the Klarna Card can be a useful way to delay payment without facing a high rate of interest.
However, it’s important to remember that, when you use the Klarna Card, or any form of BNPL, you are taking on debt that needs to be repaid. Because BNPL is so easy to use, this fact can easily be forgotten and has led to people racking up hundreds, or even thousands, of pounds of debt.
As a result, you should only use a Klarna Card if you know you can afford to make your repayments within 30 days.
If you don’t pay back Klarna within the agreed timeframes, Klarna could freeze your account and not allow you to make any future payments. If you repeatedly missed payments, they may also may get debt collectors involved to get you to pay the remaining balance. Information on late payments may also be passed to credit agencies which could damage your credit score and make it more difficult to get credit in the future
If you use the card to put off paying for items that you realistically can’t afford, you could end up with unmanageable debt and face more serious problems in the future.
Regulations
Furthermore, while the Klarna Card sounds like a credit card, you won’t get the same kind of protection that a credit card offers. For example, if you have a problem with any goods you buy with a Klarna Card, you won’t get protection under Section 75 of the Consumer Credit Act.
You also won’t be able to complain to the Financial Ombudsman Service to sort out any problems you may have with the provider.
The BNPL industry, including the Klarna Card, is not currently regulated by the Financial Conduct Authority (FCA). However, after concerns about the risks that BNPL could pose to consumers, the FCA announced in 2021 that it would be coming under regulation. This is still in the pipeline – the Treasury’s public consultation into BNPL recently closed, with its outcome yet to be published.
Once BNPL is regulated, providers, such as Klarna, will have to treat customers fairly and conduct more stringent affordability checks, for example, which should help to prevent people from taking on unaffordable debt.
» MORE: How to find debt help
What are the alternatives to using a BNPL card?
Of course, using a BNPL card isn’t your only option.
You can always use a credit card instead and get the protection that brings with it. If you pay the card off in full at the end of the month or before interest starts being charged, this can be an alternative way to buy now and pay at a later date.
However, as with BNPL, if you use a credit card you should always make sure you can afford to make all your repayments, else there is a risk that your debts could pile up and become unmanageable.
It’s also worth bearing in mind that buying on credit isn’t suitable for everyone, especially if you’re struggling with your finances.
It may be better for you to budget and save up for bigger purchases, even though it means you have to wait a while before buying. But it does mean you only buy things you can afford and means you don’t have to worry about making any repayments later.
» MORE: How to make a budget
Image source: Getty Images
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