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Klarna is one of the most talked-about payment options in online shopping today, but many people still ask the same question: What is Klarna, and how does it actually work? This article breaks down everything in plain terms.
You will explore how Klarna payments work in the US, what it costs, when it makes sense to use it, and how it compares to alternatives. We will also explore what Klarna means for merchants, including print-on-demand sellers.
Klarna payments differ by country. This article focuses on Klarna services in the United States, based on official information from Klarna’s US payments page.
Key takeaways
- Klarna is a buy now, pay later payment option (BNPL) that lets customers split purchases into installments, delay payment, or pay in full, offering more flexibility than many other methods at checkout.
- Klarna is designed for spending control and short-term budgeting, not investing, and works best when used intentionally rather than as a long-term credit solution.
- Using Klarna can help shoppers manage cash flow and saving goals, but missed payments may still result in late fees or credit impact for certain plans.
- Klarna is widely promoted through online ads and partnerships with major stores, which is why many shoppers encounter it during checkout for the first time.
- For merchants, Klarna can increase conversion rates and average order value by giving customers more ways to pay without handling customer credit directly.
What is Klarna?
So, what is Klarna in simple terms? Klarna is a buy now, pay later (BNPL) platform that lets customers split purchases into installments, delay payment, or pay in full using flexible payment options. Instead of paying the full amount at checkout, customers can choose a Klarna payment option that spreads the cost over time.
Klarna is part of the Klarna Group, a global fintech company founded in Sweden. Today, Klarna operates across major markets and works with thousands of merchants both online and in-store.
Klarna pays the merchant upfront and then collects customer payments directly from the shopper. The merchant pays Klarna a transaction fee for providing this service.
Klarna is popular because it gives people more control over their money, allows shoppers to afford larger purchases more easily, and helps merchants increase their average order value and checkout conversions.
How does Klarna work?
To understand how Klarna works, it helps to look at what happens during a typical transaction:
- A customer shops online or in-store
- Then, they select Klarna at checkout as their payment method
- The customer chooses a payment option and completes the purchase.
- Klarna pays the merchant right away, and the customer repays Klarna according to the selected plan.
Klarna’s pay system includes several payment methods. Each one works a little differently and is suited for different budgets and spending habits.
Pay in 4
This is Klarna’s most widely used option. With Pay in 4, the customer splits the full amount into 4 interest-free payments. The first installment is paid at checkout. The remaining three payments are charged every two weeks.
It does not charge interest when payments are made on time. However, late fees (up to $7 per missed payment, but never more than 25% of the purchase price) may apply if a payment is missed. For many consumers, Pay in 4 is useful for small to medium purchases they want to space out without paying interest.
Pay in 30 days
With Pay in 30 days, customers receive the product first and pay the full amount up to 30 days later. This method feels similar to an invoice. It gives buyers time to check the item before paying.
This option appeals to shoppers who want to avoid immediate cash outflow while still staying within a short payment window. There is typically no interest or late fee with this option if paid on time, though a missed payment may prevent future use of Klarna.
Pay over time
Pay over time is Klarna’s financing option for larger purchases. Customers spread the cost over several months using fixed monthly payment plans. These plans may include an annual percentage rate, depending on the terms.
This option functions more like traditional credit. Klarna performs a credit check, and interest may apply. The exact Annual Percentage Rate (APR) and cost depend on the customer’s credit profile and the selected plan.
Pay in full
Klarna also allows customers to pay the full amount immediately using a linked bank account, debit card, or card. In this case, Klarna still processes the payment, but there are no installments, no interest, and no later services involved.
Why is Klarna used in eCommerce?
Klarna is widely used because it benefits both shoppers and merchants. Let’s break down the main reasons Klarna is so commonly accepted online and in-store.
Buy now, pay later flexibility
Buy now, pay later services give people more flexibility with their purchases. Shoppers can choose to pay later, split the cost, or use financing based on their budget. This flexibility helps consumers afford items they might otherwise postpone.
Higher checkout conversions
Many merchants see higher conversion rates when Klarna is available as a payment option. Customers abandon fewer carts when they do not need to pay the full amount upfront.
Lower cart abandonment
Cart abandonment is one of the biggest challenges in eCommerce. BNPL solutions like Klarna reduce friction at checkout, especially for customers who hesitate because of price.
Increased average order value
Klarna often increases average order value because customers feel more comfortable adding extra items when they can split the cost. This directly improves revenue per transaction for merchants.
Built-in fraud protection
Klarna includes built-in fraud control systems that monitor transactions for suspicious activity. This protects both customers and merchants from fraud and unauthorized purchases.
When it’s good to use Klarna, and when it isn’t (as a buyer)
Klarna can be a useful financial tool, but it is not right for everyone. Let’s look at two simple user profiles.
Good candidate
A good Klarna user is someone who:
- Makes occasional purchases.
- Has a stable income.
- Uses Klarna to manage cash flow, not to overspend.
- Tracks their installments carefully.
- Uses Klarna’s pay options for small or medium purchases.
For this type of person, Klarna can help spread expenses without taking on long-term debt.
Risky candidate
A risky Klarna user is someone who:
- Uses BNPL frequently across multiple stores.
- Already carries high credit balances.
- Misses payments often.
- Struggles with budgeting.
- Uses installments to afford things they otherwise could not buy.
For this person, Klarna can quietly contribute to growing debt and late fees. Klarna claims that it promotes responsible spending, but the responsibility ultimately stays with the customer.
Print-on-demand businesses and Klarna
For print-on-demand merchants, Klarna can be a powerful payment option. Since POD products are custom-made, offering flexible payment options can help customers feel more confident placing higher-value orders.
Klarna is compatible with many popular eCommerce platforms that Printify merchants use, including Shopify, WooCommerce, and other major store builders. This allows POD sellers to offer buy now, pay later services without needing custom development.
Alternatives to Klarna
Klarna is not the only BNPL company on the market. Here are three of the closest alternatives.
Afterpay
Afterpay focuses almost exclusively on a Pay in 4 model. Customers split purchases into 4 interest-free payments. Afterpay does not offer long-term financing like Klarna.
Key differences:
- Fewer financing options.
- Simpler structure.
- Strong presence in fashion and retail.
Affirm
Affirm offers longer-term installment plans and financing with interest. It is often used for large purchases like electronics and furniture.
Key differences:
- More focus on credit-based financing.
- Interest and APR apply more often.
- Longer repayment periods.
PayPal
PayPal offers Pay Later services, including Pay in 4 and monthly payment plans. Many customers already trust PayPal because of its long history as a payment company.
Key differences:
- Integrated directly with PayPal accounts.
- Fewer standalone shopping features.
- No dedicated shopping app like the Klarna app.
Frequently asked questions
Klarna works by paying the merchant upfront and then collecting payment from the customer over time. When shoppers check out, they choose Klarna as their payment method, select a payment option, and agree to the terms.
Klarna handles customer payments, reminders and contacts, late fees, and collections.
The biggest downside is that it can encourage overspending. Multiple installments across different stores can stack up quickly. Missed payments may result in late fees.
In the case of the “Pay over time” financing plans, unpaid balances or late payments can be reported to credit bureaus. Klarna does not report to credit bureaus for its “Pay in 4” or “Pay in 30 days” options.
Klarna does not charge a monthly membership fee. Costs depend on the payment option. Pay in 4 and Pay in 30 days typically have no interest. Financing plans may include an annual percentage rate. Late fees may apply if a payment is missed.
Both are buy now, pay later services. Afterpay focuses only on Pay in 4. Klarna offers more payment methods, including Pay in 30 days, financing, and Pay in full. Klarna also has a shopping app and more in-store partnerships.
To summarize
So, what is Klarna at its core? Klarna is a flexible buy now, pay later payment option that lets customers split purchases into installments, delay payment, or finance larger orders. It is widely accepted online and in-store, offers several payment methods, and helps merchants increase conversion rates and average order value.
For consumers, Klarna offers convenience, budgeting support, and short-term flexibility. For merchants, Klarna offers access to more customers, higher spending, and reduced cart abandonment. It can lift conversion rates and average order value when used in the right context.
Like all credit-based services, Klarna should be used thoughtfully. Used the right way, Klarna can help consumers manage purchases without relying on traditional credit. Used carelessly, it can quietly add to your debt.
