The Klarna Card, launched by 'buy now, pay later' (BNPL) firm Klarna in 2022, allows you to borrow for in-store and online purchases. But it's evolved since it first came out.
In June, the card was revamped and now charges a monthly fee and borrowers will have to undergo a hard credit check. But as the card is now a regulated product it also offers better protection for borrowers.
Here, Which? explains what you need to know if you're thinking of signing up.
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1. Klarna runs a hard credit check
You must be a UK resident and at least 18 years old to be eligible for a Klarna Card.
You'll also need to have already used (and repaid on time) a Klarna scheme before.
For most of its products (such as 'Pay in 3' or 'Pay in 30'), Klarna only runs soft credit checks before lending to you.
But as the Klarna Card is regulated by the Financial Conduct Authority (FCA), it will run a hard credit check to assess your eligibility. A hard credit check will appear on your credit report and could affect your credit score.
- Find out more:how to check your credit score for free
2. There's a £2.99 monthly fee
Klarna introduced a £2.99 monthly fee in June 2023, which amounts to £35.88 for a full year.
If you don't plan to use the card much or are unsure about signing up for one, you might want to weigh up whether it's worth incurring this cost.
3. Your spending limit will change
Klarna calculates your spending limit continually.
It does this by looking at your credit history (via a soft credit check), your repayment history with Klarna to date, and how many outstanding or overdue payments you have (including with other credit providers). Klarna told us it makes a new lending decision on each and every transaction.
The overall maximum limit on the card is around £2,500, but to be eligible for this you would need to meet income, credit score and payment-behaviour thresholds. The current average limit is closer to £900.
You can view your available amount in the Klarna app, where you can also reduce your spending limit.
- Find out more:how BNPL schemes encourage impulse buying
3. You can use it at home and abroad
The Klarna Card can be used wherever a Visa credit card is accepted. You can pay using contactless or chip and Pin, but you can't use the card to withdraw cash.
The card can also be used overseas in any store that accepts Visa – there are no foreign exchange fees and Visa handles the currency conversion.
However, certain types of businesses are restricted for ethical reasons, including gambling companies and other financial merchants associated with high levels of fraud.
- Find out more:online shoppers bombarded with BNPL schemes
4. There are late payment fees
Unlike other forms of credit, you won't incur interest with your Klarna Card – but missed repayments will lead to late fees.
Late fees are charged at £5 or 25% of the order value if your order is below £20. Klarna charges a maximum of two late fees per order, meaning your purchase could end up costing you £10 extra if you don't make your repayment dates.
Klarna will report missed repayments to credit reporting agencies, which could hurt your credit score. Your debt may also be passed to a debt collection agency if you continue to miss payments.
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5. You can extend your repayment date
If you think you're going to miss a repayment, you can pay a fee to extend your due date to the following month's statement.
You can only extend repayments for purchases between £15 and £300, and the fee will range from 50p to £4.99 depending on the purchase amount.
Likewise, you can also pay off statements or individual purchases early if you wish to via the app.
6. You'll get Section 75 protection
As the Klarna Card is now a regulated credit product, you will benefit from Section 75 protection for any purchases you make with your card.
Section 75 applies on purchases worth £100 up to £30,000 and means your credit provider is jointly liable if anything goes wrong with your purchase – so if a company goes bust and you don't receive your item, you can make a claim with your credit provider to get your money back.
You'll also be able to complain to the Financial Ombudsman Service (FOS) if you're unhappy with Klarna's service.
Currently, you don't get Section 75 protection and can't complain to the FOS if you've used Klarna's Pay in 3 or Pay in 30 products as they're unregulated.
- Find out more:chargeback vs Section 75
7. There are fraud checks in place
If Klarna detects a potentially fraudulent payment on a Klarna Card, its automatic systems will alert you. You'll then be asked to confirm that it's a genuine purchase.
If you notice your card is lost or stolen, you can either temporarily freeze it or block it permanently on the Klarna or web app. Its fraud protection policy says you should do this immediately.
You can also contact Klarna by chat or 24/7 by phone to report any suspicious activity.
Klarna told us that, in general, if there are fraudulent transactions made on your card and you've taken reasonable steps to protect your account, you would not be held liable for these transactions.
- Find out more:how to pay off BNPL debts
This story was published in February 2022, when the Klarna Card launched. It has been updated to reflect how the card works in 2024 and what fees it will charge.
