Klarna vs Afterpay: Which is Best?

If you’re struggling to choose between Klarna vs Afterpay, you’re not alone. As demand for Buy Now Pay Later (BNPL) solutions continues to skyrocket, countless providers are jumping into the industry to offer their own services. That means more options for consumers, but more confusion too.

Though BNPL offerings have been growing for some time now, the industry has experienced significant transformation in the last couple of years, during the pandemic. With the economy struggling and limited jobs available, customers are searching for help paying for the goods and services they need.

Both Klarna and Afterpay have emerged as valuable tools for the current economy, each offering their own convenient service to help customers access extra cash. Today, we’re going to cover the basics of Klarna vs Afterpay, to help you make your choice.

Klarna vs Afterpay: An Introduction

On the surface, Klarna and Afterpay (Clearpay) have a lot of overlap. Both allow customers to pay for various items and services over several weeks rather all at once. You’ll buy what you need with a small upfront chunk of cash, then the rest of the money is collected over time.

What is Klarna?

For most people, Klarna will be the go-to choice for Buy Now Pay Later services, simply because it’s the most well-known service. The solution was first introduced in Sweden in 2005, with the aim of making it easier for people to do their online shopping. Since then, Klarna has become one of the world’s top online shopping and payments services.

What is Afterpay?

Afterpay, now Clearpay, offers a similar experience to Klarna, by giving customers a quick and easy way to shop online. For the most part, you shouldn’t even need a credit check to start buying products, because the Clearpay system involves ensuring you never spend more than you can reasonably afford to pay back.

One point to note is that although Klarna and Afterpay are primarily intended for online purchases, they can also enable purchasing in-person when you have limited finances available and want to spread out the costs of a large acquisition.

Klarna vs Afterpay: How They Work

Since both Klarna and Afterpay (Clearpay) are designed to ensure shopping online is as quick and simple as possible, you can rest assured the process of using both of these tools is relatively straightforward. Both solutions will follow similar processes to allow you to make purchases online.

Afterpay, or Clearpay, asks you to download an application on your phone for a quick and easy way to scroll through available companies who accept Clearpay payments. When you add items to your cart and choose “Clearpay” at the checkout, you’ll see a number of “instalment” options you can choose from when you’re paying back what you owe.

The good thing about Afterpay is it’s extremely easy to get signed up. There’s no credit check required. Instead, you’re just asked for basic information like your date of birth, phone number and email. Once you have an account, Afterpay will give you a spending limit – usually something quite small, at around $150.

If you pay back what you owe correctly, and according to the right timeline, you’ll be able to increase your limit gradually. However, if you don’t use the service correctly, your limit can go down, making it harder to purchase certain products.

Klarna is similar to Afterpay in a number of ways. Once again, you’ll be able to do all of your online shopping through the same convenient app. However, you can also find a number of online websites offering Klarna on the checkout page.

Unlike Clearpay, Klarna does conduct credit checks to ensure you can reasonably afford whatever you like. The Klarna pay-back process is a little simpler too, with three interest-free instalments offered for every payment. This means you know exactly what you’re going to pay every time.

The Klarna app is a little more effective at helping you to save money, with instant push notifications sent to your phone whenever the pricing drops. If you’re shopping in-person, you can also use the app to create one-time card amounts for the cash you want.

Klarna vs Afterpay: Credit Requirements

Credit is always something of a headache for people who need to find assistance with their finances, but Buy Now Pay Later solutions are often more flexible than your standard loan. You may have to go through a credit check with some providers, but there’s rarely a “hard check” to worry about.

Afterpay (Clearpay) doesn’t perform credit checks to determine what you should be able to afford. Instead, the company focuses on giving its customers a small amount of cash to work with from the beginning. You can improve your credit limit, or it can reduce if you’re not paying back what you owe on time. Afterpay has no impact on your credit rating, and anyone over the 18 can open an account with very little effort.

Klarna does perform a credit check to determine your affordability levels, but they only look at a “soft check” which doesn’t leave any kind of mark on your score. However, if you do not pay back what you owe on time, there’s a risk you could end up losing points, as Klarna may report the missed payments to the credit bureaus.

If you choose to access one of the additional features offered by Klarna, like the 6 to 36 month loan financing, you will need a hard credit check.

Interestingly, Klarna and Afterpay help to ensure affordability for their “credit” offerings by providing spending limits. Afterpay will generate an estimated spending limit for your account based on how often you use that account, and your standing with the company.

Klarna will assess each purchase request individually, looking at your successful repayments, your order size, and your standing with Klarna. You will need to spend a minimum of $10 with each order.

Klarna vs Afterpay: Interest and Fees

Importantly, Klarna and Afterpay will both give you the opportunity to pay off what you owe for your bigger purchases without any interest. As long as you pay exactly what you owe on time, there shouldn’t be any specific interest rate or fees to worry about.

If you’re late paying back what you owe, then Afterpay will charge interest capped at around 25% of your total order value. Klarna, on the other hand, will charge between $7 and $35 every missed month with your account. This means you can end up with some decent fees over time.

Klarna also has a 6-36 month financing option for your bigger payments which does come with interest fees. You’ll pay between 19.99% for standard purchases, to 24.99% based on the length of your financing and other factors.

Afterpay will charge $10 in late fees if your order value is under $40. If the price of your order is above $40, you’ll pay 25% of the installment cost. Paying your late fee will give you a total of 7 days extra to pay back what you owe. If you don’t make the payment on time, you’ll be charged another $7. You may also have your account deactivated.

Late payment costs can quickly add up, so it’s important to be cautious when using the Klarna or Afterpay app to make your purchases. Remember that late payments can also influence your credit report.

Klarna vs Afterpay: Ease of Use

Retailers of all sizes are beginning to offer solutions like Klarna and Afterpay alongside debit and credit card payments. Similar to other solutions like Affirm and Sezzle, Klarna and Afterpay don’t rely heavily on your credit score to give you access to an affordable payment plan.

Both of these tools will also allow you to shop flexibly online or in-person. You can use Sezzle and Afterpay to find an online store you want to shop with via an app on Apple or Android devices. The app shows you all the ecommerce stores which allow for BNPL shopping.

Once you download the apps from Afterpay or Klarna, you’ll be able to choose the BNPL option at the checkout for any partnered store you shop with. You can also create virtual cards on both Klarna and Afterpay’s app which you can use in online stores or offline.

Both Klarna and Afterpay work to give you a great experience when you’re shopping with the app. You can check for available discounts and deals, look for price drops, and even change your payment method, or alter your payment options in the apps.

Klarna vs Afterpay: For Businesses

For companies looking to grow in a digital world, both Afterpay and Klarna work to attract more customers, particularly among millennial and younger demographics. Today’s consumers are looking for more flexibility with their personal finance options, without having to rely on traditional lenders.

Both Klarna and Afterpay allow business leaders to simply set up their store with the application of their choice and integrate a button which allows customers to shop with buy now pay later services. While your customers get to make their installment payments on larger purchases, you’ll get the cost of the product or service upfront.

There are some fees to consider, however. For instance, with Afterpay, merchants pay a flat rate of 30 cents for every transaction starting with the first installment paid by the customer. You’ll also have a commission rate to pay, but the cost can differ depending on a number of factors.

Klarna charges different transaction and processing fees depending on where you are in the world. In the UK, there’s a 2.49% plus £0.20 fee for each transaction. In the US, this fee becomes 2.99% plus $0.30 for every transaction. You can remove the payment options from your store at any time as there are no contracts to tie you in.

Klarna vs Afterpay: Customer Service

Both Klarna and Afterpay offer a similar approach to customer service. Both allow for email and phone support if you have any issues either as a merchant or a customer. Unfortunately, if you’re worried about cash going into your bank account, problems with your credit history, or other serious concerns, it can be hard to get a fast response.

The quickest way to connect with Afterpay may be to reach out to the company through Facebook, where chat agents can ask questions about refunds, or how to set up equal payments for your new purchase. For the most part, you may need to be willing to wait.

Make sure you check out the knowledge base options and blogs for each of these buy now pay-later apps, as they may be able to help answer your questions.

Klarna vs Afterpay: Which is Best

Both Klarna and Afterpay have a lot in common. They offer an alternative to paying for transactions to common options like VISA, PayPal, and bank account transfers. This makes it much easier for customers from all backgrounds to afford the products they want.

If you’re willing to pay the transaction fee associated with each service, you can also improve your chances of converting customers. There are no account set up fees or confusing coding requirements. Anyone can get set up in no time.

Of course, for both merchants and consumers alike, buy-now pay-later services can have their risks too. It’s worth making sure you consider your options carefully before you jump into using either tool.

Klarna is likely to be the top choice for a lot of companies and consumers in search of a wider range of services. Klarna offers more payment plan options and financing solutions. Afterpay, on the other hand, is ideal for smaller purchases.