Update 2/27/22: For every $250 in payments you receive a $5 gift card.
Update 6/9/20: Klarna is adding a rewards program and users will earn 1 point per $1 spent through Klarna. At this stage it’s unclear how much points will be worth.
Original Post from 2016: Recently a few readers have asked me what Klarna is after being offered a financing option for them when looking to get a credit card without a hard pull using the shopping cart trick (works primarily on Comenity Bank cards). Klarna is a financing company that has fairly recently entered the U.S. market with the aims to take market share from traditional store credit card issuers (such as Comenity Bank or Synchrony).
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How It Works
Stores that have partnered with Klarna will give users two options to make payment:
- Pay After Delivery (via Klarna)
- Pay Now by Card (standard payment)
If you choose to pay after delivery using Klarna, the check out process is quite simple:
- Enter e-mail address
- Enter zip code
No traditional credit check is done and Klarna pays the merchant directly for your purchase. You then have 14 days to pay Klarna with a credit card or via your bank account and you will pay no interest. After that period you’re charged 19.99% APY, you can also go onto a planned payment (e.g installment payments from 6 to 36 months) and pay a lower rate.
Our Verdict
There are obvious advantages to stores using Klarna, it speeds up the check out (when a user is applying for credit) process and that would naturally increase conversions. I assume the store also receives a commission or similar from Klarna.
Store credit card’s can be an extremely profitable market segment, so it’s no surprise to see a different approach to this market. We’ve also recently seen Blispay enter the market offering 2% cash back and interest free financing.
