Klarna vs Afterpay: Key Differences and Benefits
Written by
Andrew Lisa
Edited by
Emily Gadd
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Afterpay and Klarna are two of the biggest names in the buy now, pay later (BNPL) industry, but they offer slightly different versions of similar services, each with a unique user experience.
| Feature | Afterpay | Klarna |
|---|---|---|
| Does it affect my credit? | No | Possibly. Klarna reports payment activity and new accounts, but only for some loan types. |
| Payment options | – Pay in four installments – Pay in full – Pay monthly for six or 12 months |
– Pay in four installments – Pay in full – Pay in 30 days – Pay over time from six to 24 months |
| Fees | Up to $8 for each missed installment, capped at 25% of the total purchase cost. | Up to $7 for each missed installment, capped at 25% of the total purchase cost. |
| Payment Options | In-store or online | In-store or online |
How Does Klarna Work?
To pay with Klarna online, just click the pink Klarna badge at checkout on partner sites. In person, use the Klarna app at participating stores. The platform also offers Klarna’s one-time card service, which generates a virtual Visa card that expires after a single transaction.
Either way, you’ll use one of four payment options:
- Pay in 4: Choose Klarna at checkout to split your purchase into four interest-free payments, paid automatically every other week, starting with your first payment at the time of purchase.
- Pay in 30 Days: Put off payments for up to 30 days from the date of purchase with zero interest and no fees, as long as you pay on time.
- Pay Over Time: Break up larger payments into monthly payments spanning six to 24 months with interest rates ranging from 0% to 35.99% APR.
- Pay in Full Today: Use Klarna to complete a purchase securely in one lump-sum payment.
Klarna does not report activity to the credit bureaus for Pay in 4, Pay in 30 or Pay in Full transactions. The site states that Klarna “may” run a soft credit check for Pay in 30 applications, but that won’t affect your credit.
However, Klarna does inform TransUnion if you:
- Open a Pay Over Time loan
- Default or pay late on a Pay Over Time loan
- Make on-time Pay Over Time loan payments
How Does Afterpay Work?
Afterpay, now officially Cash App Afterpay, also states that it “may” conduct soft pulls for new applicants only at sign-up — but in terms of impacting your credit score, the similarities with Klarna end there.
Afterpay does not report its BNPL transactions or payment history to the credit bureaus for any of its repayment options.
- Pay in 4: Six installments with an initial payment at the time of purchase followed by four equal interest-free payments.
- Pay Monthly: Pay installments over six months or, for purchases over $400, over 12 months with APRs ranging from 0.00% to 35.99%.
- Pay in full: Pay in 4 users can pay their entire balance off at any time, but Pay Monthly borrowers can not.
Like Klarna, Afterpay also offers the option of a virtual credit card, which you can generate on the app to use for in-store transactions with Apple Pay or Google Wallet.
Fees: Klarna vs. Afterpay
Klarna and Afterpay both have similar fee structures.
- Afterpay: Users face a late fee of up to $8 for each missed payment, but the total late fees can not exceed 25% of the order value.
- Klarna: Users face a late fee of up to $7 for scheduled installments that remain unpaid after 10 days. Similarly, combined late fees won’t exceed 25% of the order value.
Spending Limits: Klarna vs. Afterpay
Neither Klarna nor Afterpay sets universally applicable spending limits.
Afterpay
- New customers start with lower amounts that increase as they use the platform responsibly.
- On-time payments are the ticket to increasing your spending limit.
- Missed payments and declined transactions can lower or eliminate it.
Klarna
Similarly, Klarna adjusts its spending limits based on the user’s payment history and time spent on the platform. The process is automatic and Klarna will not approve any requests for higher spending limits. You can increase your spending limit by:
- Consistently making on time payments
- Being an active user
- Paying down your past purchases
Which One Is Right For You?
Klarna and Afterpay offer similar services with similar payment structures, penalties and opportunities for both short- and long-term installment plans.
Afterpay has slightly higher missed-payment fees, but the most significant difference is that Klarna does report account activity — both positive and negative — to the credit bureaus for some loan types and Afterpay does not.
FAQ
Here are the answers to some of the most frequently asked questions about Klarna and Afterpay.- Is it better to use Klarna or Afterpay?
- It’s better to use Klarna if you want your account activity reported to the credit bureaus and Afterpay is best for those who don’t.
- What are the disadvantages of using Afterpay?
- Afterpay’s late fees are slightly higher and the platform does not provide an opportunity to boost your credit score with responsible use.
- What are the disadvantages of Klarna?
- Klarna reports account activity for some loan types to the credit bureaus, which could negatively impact your score.
- Is Afterpay good or bad for your credit?
- Using Afterpay does not affect your credit because it conducts only soft pulls at signup and does not report account activity to the credit bureaus.
