Klarna vs Afterpay: Which is the Better Choice?

Did you ever have to save money for a purchase for what felt like years until you could finally afford it? Buy now and pay later services are here to solve this problem, and they’re surprisingly good at this job. From clothes and home appliances to expensive furniture and high-end gadgets, these platforms make big purchases more accessible to the average buyer, doubly so for younger people.

The two platforms that usually come up when speaking about buy now, pay later services are Klarna and Afterpay.  However, many questions may arise: Are Klarna and Afterpay connected? What do they have in common, and what's different? Which one should you choose? Read on to learn about their fees, features, and spending limits, and decide which option works for you.

The Difference Between Klarna and Afterpay

Klarna and Afterpay Credit Requirements

Traditional financing institutions like banks review your credit history, income, employment status, and other factors when you apply for a credit card or long-term financing plan. Buy now, pay later services usually don’t do that or perform at most a soft credit check. Besides, neither Klarna nor Afterpay has minimum credit score requirements, making them an excellent choice for those with a below-average or nonexistent credit history.

Klarna

Klarna performs a soft credit check when users apply for the "Pay in 4" service to ensure they’ll be able to pay off. This check doesn't affect the user's credit score, but the platform does report the payment information to credit agencies. For larger purchases that require long-term financing, the service performs a hard credit check, which affects the user’s credit score.

Afterpay

Until recently, Afterpay did not perform any credit checks at all, but now new users joining the platform have to undergo a soft credit review. The good news is it still doesn’t report late payments to credit bureaus, temporarily freezing the account instead.

Klarna vs Afterpay: Fees and Interest

Like the majority of buy now, pay later platforms, Klarna and Afterpay don’t have account maintenance fees, and provide pay-in-four services free of charge (the money is paid by the merchants, who enjoy an increase in sales in return). However, if you want to finance a purchase over a significant period, you’ll still face a variable interest rate set by the merchant, up to a maximum of 21.90%. Afterpay doesn’t charge interest rates or upfront fees.

On the other hand, if you miss the due date, you may be charged a late fee. Klarna has a $7 late fee, while Afterpay charges a minimum of $8 for every missed payment. However, the overall late fees for each order cannot get over 25% of the purchase value. Also, remember that missed payments on Klarna will impact credit rating.

The good news is that you can extend a due date in a Klarna app for pay-in-four orders (but not for financing). Also, both companies don’t have prepayment penalties, so you may pay off your purchase as soon as you like and make loan payments whenever you choose without paying any fees or extra interest.

Afterpay vs Klarna: Spending Cap

The question of which is better: Klarna or Afterpay often comes down to spending limits. The platforms have different rules in this regard.

Klarna

Klarna calls its spending limits “purchase power” and makes them different for each user. It is determined by many aspects, including your Klarna payments history and remaining balance. The amount can also vary depending on the retailer and the payment method you choose. Whenever you pay with Klarna, the platform performs an automatic evaluation of how much you may spend.

Afterpay

Afterpay has no pre-set spending limit and estimates it for each individual account. It is based on your history of orders and payments, late payments record, and other factors. The platform doesn’t set any minimum spending amount on purchases, but some merchants do.

Afterpay and Klarna Mobile Apps

Both financial services have mobile applications for Android and iOS. As a customer, you can benefit from in-app shopping, exclusive deals, and rewards programs.

Klarna

Is Klarna better than Afterpay? Well, it’s difficult to say for sure, but the platform’s app is surely a thing of beauty. Obviously, Klarna users get to view and track their orders, payments, and returns online, but there’s far more in store here. The app allows users to manage their payment plans and set up automatic payments, as well as return items, exchange sizes (for clothing), or cancel orders.

You can also use Klarna as a mobile payment method at the checkout with the new feature “Pay Now.” It allows customers to pay for their purchases immediately and in full. You can choose to pay with a credit card, debit card, or bank transfer.

The Klarna app offers personalized product recommendations based on past purchases and browsing history. Recently, the platform even introduced “virtual shopping,” where customers can chat with a retailer’s sales assistant or even schedule a video call.

While many similar services allow shopping only at retailers in their ecosystem, Klarna enables users to make purchases online at any US marketplace using a virtual card number. With this number, you can make purchases wherever Visa is accepted and pay for them later.

Afterpay

Similarly, Afterpay users get to view their payment schedule and make payments directly through the app, as well as track their orders and deliveries for online purchases. Users can return and exchange purchases directly from the app, choose how to pay within the app, and examine their purchase history and scheduled payments. The application also allows users to make upcoming payments in advance.

Focusing more on fashion and lifestyle brands, Afterpay has over 15,000 merchants for clients to choose from. Finally, the app is usable in certain vendors’ physical stores.

Conclusion

Whether you choose Klarna or Afterpay, you’ll get a great payment management tool. However, before making a decision, you should consider factors like penalty fees, the flexibility of payment schedules, and the specific terms each service imposes. While Klarna has more payment options, Afterpay doesn’t do hard credit checks. Overall, Klarna is best for large purchases that require long-term financing, while if you need to split the price of new sneakers, Afterpay is likely a better choice.