Klarna launches new credit card – everything you need to know before applying

Klarna announced that it would launch a physical “buy now, pay later” credit card in the UK allowing users to defer payment for purchases for up to 30 days, in line with the “Pay in 30” product that the Swedish tech giant currently offers online.

the Option “Pay in 30” allows buyers to spread the cost of payments over 30 days without incurring interest or late fees.

While buy now pay later ‘ offer shoppers the ability to purchase items without making an instant dent in their bank account, such as a credit card, there are risks with such schemes that can lead people into unwanted debt.

Nick Drewe, a money-saving expert on the discounts platform Wethriftshares the risks associated with using credit cards, what people should consider before applying for the new Klarna physical card, and advice for those who find themselves in debt after getting too carried away with the “buy now, buy now, pay later”.

Nick explained: “Buy Now Pay Later programs offer consumers a quick payment option that allows them to delay or break the cost into more digestible chunks, but they can also become a potential entry point on a debt road. and damaging financial problems.

“It is important to understand that online retailers that offer the option of paying by weekly or monthly installments often fail to fully explain the full terms and conditions to customers. However, late fees, credit history checks and interest repayments are factors that should be brought to the attention of the client immediately.”

At this time, despite efforts to reach an agreement with credit reference agencies, Klarna does not report any expenses or missed payments, which means credit scores are not affected when other lenders review your history. of payment.

And many people may not know that using and then paying off small balances on a credit card is one of the best ways to build a good credit score.

But as with other forms of debt, it is important to fully understand the associated risks before committing to any type of financial contract or arrangement, especially as millions of households across the country face to a financial crisis this year due to the current cost of living crisis. .

Before applying for the Klarna credit card

While it’s all well and good to want to boost your credit score, you need to make sure you have enough money in the bank to make payments when they’re due.

Nick explained, “Many people will often make purchases on ‘buy now, pay later’ programs just before payday when their bank account is feeling less healthy, but it’s important to consider the costs of these purchases and whether you will be able to comfortably afford after rents/mortgages, electricity bills, grocery shopping and other monthly payments come out of your bank at the end or beginning of the next month.

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He continued: “With the cost of living in the UK continuing to rise, money is getting tight for many Britons, and relying solely on credit card schemes to fund those extra purchases can be dangerous if you are struggling to pay for your standard monthly purchases.

“Klarna’s ‘buy now, pay later’ programs have several benefits, including price drops and the ability to negotiate deals on discounts with high street and online favorites that other retailers and shopping sites cannot. equal.”

“In a nutshell, if you are able to discipline yourself when using a Klarna credit card, there are some positives to your future credit score – as long as you don’t overspend and go into debt. , you can’t get out without borrowing more money,” Nick added.

Financial aid available in Scotland

Top tips if you’re struggling with your finances

make a budget

If you have different types of debt, setting a budget to categorize your highest priority expenses, like rent and food, will really help.

In order, you must:

  • Calculate your total income
  • Make a list of your monthly expenses
  • Deduct the total amount you spend each month from your monthly income

If you have money left over after you’ve paid for everything, you have a “budget surplus.” If you spend more money than you have, you have a “budget deficit”.

Decide which bills to pay first

It is important to know which are your priority and non-priority bills. An example of priority debt would be your rent or mortgage, as opposed to your direct debit for Netflix, or the meal subscription box you treat yourself to once a month.

Accept your purchase now pay your debts later

It’s important to accept that you’re in debt and start changing the way you spend. If you’re struggling to make repayments, there are several ways to get debt relief to buy now, pay payments later.

For example, some brands offer payment holidays and revised payment schedules to help users pay back what they owe.

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Financial aid

If you are worried about debt or upcoming payments that you cannot afford, seek help or advice from a non-profit charity such as Citizens Advice Scotland, Christians Against Poverty or StepChange Debt Charity .

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