Klarna, alongside other ‘buy now, pay later’ services, has popped up all over the place this year on all your favourite clothing and merchandise websites. They are advertised as a no-strings-attached service that give you longer to pay for your items – no interest, no credit checks, no hassle. With Klarna you can order all the clothes you want and won’t need to pay a thing for thirty days, or with their ‘pay in three’ option, you can pay a third of the cost upfront, with the rest coming out of your account as direct debit.
Sounds like a dream for students, right?
I know I spend far too long trawling through ASOS trying to find the perfect item to complete an outfit, knowing I only have enough money to purchase one thing. Due to the massive inconsistencies with women’s clothing, finding the right item then leads to the inevitable question: what size should I get?
Klarna is perfect in those situations, giving you a ‘try before you buy option’. You can get as many items as you wish, in as many sizes, returning all the items you don’t need before a penny leaves your bank account. There’s no waiting around for refunds to reach your depleted bank account – you only pay for what you actually keep.
I’ll admit that it is pretty easy to get sucked into services like Klarna – it is simple to set up, gives me flexibility with my orders, and helps me with last-minute purchases. On both the thirty-day payment option and the ‘pay in three’ there is only a soft credit check meaning that even if you are declined for the service it won’t negatively affect your credit score.
The service is so simple and convenient that it’s easy to forget that you are taking on debt.
If you are a frequent shopper, like myself, it will be easy to start losing track with all the payments you need to make. Thirty days comes around a lot quicker than you think it does. While they do send out email notifications, the money does not automatically leave your account with the thirty-day ‘buy now pay later’ option, so you need to remember to go on to your Klarna account and pay it off. Though, admittedly, remembering to pay isn’t a problem with their ‘pay in three’ option as the money leaves your account as a direct debit.
So, what happens if you do forget to pay or you don’t have the money?
While it may not be as soon as your thirty days are up, eventually, your debt will be transferred to a debt collection agency, which is just as scary as it sounds. If you choose the ‘pay in three’ option, and you cannot make the payments after multiple attempts, you will be issued with a statement to pay off the full balance, which is payable 15 days later. And, failing to pay up, using either the thirty-day or the ‘pay in three’, may result in your credit score going down, which is already hard enough to increase as a student. Klarna do say that these potential repercussions are the last resort, and they will make every effort to help you pay off your debt.
It’s no secret that students struggle with money and often have little understanding of credit scores, interest rates, and debt. Klarna may have an allure for students because of its simplicity, but it will also pray on the money worries of students. Giving students an option to delay paying for the things that they are buying and, with no money being paid upfront, may push them to order more things then they actually want, need or can afford. If no money is coming out of your account, why not order more stuff? I know it’s a thought I’ve had, and it’s a dangerous one.
Klarna is a service that does have its merits, but it’s so easy to get sucked in that it may become a danger for students who already have cash-flow problems or who lack the knowledge of how to manage credit repayments. Which, let’s face it, is most of us.