Buy now pay later is a millennial phenomenon which is currently on the rise. Rather than having credit cards which can rack up balances and interest over time, modern consumers are opting for this more straightforward model. Instead of paying the full amount for a purchase when you buy it, whether it’s credit or debit, buy now, pay later (BNPL) allows you to split the cost of a transaction over several set transactions, with no additional fees.
Klarna and Clearpay are two retail apps which not only offer this service, but package it inside a neat app interface where you can make sure of offers, coupons, and spending tracking. Their aim is to simplify the shopping experience so that you can manage your spending budgets, repayments, and discounting all in one app.
So, when you have two to choose from, which one do you go with? In this review we will be exploring the similarities and differences between Klarna and Clearplay, and which one works best for you.
Klarna vs Clearpay – What’s the difference?
In my experience of both apps, I found them generally to be very similar at their core. They both offer BNPL payment models, and they both offer a wide variety of stores – though I found Clearpay to seemingly focus more on clothing stores than Klarna did. Either way there are plenty of retailer options available on both apps, and I didn’t really find myself using one over the other for any particular type of shopping.
However, the devil is in the details. While they both offer a similar selection and service, they differ greatly when it comes to the details of their payment models, and how their apps look and perform.
Personally, I found Klarna’s app to be more streamlined, easier to navigate and more informative when it came to budgeting, spending and payment processing. That’s just personal preference though, and it could just be a case of their colour scheme and how they organized their pages, though I couldn’t find an equivalent charting and budgeting section on Clearpay.
Both apps also offer cards to make shopping easier and more secure, though as far as I could tell, Clearpay doesn’t offer “one time cards,” which are a more secure way of buying things online.
Klarna’s BNPL models
Klarna offers a very wide range of payment options, allowing you to choose your repayment type depending on your personal circumstances.
Klarna Pay in 3
Pay in 3 is great for those who want to budget for more expensive purchases that might cost too much for them up front. Your payment schedule is split over 3 months, paying the first instalment immediately and then the next two at 30 and 60 days. These payments are automatic, and taken from your linked card, and a reminder is sent before each payment is taken so the customer can avoid going overdrawn and ensure they have enough of a balance to make the payment.
At checkout, your name, address, and credit card details are taken along with a soft credit search. If the search provides an acceptable result, Klarna confirms the transaction and informs the customer that they have been granted the Pay in 3 service, outlining their payment dates.
Klarna Pay in 30
This is a great BNPL option for people looking to try out products and only pay for the ones they keep. The money is only taken at the end of the 30-day period after purchase and any returned items are deducted from that total. You can also pay the balance early if you decide that you are happy with what you’ve purchased and have the funds to confirm the transaction.
This will also initiate a soft credit check, but you don’t need to provide your card details at checkout. It will be on you to confirm payment and enter your card details to finalize the transaction at any point in the following 30 days. Frankly, I was surprised by this level of trust Klarna has in their customers, but they are referring to credit files, so there’s no guarantee you will get this option, and if you have a history of not making payments, it likely won’t be offered to you.
Klarna One-time card
This one-time-use card is stored on the Klarna app and is linked to your regular card, just providing different payment details that are generated each time you make a new budget. Each card is provided with a budget, which includes delivery costs, and if you don’t spend the total amount, you can request a refund to your normal card.
This is a great safety feature if you are shopping with non-Klarna supported retailers, or retailers that might not be as secure as others, and you want to protect your personal card details from potential fraud.
Just like any other credit card, you will be provided with a physical Visa card which you can make purchases with. This will require a full credit check, which could negatively impact your credit score, so in my opinion isn’t really worth it as it doesn’t provide any particular benefits.
With Klarna financing, you can pay over 6-36 months, though this will incur a pretty hefty interest fee at 18.9% APR variable. There is no real benefit to this option compared to a normal credit card, other than having your purchases and credit all in the same place, rather than tracking them separately. This is best used for larger purchases which would be difficult to budget upfront or even over the 3-month period.
You can repay early with Klarna and there are no late payment fees, though you will get your services suspended if you continually miss payments.
Clearpay’s BNPL model
Compared to Klarna’s multiple different payment and even credit options, Clearpay only offers one repayment model. This comes in the form of a single “4 payments” option. This will always involve the first instalment being taken immediately, so unlike Klarna’s 30-day plan, you won’t be able to “try before you buy” without your funds being taken initially.
This can be a disadvantage for a lot of users, as people wanting to try out products before purchasing them will find Klarna’s offer to be much more useful, but Clearpay offers a longer repayment term of 4 months than Klarna’s 3 months. Ignoring the credit offering.
Clearpay is quite different from Klarna and doesn’t run a credit check at all. You will still have to meet affordability requirements by requiring pre-authorized deposits up to the value of your first instalment. This allows you to avoid a potentially damaging credit check, at the expense of having to allocate some money up front towards one of the prepayments.
Spreading payments over a longer term can help lower the monthly cost of repaying balances, though if you miss a payment it could end up costing you pretty heavily, as there is a £6 late payment fee for each missed payment. This can stack up to a maximum of £36 if you miss payments consecutively.
Both apps were incredibly straightforward and easy to use with clear interfaces and relatively similar UI menus. Each app clearly sectioned retailers, categories, coupons, offers and financing all in a very intuitive manner, though as previously mentioned I preferred Klarna’s budgeting and tracking graphics. Clearplay didn’t have any tracking graphics in comparison, and only had a “set budget” as a single reference to anything relating to a limit.
Both apps ran incredibly well, and I never found any problems or slowdown in using either, though Clearpay did take much longer to set up, as I had to provide more details upon initial setup, compared to Klarna, which requests details at checkout instead. I honestly prefer Clearpay’s approach in this matter, as at least it’s done with, and you can forget about it after you’ve signed in.
Both apps are extremely safe to use in terms of professionality, security, and financial compensation if problems occur. However, there are a few caveats to keep in mind when using either app.
Neither app will provide you with your customer rights under section 75 of the Consumer Credit Act. As 3rd party purchasing applications, you are not directly covered for items over £100 whether they are faulty, not delivered or the retailer goes bust. This is a significant issue that you should keep in mind when shopping with either of these apps, as when things go wrong you will find yourself with less protections than if you went to a retailer directly with your own credit card.
The apps provide their own Buyers’ protection policies, but these are just company policies and not protected by law, thus shouldn’t be relied on.
Both apps are incredibly useful to spread the cost of purchases, especially without needing to take out credit and pay hefty interest rates on debt. When managed properly, they can have plenty of upsides for savvy budgeting customers, but if misused, they can not only result in expensive late fees, but also damage your credit rating overall.
Regardless of which app you choose, make sure you know their repayment terms and read their policies carefully, as you should always do when dealing with any financial option involving credit or debited payment terms.
In my experience, both apps worked phenomenally well, and I didn’t come across any issues while using them, and as long as you use them responsibly and adhere to payment terms, hopefully neither will you.