Which Buy Now, Pay Later Service Is Right for You?

Buy Now Pay Later (BNPL) services are popular among consumers as an alternative way to finance their purchases. In the UK, two popular players are Klarna and Clearpay which both provide users with the flexibility to spread the cost of their shopping over several weeks or months. This makes the purchases much more affordable as users can wait until they are next paid.

It is important to know the pros and cons of BNPL services before using so you are aware of any risks.

 

Klarna:

Klarna offers several payment options, which is one of its major strengths. Users can choose to pay for their purchases in one of three ways:

  1. Pay in 30 days: This option allows users to receive their items before making a payment. This is particularly appealing for those who want to try before they buy, ensuring satisfaction with the product before committing to the purchase. This also makes any returns much simpler as no payment will be taken out of the users account within the first 30 days giving them time to return the item and never be charged.
  2. Pay in 3 instalments: This splits the cost of the purchase into three equal payments, spread over 60 days, with no interest or fees as long as payments are made on time.
  3. Financing options: Klarna also offers longer-term financing, allowing users to spread the cost of larger purchases over 6 to 36 months. Unlike the short-term options, this financing typically comes with interest rates, depending on the terms agreed upon.

One of Klarna’s standout features is its smooth, user-friendly app. The app not only facilitates payments but also helps users track their spending, manage returns, and access exclusive deals. Klarna also partners with a wide range of retailers, from high-end fashion brands to everyday essentials, giving users plenty of choices when shopping.

When using BNPL services it is important to consider the purchase and to ensure you will be able to afford the payments. If you miss a payment by 7 days you will be charged £5 on top of your total. You can be charged a maximum of £10, if you make two late payments.

 

 

Clearpay:

Clearpay's approach to BNPL is slightly more straightforward compared to Klarna. It offers a single primary payment option:

  1. Pay in 4 installments: Clearpay divides the total cost of your purchase into four equal payments, spread over six weeks, with payments due every two weeks. Like Klarna’s instalment plan, Clearpay does not charge interest or fees as long as payments are made on time. This makes it popular among those who are paid weekly and will be able to make their next payment sooner.

Clearpay’s simplicity is one of its main attractions. The service is easy to use, with a clear structure and straightforward repayment terms. Users know exactly what to expect, with no hidden fees or complicated financing options.

Clearpay also has a strong presence in the fashion and beauty sectors, partnering with many popular brands. Its app is designed to be user-friendly, offering features like spending tracking and reminders to help users stay on top of their payments.

Clearpay also charges for missed payments, initially the charge will be £6 but after another 7 days of missing the payments you will be charged an additional £6. Fees are capped at £25 or 25% of your total order value.

 

Klarna vs. Clearpay: Key Differences

While both Klarna and Clearpay offer interest-free instalment plans, their key differences lie in their payment structures, additional features, and how they handle missed payments.

  • Payment Flexibility: Klarna offers more flexibility with multiple payment options, including the ability to pay after 30 days or finance larger purchases over several months. Clearpay, on the other hand, focuses on a single, straightforward instalment plan, which might appeal to users purchasing smaller items and are able to pay the amount off sooner.
  • App Experience: Both Klarna and Clearpay offer user-friendly apps, but Klarna’s app provides more features, including spending insights, deals, and the ability to manage returns. Clearpay’s app, while simpler, is designed for users who value ease of use and clarity.
  • Impact of Missed Payments: Klarna does not charge fees for late payments, but missed payments can impact your credit score. Clearpay, however, charges late fees and may restrict account access until outstanding payments are made.

 

Choosing the right one for you

Choosing the right BNPL service will depend on your financial situation, the product you are purchasing and your need for flexibility. Both offer valuable services, 38% of Brits used either service in the year to January 2024.

If you remain responsible and are able to make the repayments on time to avoid any fees then this could offer you a great way to finance your purchases making it easier to manage.