- Warning: Late repayments can cause you serious money problems. For help, contact the MoneyHelper.
Klarna vs Openpay: What are the differences and which should you choose?
We take a look at the popular buy now, pay later services and see which is the right fit for you.
Buy now, pay later (BNPL) services allow shoppers to buy now and pay off the total later. In the last year, these services have expanded into the UK and customers are now in the potentially enviable situation of having many options when choosing a payment service that best suits their financial needs.
With so many BNPL options now available in the UK, you may be wondering what the differences are between them and which one is right for you.
We’ve compared some of the most popular payment services to help you make the best decision for your online shopping future.
Popular payment service Klarna offers shoppers 3 ways to buy now and pay later:
- Pay in 30 days. Receive an invoice for your full order total with up to 30 days to pay the full amount.
- Financing. Split your payments into monthly instalments that you pay over time. (Requires a full credit check and charges interest of up to 18.9% APR.)
- Pay in 3 instalments. Spread the cost of your purchase equally over 3 months with no interest. Payments are due at the time of ordering, and then 30 and 60 days later.
- Late payment fees. Klarna charges a late payment fee of up to £5, 7 days after the due date.
Aussie payment service Openpay now offers UK customers a smarter way to pay for their online shopping.
Openpay lets customers get approved for the service in just 90 seconds and then choose their own payment plan. The service takes automatic payments from payment methods each month to avoid missed payments and charges no interest.
- You choose the plan. At the point of purchase, Openpay will give you several repayment schedule options with monthly instalments to choose from.
Compare: Klarna or Openpay
We update our data regularly, but information can change between updates. Confirm details with the provider you're interested in before making a decision.
How does buy now, pay later work?
This can depend on the service that you choose, but the general idea is that you shop online as you usually would, and at the checkout choose a BNPL service as your payment option.
Depending on the service you choose, you will then be able to select your payment terms. These vary from simply delaying the payment to splitting the payment into smaller chunks which can be paid off automatically from your bank account weekly, bi-weekly or monthly.
Do Klarna and Openpay carry out credit checks?
Klarna carries out a soft credit check and affordability assessment for its Pay in 3 and Pay in 30 days plans. These don’t show up on your credit rating and won’t be visible to other lenders. If you choose Klarna’s Financing option, this is more like a traditional credit card, so you will be subject to a full credit check, which could negatively impact your credit rating.
When you sign up for an account with Openpay, it might carry out a credit check to decide whether or not you’re eligible for a payment plan. Openpay will always ask for your permission before a credit check is carried out.
What if I’m late making a payment?
Klarna charges a late payment fee of up to £5. f you place an order valued at £20 or above, you’ll be charged £5 if you miss your payment. If your order is below £20, your late payment fee will be under £5. The fee is also capped at 25% of your order.
If you do miss your payment, Klarna won’t charge you until after a 7 day grace period and sent you 4 reminders. Until April 27th 2023, you can waive the late repayment fee by completing a financial awareness test, dubbed the ‘Never Forget’ test, in the Klarna app.
It’s important to note that Klarna reports purchases paid on time, late payments and unpaid purchases to both Experian and TransUnion, but at the moment, it does not affect your credit score. To learn more, read our full guide.
For Klarna’s Pay in 30 days service, if the debt remains unpaid after several months, the account will be classed as in arrears and then passed to a debt collection agency.
If you fail to pay an instalment due under any Openpay plan, the company will charge you a late payment fee of up to £7.50 if the instalment remains unpaid 2 days after it is due. A second late payment fee of £7.50 will be charged if the instalment is still unpaid 10 days after it was originally due. Openpay caps its late payment fees at a total of £15. If you do end up in default on your plan, Openpay may engage a debt collector to recover the amount you owe.
Do buy now, pay later services have an affect on credit scores?
Credit reference agencies (CRAs) Experian, Equifax and TransUnion have recently announced that BNPL debt will start showing on credit reports from spring 2022. This means that any debt could have a negative impact on your score and future lending or the rates you’re offered if you, for example, miss repayments or borrow more than you can really afford through a BNPL service. But it could also help your score if you borrow and repay on time and responsibly.
For more information, read our news article.
Our verdict: Klarna or Openpay?
Choosing between Klarna and Openpay comes down to the payment plan that works best for you. If you want a platform that allows you to “try before you buy”, Klarna’s Pay in 30 solution is probably your best bet.
If you’d prefer to pay for your goods in monthly instalments, then Openpay is a good option. You’ll usually pay 25% of the value of your goods as your first instalment and then the rest over a period of between 2–9 months. The length of your payment plan will vary by retailer.
For choice of retailer, Klarna trumps Openpay with a huge range of shops to choose from.
Whichever option you choose, it’s vital that you only sign up for BNPL services if you’re sure you can repay the money you borrow, and definitely after you’ve read the terms and conditions.
Why use a buy now, pay later service?
There are several reasons why someone might benefit from using a BNPL service. Using these payment services can help consumers manage large, expensive purchases, such as home goods, by allowing the amount to be split across multiple months. Splitting these payments allows consumers to spread the cost over multiple paydays without the added cost of the interest that would apply to typical longer-term payment options.
Using a BNPL service is also a useful option if you need to order 1 item in several sizes. This allows consumers to try the clothes on, return the items that aren’t the right size and only pay for what they keep, eliminating the confusing process of returns and refunds.
As you can see from Finder research conducted in July 2020, there are many reasons why shoppers choose to pay later. The graph below details this in full.
Popular BNPL news and reviews
Find out how to spread your purchases over 3, 6 or 12 months with Monzo Flex.Read more…
Report suggests buy now, pay later regulation could be ditchedRead more…
Klarna will start charging UK customers for late payments from March 2023.Read more…
Payment platform Square enters the buy now, pay later market with Clearpay.Read more…
Virgin Money is offering eligible customers to “buy now, pay better on terms that work for them” with its new credit card product, Slyce.Read more…
Discover more about PayPal Credit to see if it could work for you.Read more…
Spread your flights, hotels and shopping purchases over 10 instalments with buy now, pay later provider Butter.Read more…
Buy now, pay later provider, Klarna, is set to share UK customers’ spending habits with credit reference agencies from 1 June 2022.Read more…
New buy now, pay later challenger PollenPay goes head to head with big fishes like Klarna and Clearpay to offer customers interest-free instalment plans.Read more…
Buy now, pay later with Klarna on your next laptop with these retailers that offer Klarna.Read more…
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