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29/04/2020

Klarna teams up with ASOS for ‘Giveback Day’

29/04/2020

Klarna teams up with ASOS for ‘Giveback Day’

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Fashion giant ASOS has joined forces with global buy now, pay later payment provider Klarna to launch ‘Giveback Day’ – an initiative that aims to support vulnerable communities during the COVID-19 crisis.

Today (April 29) both brands have pledged to support the International Committee of the Red Cross as it fights to respond to the coronavirus conflict in countries around the world.

Taking place in the UK, United States, Finland, Norway, Sweden, Austria, and Germany Klarna is committed to donating £1, $1 or €1 for every order using its service to buy goods on ASOS throughout the day – with no maximum limit on donations.

The money raised will go towards activities such as sanitation to prevent the spread of the disease, support for vital health infrastructure such as hospitals, and towards ensuring access to clean water for countless communities.

However, whilst the charity campaign will support those most in need it is important never to lose sight of the commitment made when using a buy now, pay later scheme such as Klarna.

Here we offer guidance about how to use services such as Klarna responsibly and the support available should repayments become a struggle.

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What is Klarna?

If you’re under the age of 30, chances are you have probably heard of Klarna.

Eagled-eyed fans of Love Island will recognise the bubble-gum pink brand as the sponsor of hit reality TV show, while others will have noticed prominent advertising across the country.

The popularity of the buy now, pay later firm, founded in Sweden in 2005, has soared in recent years with more than 80 million online shoppers making use of the service around the world.

Those accepted for Klarna’s service have between 14 and 30 days to pay for their goods or set up a payment plan with a retailer utilising the scheme for anywhere between six months and three years.

There are no interest, fees or late charges, however, approval depends on a few factors including a soft credit check, a customer’s credit history and age to name just a few.

Quite simply, Klarna offers cash-strapped consumers the chance to receive a delivery of new clothes and only pay for what they keep.

However, behind the pink exterior, there can be a dark side to buy now pay later, especially for those who are already struggling with their finances.

How does buy now, pay later work?

If you’re keen to buy something urgently but don’t have the cash to cover the cost buy now, pay later might seem like an attractive option.

As long as you’re able to keep on top of the repayment costs and make them on time a service like Klarna could help you get your hands on that elusive new outfit you’ve wanted for a special occasion.

However, it’s important to be aware of the financial commitment you’re signing up to.

Klarna keeps in touch with customers about payment dates through a variety of methods, including text and email reminders, and even offers customers the chance to snooze a payment for up to 10 days interest and fee-free but the trouble begins if you’re unable to keep up with what you owe.

Most buy now, pay later providers claim their service is interest-free, which is the case as long as you pay on time.

If you opt for Klarna’s finance option and fall behind on payments any promotional interest payments will be cancelled and you’ll be charged interest on repayments at a rate of 18.9% APR (variable).

Always be sure to check the small print if you’re considering signing up to a buy now, pay later scheme to make sure you’re aware of any potential costs in the future should you struggle with what you owe.

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Can Klarna damage your credit score?

If you’ve turned to Klarna to shop online, you’re not alone.

In fact, more than one million transactions are made through their services every single day on sites such as Topshop, JD Sports and Schuh to name just a few.

A recent study by comparison website Compare the Market highlighted that one in five shoppers have made use of a buy now, pay later scheme within the last 12 months.

However, the research revealed that one in five people have damaged their credit score as a result, with 40% not aware that it could be affected by the initiative.

The figures make for stark reading as they highlight that although a Klarna’s financial crutch may offer instant gratification for some, it can have a lasting impact on finances.

When you pay later with Klarna, the company will run a soft credit search against your credit report. This will only be visible by you and won’t affect your credit score.

However, when you apply for financing with Klarna, the brand will run a hard search against your report which will be visible and could damage your credit score. Missing or making late payment using this option could also have a negative impact on your credit score.

It’s also important to remember that making several credit applications in a short space of time can bring your score down too – something to keep in mind if you’re considering using more than one buy now, pay later scheme.

Can I get into debt using Klarna?

Although clicking Klarna at the checkout might seem easy it’s important to remember that you are signing up for a financial commitment.

Whilst it can be a positive option for those able to repay what they owe with little hassle, for those who are already struggling with their finances and repaying various different debts it can only add to the problem.

You may be buying now but it’s important to never lose sight that you will be required to pay later.

If you are concerned that you won’t be able to continue to make repayments on time, or indeed at all, you should take a moment to decide whether schemes such as Klarna are only adding to your current problems.

 

If you’re struggling with your finances, you’re not alone. Creditfix supports people across the UK every day who are in need of debt advice and support. For free help and advice, speak to an experienced debt advisor on 0808 253 3451.

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