Buy now, pay later (BNPL) firm Klarna has announced that it will start charging late fees from March 2023 in an effort to reduce defaults on customer loans. In this article, we explain how the Klarna late fee works, when it will be introduced and how it could impact you.
Why is Klarna introducing late fees?
Klarna isn’t the first BNPL firm to introduce late fees, with rival BNPL firms Clearpay and Laybuy already charging customers a fee of £6 for missed or late payments. Alex Marsh, head of Klarna UK said “Not charging fees feels consumer-friendly, but we’re worried it drives the wrong behaviour. Our data now shows that a total absence of late fees actually leads to less favourable outcomes for customers: with less reason to pay on time, customers are more likely to miss a payment".
The news that Klarna is to introduce late fees comes swiftly after the Treasury announced an eight-week consultation period where it hopes to tighten BNPL regulations in an effort to further protect consumers.
When is the Klarna late fee being introduced?
From 16th March 2023, customers will be charged a late fee of £5 if they miss a Klarna payment.
How does the Klarna late fee work?
If you miss a payment, Klarna may charge a late fee of £5. A total of two late fees may be charged per customer order, not totalling more than 25% of the value of the initial purchase.
When is the Klarna late fee charged?
The Klarna late fee isn’t applied immediately. There is a grace period of seven days for 'Pay in 30 days' purchases and 14 days for 'Pay in 3' purchases, after which a fee of £5 may be charged. Klarna has said that it will send a number of 'friendly reminders' during this time so as to try and avoid the late fee being charged.
How to avoid Klarna’s late fee
The most obvious way to avoid late fees is to avoid using buy now, pay later services altogether. Failing that, the simplest way to avoid late fees is to pay on time or at the very least, pay before the 7 or 14-day grace period is up. Additionally, customers can access Klarna’s ‘Autopay’ feature on its Pay in 30 days product and the money will be automatically collected from their account.
Check out our article ‘Everything you need to know about buy now, pay later’ where we discuss how BNPL works in detail, including the alternatives. You may also wish to check out our article ‘7 signs you are living beyond your means’ and if you are struggling with debt, our article 'Where to get free debt advice' may also be useful.