Introduction
Buy Now Pay Later (BNPL) installment loans have become very popular for both online and in-store shopping. These loans, often called BNPL, are a good choice compared to credit cards. They let people break their purchases into smaller payments. But the Consumer Financial Protection Bureau (CFPB) warns users to read the terms and conditions before choosing a BNPL payment plan. This comparison will look at Klarna, Afterpay and Affirm in 2025. It will discuss the benefits and downsides of each option.
Comparing Klarna, Afterpay and Affirm in 2025
The appeal of BNPL is that it offers convenience and affordability. People like to split their purchases into easy installments, often without any interest. However, it’s not the best choice for everyone.
Each BNPL provider has its own details. They can have different terms, fees and ways of reporting credit. To choose the right service, you should look closely at your spending habits, credit score and the specific terms from each platform.
1. Klarna:
Klarna is a popular Buy Now, Pay Later service with several payment options:
Pay in 4: You can split your purchase into 4 payments with no interest. You pay every two weeks. If you're late, you might have to pay up to $7 extra. Klarna does a soft check on your credit (this doesn't hurt your credit score). In the US, they don't tell credit bureaus about these payments, but they do in the UK. How much you can spend depends on your history with them.
Pay in 30: You can pay the full amount within 30 days with no interest. There are no late fees if you pay on time. They might do a soft credit check. In the US, they don't report this to credit bureaus.
Monthly Financing: For bigger purchases, you can pay monthly. The interest rates can be from 7.99% to 33.99% APR (this is like the yearly interest rate). If you pay late, they might tell credit bureaus. They do check your credit for this. They report if you make payments on time. You can pay over 3 to 48 months. You might need to spend at least $200 to use this option.
Klarna Card: You can use this card anywhere that takes Visa. You can turn purchases into Pay in 4 plans. If you do that, there's a 28.99% APR in the US. There are no yearly fees. They do a soft credit check in the US but a hard check in the UK (hard checks can lower your credit score temporarily). In the US, they don't tell credit bureaus about regular use, but they do in the UK.
Klarna has a shopping app that helps you track purchases, manage payments, and find stores that work with Klarna.
Klarna offers a paid membership called Klarna Plus for $7.99 a month. It gives you no service fees on one-time cards, double rewards points, and special deals. If you use the one-time card feature at stores that don't partner with Klarna, you'll pay a $1-$3 service fee.
2. Afterpay (Now Cash App Afterpay):
Afterpay is now part of Cash App. You can use it online and in stores. They're known for their "Pay in 4" plan, which lets you pay in 4 payments over six weeks with no interest. For purchases over $400, they have a "Pay Monthly" plan which may include interest rates from 6.99% to 35.99%.
Pay in 4: You make 4 payments with no interest over six weeks. If you're late, you might have to pay fees up to $8 or 25% of what you spent in the US, and the lower of 25% or $68 in New Zealand. In the US, they do a soft credit check for new customers, but it's required in New Zealand. Usually, they don't report "Pay in 4" to credit bureaus in the US, but they do in New Zealand. Your spending limit can go up over time if you use it responsibly.
Pay Monthly: You can pay over 6 or 12 months for purchases over $400. Interest rates range from 6.99% to 35.99% APR (simple interest, which means it doesn't compound). No late fees. They do check your credit. They might report to credit bureaus. You can usually spend between $400-$4,000, but some stores allow $200-$5,000.
Afterpay Card: You can use this in your digital wallet for in-store payments.
Afterpay has special deals and benefits if you use their app. In Australia, they have a subscription called Afterpay Plus for $9.99 AUD per month, which lets you use pay in 4 almost anywhere through a digital wallet.
Afterpay helps both customers and businesses. Store owners who use Shopify can bring in more customers and possibly increase how much people spend by offering Afterpay.
3. Affirm:
Affirm is clear about their terms and sometimes charges interest. They work with many stores and can offer interest-free payment plans if you have good enough credit.
Pay in 4: You make 4 payments with no interest every two weeks. No late fees. They do a soft credit check that doesn't affect your score. Starting April 1, 2025, they will report to Experian (a credit bureau). You can spend between $50-$999 or $50-$1,000+.
Monthly Payments: You can pay over 3 to 60 months. Interest rates range from 0% to 36% APR (simple interest). No late fees. They do check your credit, which might affect your score. Starting April 1, 2025, they will report to Experian. You can spend from $50 to $20,000 depending on the store.
Affirm Card: You can use this anywhere Visa is accepted in the US. It offers interest-free plans and longer plans with 0% to 36% APR. No card or yearly fees. Applying doesn't hurt your credit score, but paying over time is subject to checks. Starting April 1, 2025, they will report installment payments to Experian. How much you can spend varies.
Affirm clearly shows all terms, including APR and any fees. Loan terms range from 3 to 60 months. They also offer:
- Affirm Pay in 2: Two interest-free payments over two months
- Affirm Pay in 30: Pay in full within 30 days, interest-free
Affirm might ask for a down payment at checkout if you don't qualify for the full loan amount. This will be clearly shown during checkout.
Understanding the Impact on Credit Scores
BNPL services might seem different from regular credit, but they can still affect your credit score. Each BNPL service reports to credit bureaus in its own way. Missing a payment or paying late can lead to serious consequences. It's important to remember that using BNPL, just like using credit cards, means you are borrowing money that needs to be paid back.
To make smart financial choices, you should understand how each provider reports to credit bureaus. You also need to know how your payment behavior can impact your credit score.
How Klarna Affects Your Credit
When you use Klarna's "Pay in 4," they usually do a soft credit check that doesn't show up on your credit report or change your score. But if you miss payments, they tell credit bureaus, which can hurt your credit rating.
Afterpay and Your Creditworthiness
For short-term, interest-free plans, Afterpay usually does a soft credit check that won't change your score. They report late payments to major credit bureaus. If you often miss payments, it can have a bigger negative impact on your score.
Affirm's Approach to Credit Scores
Like the others, Affirm usually does soft credit checks that don't impact your score. They look at your credit to decide your loan options. Affirm may tell credit bureaus about your loan activity, like whether you make payments on time. Using Affirm responsibly can help improve your credit, but missing payments can damage it. Affirm will begin reporting all pay-over-time products to Experian in April 2025.
It's important to remember that using Buy Now, Pay Later is like borrowing money that needs to be paid back, just like with credit cards.
Fee Structures and Interest Rates
Navigating BNPL services means looking closely at the fees and interest rates. Even though these services often promote interest-free installment plans, late payment fees and interest on loans that last a longer time can raise costs a lot. It is important to know the fee structure of each provider to dodge surprise costs.
Being clear about interest rates and possible penalties helps people make smart choices. This way, they can avoid falling into debt and use BNPL services responsibly.
Analyzing Klarna's Fees
- "Pay in 4" has no interest and no late fees if paid on time, but late fees up to $7 can apply if you miss payments
- Monthly financing interest rates range from 7.99% to 33.99%
Afterpay's No-Interest Advantage
- No interest on the six-week "Pay in 4" plan, but late fees up to $8 may apply if you're late
- "Pay Monthly" has interest rates from 6.99% to 35.99%
Affirm's Transparent Fee Policy
- Offers interest-free plans with credit approval
- Interest rates for other plans range from 0% to 36% APR, not compounded (meaning the interest doesn't build up on itself)
- No fees at all, including late fees
- They might require a down payment for some purchases
- Affirm has released a Heter Iska agreement effective April 1, 2025, allowing customers subject to religious prohibitions on interest (Ribbis) to structure transactions as investments
Klarna vs Affirm vs Afterpay: Comparison Table ( 2025)
| Feature | Klarna | Affirm | Afterpay |
|---|---|---|---|
| Payment Options | Pay in 4, Pay in 30, Monthly financing, Klarna Card | Pay in 4, Monthly payments, Pay in full, Affirm Card | Pay in 4, Pay Monthly |
| Pay in 4 Interest | No interest | No interest | No interest |
| Monthly Interest | 7.99-33.99% APR | 0-36% APR | 6.99-35.99% APR (Simple) |
| Late Fee | Up to $7 (max 25% of purchase) | No late fees | Up to $8 (max 25% of order or $68 in NZ) |
| Annual Fee | No | No | No |
| Service Fee (Non-Partner) | $1-$3 (waived for Klarna Plus) | N/A | N/A |
| Pay in 4 Credit Check | Soft (doesn't affect credit score) | Soft (doesn't affect credit score) | Soft (doesn't affect credit score) |
| Reports Payment (Pay in 4) | No (US), Yes (UK for Pay in 3), No (Card US), Yes (Card UK) | Yes (to Experian from 4/1/2025) | Generally No (US), Yes (NZ) |
| Pay in 4 Limit | Varies by user (e.g., $35-$2,000 with Apple Pay) | Varies by user(e.g., $50–$249.99) | Varies by user (e.g., $35-$1,000 for some merchants) |
| Monthly Limit | Varies by user (e.g., $250-$10,000), Tailored spending limits | Varies by merchant and user | Generally $400-$4,000 (some $200-$5,000) |
| Pay in 4 Duration | 6 weeks | 6 weeks | 6 weeks |
| Monthly Duration | 3-36 months | 3-60 months | 6 or 12 months |
| In-store Payment | App (digital card or QR code), Klarna Card, Apple Pay | Affirm Card, Virtual Card | App (Afterpay Card in digital wallet) |
| Cash App Integration | No | No | Yes (Afterpay is now Cash App Afterpay) |
| Rewards Program | Cashback in app, Klarna Plus subscription | N/A | App-only benefits, Afterpay Plus subscription (invitation only, select regions) |
Disclaimer: The information and rates provided in the table may change, so please check each vendor's website before deciding.
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The Hidden Costs of Buy Now, Pay Later Services: What You Need to Know
Buy Now, Pay Later (BNPL) services like Klarna, Afterpay and Affirm have gained immense popularity, particularly in today’s rising inflation environment. On the surface, these services appear as convenient and interest-free ways to spread out your purchases over time. But as the saying goes, if something sounds too good to be true, it probably is.
BNPL options promise to ease financial strain by offering consumers the ability to split payments into multiple installments—often interest-free for short periods. Imagine buying a $160 pair of sneakers today but only having to pay $40 upfront and spreading the remaining cost over the next six weeks. It seems like a manageable way to shop within your budget, right? While it may feel convenient, there are hidden pitfalls that many people overlook.
The Psychological Trap: Making Spending Seem Affordable
BNPL services play a psychological trick by making items seem more affordable than they are. They provide instant gratification by allowing you to take the item home while paying for it over time. However, these services often encourage overspending. Many users unknowingly stretch their budgets by buying items they may not need. After all, it’s easier to justify a purchase when it’s broken into smaller payments. Over time, this can lead to accumulating more debt than expected.
Moreover, splitting payments doesn’t make the overall purchase cheaper. It only gives the illusion of affordability by masking the total cost. A $160 sneaker remains $160, but consumers are more likely to commit to the purchase when they don’t have to pay the full amount upfront.
The Debt Accumulation Game
For those living paycheck to paycheck, BNPL can seem like a lifeline for covering necessary expenses. However, missed payments come with consequences, including late fees and potential damage to your credit score. While BNPL services often perform soft credit checks that don’t impact your credit score initially, missing payments can lead to penalties that do.
The key to avoiding the debt trap is simple: stick to a budget. If you can’t afford to buy something outright, consider whether it’s a need or a want. And if it’s not a necessity, it may be wiser to save for the purchase rather than relying on BNPL.
A Smarter Approach: Save Now, Pay Later
One healthier alternative to BNPL is the old-fashioned method: save now, pay later. If you can wait for an item and save for it over a few weeks, you’ll avoid the risk of debt and the temptation of impulse buying. By the time you’ve saved enough to make the purchase, you might even decide you don’t need it after all.
Discover the key differences between Klarna, Afterpay and Affirm in our 2025 comparison. Find out which BNPL service suits your needs best.