Are you looking for a way to pay for your next vacation without breaking the bank? As an innovative, easy-to-use buy now pay later platform, Klarna may sound like an appealing option. After all, you can book flights, hotels, rental cars, and more without worrying about upfront payments or hidden fees.
Sounds great, right?
But before you reach for your debit card, it’s important to be aware of Klarna’s drawbacks to ensure it’s the most suitable choice. In this article, we’ll explore Klarna’s pros and cons, why saving for a vacation is an alternative worth considering, and how Accrue can help you reach your travel savings goals faster.
Klarna is a Swedish payment platform that lets you buy now and pay later for goods and services. Since its launch in 2005, Klarna has grown rapidly and now provides payment solutions to over 150 million customers across 500,000 merchants in 45 countries.
It works like a credit card but without a hard credit check. Instead, Klarna runs a soft credit check to determine your eligibility. Klarna offers four payment plans, so you can customize your payment schedule to suit your budget.
- Pay in 3: Available for UK residents only, this plan allows travelers to split their payment into three equal installments over 30, 60, and 90 days — interest-free. The first payment is due when booking and the remaining two payments are automatically taken from your account 30 and 60 days later.
- Pay in 4: This plan allows you to split your payment into four equal installments over 60, 90, 120, and 150 days, also interest-free. You pay the first installment at the time of booking, and the remaining three payments are automatically deducted from your account every 30 days.
- Pay in 30: This plan allows you to book now and pay for your vacation over 30 days interest-free. You won’t incur any late fees if you pay on time.
- Pay Now: This plan allows you to pay for your vacation in full at the time of booking. You can use SOFORT bank transfer or direct debit to pay, and you won’t incur any interest or late fees.
How does Klarna work?
Before we jump into the pros and cons of this service, let’s take a look at the process of using Klarna to shop for travel:
- Search for flights: Shop from over 600 airlines with Alternative Airlines to find the best flight for your budget. Enter your destination, travel dates, and the number of people traveling for customized results.
- Select Klarna as your payment option: At checkout, enter your passenger details, scroll down, select Klarna as your payment option, and then continue to payment.
- Choose a payment plan: Select the installment plan that works best for you, enter your payment details, and confirm your booking. You will receive an instant approval decision within minutes.
- Get your flight tickets: After approval, Klarna will send your e-tickets and booking confirmation to your email. Pay your first installment, and you’re all set for your trip!
The seamless, hassle-free checkout process is why many travelers are now turning to Klarna as their preferred payment platform for travel. But before you book your vacation with Klarna, it’s essential to understand the pros and cons, which we’ll dive into in the next section.
The number of Klarna customers in the U.S. is projected to hit 49.3 million in 2026, up from 14.1 million in 2020, so there’s plenty that’s appealing about using Klarna for travel. Let’s look at a few of the pros:
Flexibility in payment options
Klarna offers multiple payment plans, so you can customize your repayment schedule to suit your budget. You can spread the cost of your trip over three or four installments (depending on your location), pay in 30 days, or pay for it in full upfront. Plus, all Klarna plans are interest-free, so you don’t have to worry about extra costs or late fees.
Ability to split payments and manage budgets
Using Klarna to pay for your vacation lets you easily manage your budget. You can split the cost of flights, hotels, and other travel expenses into smaller, more affordable installments. This way, you can ensure you don’t overspend on your vacation and still have money left for other essentials. The Klarna app also lets you manage your spending and keep track of all transactions in one place.
Protection against fraud and unauthorized transactions
Fraud and unauthorized transactions are major concerns when booking travel online. According to a Federal Trade Commission (FTC) report, identity theft, phishing, and credit card fraud accounted for $8.8 billion in losses in 2022. Klarna has robust fraud prevention measures to protect your data and ensure safe payments. All transactions are monitored 24/7 to detect unusual activity, and all payment information is encrypted to keep your data safe.
Although Klarna’s flexible payment options, budget-friendly plans, and secure payment system make it an attractive option for travelers, there are some potential drawbacks to consider, including:
Potential high-interest rates and fees
Klarna’s interest-free payment plans are designed to give you more flexibility and affordability when booking travel. However, if you miss a payment or exceed the deadline, you may be subject to late fees or interest charges. Choose a payment method that fits your budget and make timely installment payments to avoid extra costs.
Limitations on eligible travel providers
Klarna works with several travel providers, including airlines, hotels, and car rental companies. You may be unable to use Klarna for your favorite airline or hotel chain, which can be limiting. Check out eligible providers before booking your next trip to ensure you get the best deal.
Impact on credit scores
Late payments, missed payments, and high balances can hurt your credit score. Klarna runs a soft credit check at the time of booking to determine your eligibility which doesn’t affect your credit score but late payments and high balances, when reported to the three major credit bureaus, can knock a few points off your score. To keep your credit in good health, avoid taking out more than you can afford and set autopay for timely monthly payments.
Availability and acceptance of Klarna in different countries
Klarna is available in 45 countries, including the United Kingdom, the United States, Sweden, Denmark, Finland, Austria, Germany, and Switzerland. However, the availability and acceptance of Klarna varies by country and even between retailers in the same country. Research before you shop to ensure the store or provider you’re buying from accepts Klarna as a payment method.
Buy now pay later options like Klarna, Uplift, and PayPal Credit can be convenient and appealing — especially if you’re short on cash. However, it may not always be the best option for your finances in the long run.
Saving up for a vacation may take more time and effort, but it can reduce your risk of getting into debt and help you stay on top of your budget. Here are the top reasons why saving up is the better option:
You can earn rewards through Accrue Savings
Accrue Savings is a savings program that helps you save for a vacation and rewards you with money you can use toward purchases from your favorite partnering brands. Once you register for a free account, you can choose a goal, such as a vacation or family trip, and start funding your wallet with automatic deposits.
There is no set minimum or maximum amount per deposit, so you can save as little or as much as you want, and you have the flexibility to change, pause, or stop deposits at any time.
You have more protection from overspending
Buy now pay later options give you access to instant funds, which can lead to impulse purchases and overspending. You may be tempted to upgrade your accommodations or book a more expensive flight than you can afford, leaving you with a hefty bill at the end of your trip.
Saving up for a vacation gives you more control over your budget and helps keep your spending in check. You’ll have a better idea of how much you can afford and be able to come up with a more realistic budget for your trip.
No high-interest rates or fees
High-interest rates and late fees are a surefire way to rack up debt. Paying off your vacation in installments might seem like a good idea, but you could face hefty fees if you miss payments or don’t stick to your payment schedule.
Saving up for your next trip eliminates the risk of interest and fees, giving you more flexibility and peace of mind. Besides, the joy of paying for the entire trip with cash in full is priceless! Imagine sitting down to fabulous meals and enjoying excursions without the question, “how am I going to pay this back?” repeating in the back of your mind. You can focus on living in the moment and making incredible memories knowing there aren’t any giant travel bills waiting for you when you get home.
You’re in control of your destiny
Unlike pay-later flights and vacations, saving up gives you more control of your finances. You decide on how much or how little you want to spend on your vacation package and how quickly you want to save up for it.
You can adjust your budget whenever needed and make informed decisions about your travel purchases. Saving up for a vacation also gives you more time to compare prices and find the most budget-friendly deal.
Start saving for your dream vacation with Accrue Savings
Klarna and other pay-later options are attractive options for cash-strapped travelers. However, they come with potential fees and risks that could jeopardize your credit score and overall financial health.
Saving up for a vacation is a smarter alternative that gives you more control over your finances, helps you stick to your budget, and reduces the risk of overspending. Accrue Savings helps make saving effortless and rewarding with its cash rewards program.
Jump-start your savings with Accrue to reach your goals faster without going into debt. Get started today!