Klarna wants you to pay more now, and less later. But is it worth it?

Designed for people who use Klarna regularly, the subscription also comes with two other benefits that aren’t available to non-subscribers: It doubles rewards points on purchases and it provides discounts of up to $30 on purchases with certain partner brands.

The service fees that Klarna is referring to are charged when customers use Klarna’s “One Time Card,” which functions as a credit-card equivalent when users want to buy something at a retailer that doesn’t offer Klarna payment. Using the “One Time Card” allows customers to divide their purchases into four installments; they pay the service fee with the first installment. 

The fee is $1 for orders under $100, and $2 for orders over $100, a Klarna spokesperson told MarketWatch in an email. Klarna users don’t pay the service fee when they use Klarna’s most popular “Pay in 4” product, which allows customers to split up their purchases into four interest-free payments to be paid every two weeks. However, Klarna will also charge a service fee when users create a gift card to pay at certain merchants.

With the subscription to Klarna Plus, the company estimates that those who make at least six “One Time Card” purchases each month can save around $12 a month, the spokesperson said. 

Consumer advocates have said that although buy-now, pay-later products are marketed as having no fees and no interest, some products do include such charges. And it can be hard for consumers to know what they are getting into.

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Most BNPL providers don’t charge interest, but some charge late-payment fees and other types of fees. Klarna charges up to $7 for a late fee if the payment is overdue more than 10 days. It also offers longer-term loans up to 36 months that charge interest.

The yearly cost of the Klarna Plus subscription comes to more than $90, making it similar to annual fees on some credit cards, said Adam Rust, director of financial services at the Consumer Federation of America. But consumers using Klarna or any BNPL service don’t enjoy the same kind of protections as they do when using a credit card, he added. For example, credit-card companies are not allowed to advertise their services to people who are under 21 years old. 

A 2009 law known as the Credit Card Act put a cap on interest-rate changes and fees, but it does not apply to BNPL companies, for now. Klarna users do enjoy some purchase protections, similar to credit cards, such as getting refunds for goods not received.

Against this backdrop, the Consumer Financial Protection Bureau has said it’s looking into extending existing credit-card regulations to BNPL companies.

“It’s really important for consumers to understand that this is still a form of credit,” Rust told MarketWatch. “Because it’s so new, it evades a lot of protections.”

The annual percentage rate for Klarna varies by financing options, but does not top 21.90%, which is in line with the 21.47% average APR for credit-card accounts in the fourth quarter of 2023, according to LendingTree data. Americans typically use BNPL services to purchase apparel, electronics and home goods, but they also use the payment service for essentials including groceries.

The debut of Klarna’s subscription comes as the company is attempting to create new revenue streams ahead of its planned initial public offering this year.

“So that’s something that benefits Klarna, but it’s not clear if there’s a benefit for consumers,” Rust said.

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