Klarna is a popular Buy Now Pay Later App that allows you to make payments for your purchases in four equal instalments. However, recently many users have been facing the issue of Klarna adjusting the payment plan where the installments do not get split evenly and often involve paying a higher amount of first instalment.
In this guide, we will dig into the reasons why Klarna could have adjusted your payment plan and what are the solutions for this issue.
Klarna works by requiring you set up an account with a acceptable payment method like a debit card or credit card. You are then assigned a spending limit referred fancifully to as “Klarna Purchase Power“. This is the maximum amount of purchase you using Klarna credit.
So technically whenever you make a purchase with Klarna, it should go through so long as the purchase amount is within your Klarna Purchase Power and the payment should be split into four even instalments e.g. if your Klarna Purchase Power is $200, you make a purchase of $160, it should go through with four equal payments of $40 each. Even here the first $40 is due immediately on Purchase. So Klarna is actually giving credit only for the remaining 75% amount.
However, with the changing economic conditions, business dynamics and increased regulatory scrutiny of Buy Now Pay Later, there have been many changes implemented by Klarna. These changes seem to have hit all the consumers irrespective of their payment record.
The major change seems to be on the customer credit evaluation being made more stringent. Klarna is now using more factors like the individual’s credit limit to determine the Klarna spending limit aka Purchase Power and a more stringent evaluation of purchase transaction.
This is broadly the main driver why you are facing where Klarna has been randomly adjusting the payment plan. This has impacted many users on the platform and also been one of the reasons why many users have been jumping ship to other platforms like Affirm, AfterPay etc.
Now, let’s see the specific reasons for this issue that you can identify for your case.
Why Does Klarna Adjust My Plan
There can be multiple reasons for Klarna adjusting your plan primary ones being factors like change in your Klarna spending limit (Purchase Power), evaluation of past payment history and those related to transaction specific factors like the purchase size, time when the transaction is being undertaken etc..
One of the official answers of Klarna on this issue-
In terms for the adjusted first installment, various factors with the approval decision is not based solely on credit information, but rather multiple internal data points such as past payment history, the time of day, and the size of the purchase.
To make it simple, Klarna is being more stringent on whom and how much to lend and looking at factors beyond your past payment track record on Klarna.
Change in Klarna Purchase Power
This is one of the main reasons that can have an impact on the payment plan.
If you have seen a dip in the Klarna Purchase Power, the chances are high that you may have also seen adjustments in your payment plan.
In 2022, many users have seen a sudden and overnight dip in their Klarna Purchase Power. The main reason was for Klarna now taking into account a new factor i.e. the credit score of the customer in determining the spending limit which was not the case earlier.
Many users had seen the Klarna Purchase go down to even zero from levels as high as $1000.
To help our users shop responsibly, we have to lend responsibly. Sometimes this means lowering the estimated amount we can lend.
So if you are impacted by this, you have to look at your Klarna Purchase Power which is a dynamic limit that can change due to multiple factors.
You have to look at credit score and figure some ways to improving this.
The irony is your successful on-time payment record on Klarna does not favorably impact your credit score. So you will have to look at other credits or loans you have borrowed besides the Klarna dues.
Evaluation of Past Payment History
If you have had missed or made any late payments in the past with Klarna, this can be one of the reasons that may trigger change in Purchase Power and more conservative payment plan from Klarna.
In such cases, Klarna may require you to pay a higher percentage on the first instalment by custom adjustments, triggered based on the risk profile.
The transaction size can be one key factor in seeing an adjustment in your Klarna purchase plan.
While Klarna assigns you a Purchase Power, it is a maximum spending limit.
The transaction can be potentially declined for large amounts with changes in your Klarna Purchase Power or where you have a existing balance instalments on the other transactions. Each purchase decision is approved independently.
So if you have any open balances with Klarna, see if you can clear it first and then try again if the transaction goes through.
Time of the transaction
If you are doing too many purchases in a short span of time, it can also be one of the reasons that may trigger an adjustment in the payment plan.
In some cases, it also causes a transaction decline.
There are also other things factored when looking at the time of transaction.
Other options outside of Klarna
If you feel let down by Klarna, you have a few options to explore with similar buy now pay later players that include:
- Zip (QuadPay)
- PayPal Pay in 4
It does seem surprising and ironical when you are forced to accept a Klarna payment plan that is adjusted and not the general norm. It is best to explore alternate options in such cases, but also look at ways in which you can cut down your reliance on Buy Now Pay Later as a payment option and use it selectively only when needed to avoid surprises.