Klarna launches new loyalty scheme where it rewards customers for paying on time – is it any good?

KLARNA is launching a reward scheme that will give you money off when you use buy now, pay later.

Shoppers in the UK will be able to earn points each time they make a payment on time, or make a purchase upfront using Klarna’s “pay now” option.

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For each £1 paid via pay now, pay later, shoppers earn one point, provided you pay it on time which is typically within 30 days or less.

It also applies to “pay over time” which is longer financing where repayments are made over three to 12 months and again you’ll need to make payments on time to get the points.

Once you get 250 points, you’ll typically get a £5 gift voucher or discount for up to 20% at certain shops.

You’ll unlock the rewards for each 250 points you earn and to redeem the rewards you’ll have to shop through the Klarna app.

Decathlon, Caffe Nero, River Island are among the brands you’ll be able to get money off with Klarna rewards, but the vouchers and gift cards available will depend at the time.

You’ll also be able to earn extra points by using features in the Klarna app.

You can build up points over time and they won’t expire, but once you’ve chosen to “unlock” a reward you’ll need to claim it within 90 days.

The reward itself may also have a deadline for using it, depending on the retailer, so it’s worth checking this on any vouchers you get.

If you later return an item you’ve paid for using Klarna, the points will be taken off your balance.

Klarna said the new loyalty scheme, which is launching this spring, will “reward responsible use of buy now pay later” and puts the emphasis on repayment.

Debt charity Stepchange previously warned that it encouraged overspending when rewards launched in the US.

For some shoppers, BNPL could be a slippery slope into a spiral of debt encouraging spending cash they can’t afford to pay back.

The financial regulator has announced plans to tighten the rules around this type of lending, which will include it appearing on credit histories.

But that isn’t expected to come in to force for some time yet.

Buy now, pay later is not currently regulated in the same way as other borrowing like loans and credit cards.

If something goes wrong you won’t be able to complain to the financial ombudsman.

How does Klarna’s rewards compare?

You can get rewards for shopping in many ways, including credit cards, shop loyalty schemes and via cashback websites.

How much you can earn and the way you redeem them can vary.

Credit cards

Some credit cards offer rewards for spending, though you usually need to pay off the bill in full each month to make it worthwhile

If you don’t you’ll typically pay interest that can cost you more than the rewards you get in return.

Some reward credit cards are interest free on purchases for up to 24 months, but after this introductory offer ends interest rates can be as high as 39%.

There may also be fees for the credit card, and you’ll also need to be eligible for one, which can be affected by your previous credit history and income, for example.

With any credit card you need to keep up with repayments and pay off at least the minimum each month.

A common reward offered by credit cards is cashback, and that gives you a percentage of your spending back as cash, which means you can spend it anywhere you want.

Credit card points schemes vary massively in value according to MoneyFacts and it’s not always the equivalent of one point for £1 spent.

Plus, the levels where you can redeem those points can vary too.

Most reward cards that help you accumulate points are limited to being spent at one retailer, though not always.

Of course it’s a bad idea to use buy now, pay later or credit cards in the first place if you can’t afford to pay for the item upfront as you could be stuck with a higher bill later or get into debt.

And if you weren’t intending to make a purchase anyway, then the rewards are unlikely to be worth it.

Rachel Springall, finance expert at MoneyFacts said: “It’s wise to weigh up the cost and benefits of any deal to ensure it the right deal, an upfront perk or incentive is only beneficial if someone actively uses.

“Some offers can be retailer specific so customers will need to be conscious of this when spending.”

There are introductory offers with some reward credit cards that mean you can earn more points to start with, but here we’ve looked at the standard points and how you can get £5 back, or the minimum reward available.

M&S

With credit cards from M&S Bank, you get one M&S point for every £1 spent in M&S and one point for every £5 you spend elsewhere.

100 points is equal to £1 and once you’ve earned at least 200 points, you’ll get sent vouchers to spend in M&S quarterly and they are valid for 15 months.

So to earn £5 back you need to have earned 500 points, which would require spending £500 at M&S and £2,500 elsewhere.

Sainsbury’s

Sainsbury’s Bank offers the Dual 24 Month Credit Card which you can use to earn Nectar rewards.

You can collect up to three points for every £1 spent at Sainsbury’s, Argos, Habitat or Tu Clothing and one Nectar point for every £5 you spend elsewhere

One point is worth 0.5p so to get a £5 back you’d need 1,000 points, which you’d get by spending around £300.

With Nectar you can spend your points at several different places, not just Sainsburys.

Tesco

Tesco Bank Clubcard Credit Card Purchases Mastercard offers 1 point for every £4 spent in Tesco.

If you use it elsewhere you get 1 point for every £8 you spend.

One point is worth 1p although they can be worth up to three times that if you choose rewards like restaurant vouchers and tickets for days out.

To get £5 of vouchers you’ll need to get 500 points, so you’ll need to spend £2,000 in store to get it or £4,000 elsewhere.

Amazon

Amazon Platinum Mastercard, which is offered via the car provider NewDay, offers a £10 Amazon gift voucher for every 1,000 points you earn.

When shopping at Amazon you get 3 points for every £2 you spend if you’re a Prime member and 1.5 points for every £2 spent if you’re not.

When shopping elsewhere, you get 0.5 points for every £2 spent.

To reach 1,000 points then, you need to spend £666 at Amazon as a Prime member, £1,333 at Amazon if you’re not and £4,000 elsewhere.

HSBC

HSBC’s reward credit card gives you up to 10 points for every £1 you spend at selected retailers, and 1 point for every £5 you spend elsewhere.

100 points is worth £1, so to get £5 you need to earn 500 points

That requires £50 of spending at the selected retailers, or £2,500 elsewhere.

Shop loyalty schemes

Meanwhile many shops offer their own loyalty schemes when you shop with them directly.

These are typically free to sign up to and you don’t have to worry about paying money back as you get the points when you pay upfront.

All you need to do is share some personal information with them, like your email address and date of birth.

Nectar

You can earn Nectar points without the Sainsbury’s credit card too.

You get one point per £1 spent at Sainsbury’s in store and online (excluding some products like tobacco and gift cards) and a point for every litre of fuel bought.

One point is worth 0.5p and you can also earn points spending at other stores like eBay and Argos.

Spend £100 a week at Sainsbury’s all year, and you’ll get 5,200 points, or £26 to spend with the retailer.

Clubcard

The same goes for Tesco – you can earn Clubcard points without a Tesco credit card.

You can collect one point for every £1 spent in store and online and one point for every £2 spent on fuel.

One point is worth 1p in Tesco. Or trade them in for three times the value with Tesco’s reward partners, such as Hungry Horse pub or Cineworld. Clubcard holders also get special discounts on products in store.

So spend £100 a week at Tesco all year, get 5,200 points, or £52 in Tesco vouchers.

Advantage card

Boots’ Advantage Card is one of the most generous loyalty schemes out there.

You get four points for every £1 spent, and each is worth 1p. Over-60s and parents get double points when buying certain products.

If you spend £20 a month at Boots all year you get an extra £9.60 to spend there.

Cashback sites

You can also earn cashback and rewards without borrowing when you spend online through cashback websites.

Cashback websites give you money back when you spend online. Quidco and TopCashback are two of the most popular sites. 

They often give new users special welcome discounts on top of the usual offers too.

Sign up and shop through them and you can build up cashback through your account with them.

How much cashback you get will depend on the offer from each shop or service, and how much you spend.

Make sure to read the details first so you know when you can expect to get the cashback, and any other requirements.

Don’t forget you must make the purchase via the cashback site, rather than direct, or you could miss the money.

Some sites like TopCashback will also let you upload your receipts from shopping in real life so you can get cashback on this spending too.

Often you can stack other deals with cashback if the retailer is offering a sale or other discount at the same time.

Once you’ve earned your cashback you can “cash out” by moving the money to your bank account, but you may have to wait to do this depending on the deal.

It’s always worth checking to see if it’s the best deal out there and if you didn’t intend to buy it anyway, it’s not really a saving

This post first appeared on thesun.co.uk