Buy-now-pay-later firm Klarna has launched an interest-free contactless card - but debt experts have warned that shoppers don’t get vital protection on their purchases.
Klarna Card is run through payment provider Visa and allows you to buy something in a shop without paying anything for up to 30 days.
You’re not charged interest on purchases and there are no fees if you make a late repayment.
But, failing to clear what you owe on the Klarna Card could still see you referred to a debt collection agency and your card frozen.
Money experts have warned how shoppers could be left without any legal protection on purchases made using Klarna Card as well, as it isn’t covered by Section 75 regulations.
Section 75 of the Consumer Credit Act allows buyers to make a claim against their credit card provider if there is a problem with their purchase.
Klarna Card also isn’t covered by the Financial Ombudsman Service, although users will be able to use the Chargeback scheme.
Chargeback is essentially a transaction reversal that you request from your bank.
Martyn James, of complaints website Resolver, told The Telegraph: "The lack of regulation means consumers are fundamentally at risk if things go wrong and they can't pay back the cash.
"This is not a philanthropic gesture on the part of the business – it's designed to make it easier for you to buy things you might not be able to afford.
Have you been contacted by debt collectors after using a buy-now-pay-later firm? Let us know: mirror.money.saving@mirror.co.uk
“Without clear and transparent warnings in place, the industry still needs to do much more if it wants to be a responsible lender."
Debt expert Sarah Williams, who runs the Debt Camel blog, warned how Klarna Card could also encourage debt.
She told The Mirror: "It sounds helpful being able to pay later without any interest being added, but you get longer than 30 days interest-free if you buy something on a credit card and pay for it when the statement arrives.
"With this new card, some users may accumulate more debt that it is urgent to repay than they can easily manage.
“This is made worse if they have bought several items at different times using different Buy Now Pay Later accounts - then it isn't easy to see how much you owe overall and what needs to be paid by when.
“So what seemed like a convenience could result in you missing a payment, being contacted by debt collectors."
Klarna is said to have a waiting list of 400,000 consumers looking to apply for its card and is expected to start distributing them this week.
The BNPL provider performs a “soft” credit check on customers and you have to be 18 years old to apply.
Previously, you’ve only been able to use Klarna for online spends.
Alex Marsh, head of Klarna UK, said: “Unlike a credit card, we never charge interest or late fees so consumers only ever owe the cost of their original purchase.
"We re-evaluate the amount consumers can spend on a daily basis and we freeze the card as soon as a payment is late, to stop consumers from getting further into debt.
"These controls don’t exist on traditional credit cards because if everyone paid off their credit card bill on time, the lenders would go out of business.”
