Klarna has unveiled a new interest-free contactless card, but shoppers have been warned of the dangers of picking one up.
The company allows its users to purchase products at online retailers without paying for them upfront — instead splitting up the cost in instalments.
The buy-now-pay-later firm's new Klarna Card means that customers can now use the service in physical shops and avoid paying for purchases for up to 30 days.
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As reported by The Mirror, the new contactless card is a Visa card that can be used anywhere Visa is accepted.
There is no interest charged on bought items, and there are reportedly no fees if you make a late repayment.
However, debt experts have warned that shoppers who use the card do not receive important protections on their purchased products.
Failure to clear what is owed on the card may result in referral to a debt collection company and your card could be frozen.
Specialists have also revealed that customers may find themselves with no legal protection on items bought with a Klarna Card, since it is not covered by Section 75 of the Consumer Credit Act.
This is what allows consumers 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.
“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.
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.”
