Deal or no deal
Many stores offer interest-free deals that let you take goods
home before you pay for them. But interest-free doesn't mean
cost-free - there are fees and charges you should know about.
How interest-free deals work
There are two ways you can pay for interest-free deals:
- Payment by instalments - you make regular
payments each month.
- Buy now, pay later - you don't make any
payments until the end of the interest-free period.
Before you get an interest-free deal you need to know that:
- If you only pay the minimum monthly repayment you won't pay off
your balance in full within the interest-free period.
- The interest rate you'll be charged if you miss a payment or
haven't paid off the balance by the end of the interest-free period
can be as high as 29%, much higher than most credit cards.
Work out how much your repayments should be to avoid paying
Case study: Ron and Maya compare interest-free deals
Ron and Maya both got interest-free
deals but for different amounts.
The interest-free deal worked out well for Ron as he increased
his repayments to pay off the deal in time.
But Maya just left her repayments at the minimum amount and
ended up being charged 29% interest and still owed a lot.
|After 12 months
||Fully paid off
||Paying 29% interest on a $1000 balance
||Happy with the deal
||Stressed with more debt
How to make the most of an
Here are some tips to make the most of an interest-free
- Work out your repayments - Only use an
interest-free deal if the contract allows you to pay more than the
minimum monthly amount, check the fine print. Use our interest-free deal
calculator to work out how much to pay each month to avoid
paying interest. If you have multiple deals, check with your
provider where your repayments are being allocated.
- If you can't afford the repayments don't take the
deal - Sometimes people think if they can just make the
minimum repayment now, their situation will get better in the
future and they will increase their repayments later. This can
result in more debt and more stress.
- Multiple deals - If you have
more than one interest-free deal on your account, find out how
additional repayments are allocated to make sure you have each one
paid off within the interest-free period.
- Don't use the credit card - You may be tempted
to use the credit card that comes with the deal but it will
probably have a high interest rate, your purchases may not be
interest-free and it may be difficult to work out which balance is
getting paid off first.
- Check the fees and charges - Even when an ad
says 'no deposit, no interest, nothing to pay', you may still have
to pay fees, such as an application fee, monthly account fees and
payment processing fees. These will be listed in your credit
- Review your account regularly - When you
receive your statement check the expiry date on your interest-free
deal and make sure you are paying enough to have it paid off
completely within the interest-free period.
Buy now, pay later payment
Payment services such as Afterpay or zipPay are now available
when you shop online or in store. You can use these services to
shop now and pay later for a short time, either until you receive
your goods and are happy with them, or by paying by instalments
(often fortnightly). These services are offered by separate
companies, not the retailer.
You may not need to apply for this service, it could simply be
an option at the checkout if the online retailer offers it. You
will need to provide your credit or debit card details the first
time you use these services so your payments can be
deducted, and you may have to pay the first instalment up
No interest is charged but the cost will add up if you can't
make the repayments on time. There's usually a late fee every time
you miss, or are late with a scheduled repayment and some services
also have monthly account keeping fees or payment processing fees.
Always check the terms and conditions before you sign up as they
can be different for each payment service.
Before you use this payment option, also make sure the
fortnightly payments are affordable and in your budget. See how to do a
budget for tips on preparing and using a budget.
Some travel companies will encourage you to book the 'trip of a
lifetime', even if you can't afford it, by offering interest-free
There are two types of interest-free travel deals:
Pay before you holiday
You book your trip in advance, locking in fares and other costs
and then pay it off with regular monthly payments before you
travel. You will pay an up-front fee and if you miss a repayment
your trip could be cancelled and any payments you have made used to
pay cancellation fees before you are refunded the balance.
Holiday now, pay later
With these deals you start making regular repayments now and
continue to pay off the trip after you get home. There is an
interest-free period but when that finishes you'll be charged high
interest on the balance. Use our interest-free deal
calculator to work out how much you would need to pay each
month to pay the trip off before you leave home. If you can't
afford the repayments, delay your trip until you have saved enough
to afford it, or holiday somewhere cheaper.
No interest ever deals
With no interest ever deals the repayments are high enough to
repay the debt over the term of the loan. These deals usually have
costly establishment fees, payment processing fees and monthly
While you won't pay interest on debt, you can be charged high
default fees if you don't make all your repayments on time.
Check your other options
Don't feel pressured to sign up to an
interest-free deal by a pushy salesperson or a 'limited time'
offer. Consider other options, such as:
- Using savings instead - our savings
goals calculator will help you work out how much you need to
save and our TrackMyGoals app will help keep you on
- Get a no or low interest
loan - these schemes help lower income earners get
access to funds for essential items
- Put it on lay-by - you won't be able to take
the item home straight away but you won't be stuck paying interest
Interest-free deals can be great if you pay them
off in the interest-free period. But if you don't, you'll be
slugged with extra interest and fees.
Last updated: 11 Oct 2017