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.
- Deferred payment - 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%, which is much higher than most credit
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 at the end
of the interest-free period.
|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 - Check the fine
print and only get an interest-free deal if the contract allows you
to pay more than the minimum monthly amount. Use our interest-free deal
calculator to work out how much to pay each month to avoid
- 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 will 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.
Video: Andrew's tips on interest-free deals
Video tips on interest-free deals
Andrew from ASIC's MoneySmart team talks about how to pay more
than the minimum repayment so you can avoid paying interest.
Buy now, pay later payment
Buy now, pay later services such as Afterpay, Certegy and zipPay
are offered by approved retailers and allow you to order or
purchase a product immediately and delay payment. You then pay off
the product in instalments over several weeks - or, with some
service providers, over a longer period of time. Read more about
how buy now, pay later services
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 payment
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
- 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: 26 Nov 2018