Interest-Free Deals in Australia: Hidden Costs & Smart Alternatives

“Interest-free” sounds ideal. You can take home a new fridge, phone, couch or even book a holiday without paying a cent in interest. For many Australians, interest-free deals can feel like a smart way to manage cash flow.

But while these offers can be useful, they’re not always as cost-free as they appear.

Many Australians sign up for interest-free finance without fully understanding the fees, strict repayment conditions and what happens if things go wrong. If deadlines are missed, the overall cost can quickly outweigh any savings.¹

This guide explains:

• What interest-free deals really mean
• The hidden costs most people overlook
• How these deals may affect your credit score
• When interest-free can make sense — and when it may not
• Smarter alternatives, including transparent personal loans

We’ll also explain where Credit24 fits in. Credit24 does not offer interest-free deals. Instead, it provides personal loans with clear pricing and predictable repayments, so you know what you’re agreeing to upfront.

Apply now

What does interest free mean and how do these deals work?

An interest-free deal allows you to repay a purchase over a set period without paying interest — as long as you meet all conditions.

Interest free meaning in practice

In Australia, interest-free periods typically last:

• 6 months
• 12 months
• 24 months
• Sometimes 36 months

During this time, no interest is charged if you follow the rules exactly.²

Most interest-free finance offers are funded through:

• Store credit cards
• Retail finance cards
• Branded credit cards with special promotions

Retailers partner with finance providers who cover the interest cost — but fees, strict terms and penalties may still apply.

Interest-free finance vs buy now, pay later

Interest-free finance:

• Is regulated credit
• Appears on your credit report
• Usually involves formal applications

Buy now, pay later:

• Often split into short instalments
• May not charge interest but relies on late fees
• Can still impact creditworthiness

Both can create problems if repayments aren’t managed carefully.

Common repayment structures

Interest free payment plans usually fall into three categories:

Equal instalments
You repay the balance evenly across the period.

Minimum repayments
You make smaller required payments that may not clear the balance before the deal ends.

Deferred payment
You may not need to repay anything until the end — then face a large final payment.

The second and third options are where many Australians get caught out.³

The costs of interest free purchases

Interest-free doesn’t always mean fee-free. Common costs can include:

• Establishment or application fees
  Often $25–$100+ upfront
• Monthly account keeping fees
  Typically $5–$10 per month
• Payment processing fees
  Charged for certain payment methods
• Annual card fees
  If the deal uses a credit or store card
• Late payment penalties
  Even one missed payment can sometimes void the interest-free offer
• Bundled insurance products
  Sometimes added automatically unless declined
• Revert interest rates
  Often 20%+ if a balance remains after the interest-free period⁴

Over a long interest-free period, fees alone may add up to hundreds of dollars, especially if multiple products are financed at the same time.

If you’re comparing offers, it can help to understand how lenders display borrowing costs, including comparison rates:
https://www.credit24.com.au/blog/what-is-a-comparison-rate

You may also want to understand common loan fees, such as establishment fees:
https://www.credit24.com.au/blog/what-is-an-establishment-fee

Interest free deals and your credit score

Interest-free deals can affect your credit file.

Each application may:

• Create a hard credit enquiry
• Appear as an open credit account
• Reduce borrowing capacity for other loans

Multiple interest-free purchases may:

• Lower your credit score
• Reduce your options for future lending
• Signal higher credit exposure to lenders

ASIC has warned that stacking interest-free deals can quietly damage credit health, even if no interest is charged.⁵

If improving your credit profile is a goal, this guide may help:
https://www.credit24.com.au/blog/how-to-improve-credit-score-australia

How to maximise interest free payment plans

Before signing up

Always take time to:

• Calculate what you must repay each month to clear the balance
• Ignore minimum repayments unless they fully repay the balance in time
• Read the Key Facts Sheet and contract carefully
• Confirm all fees and revert rates
• Make sure the end date fits your budget

If you're unsure how interest works, this guide may help:
https://www.credit24.com.au/blog/what-is-interest-rate

During the interest-free period

Best practices include:

• Setting automatic repayments above the minimum
• Tracking the end date in your calendar
• Avoiding extra spending on the same card
• Reviewing statements monthly
• Checking progress halfway through the term

Understanding how credit cards apply interest and repayments can also help:
https://www.credit24.com.au/blog/credit-card-interest-free-period

Smart interest free credit strategies

If you choose to use an interest-free deal, you may reduce risk by:

• Using it only for essential, planned purchases
• Paying more than the minimum repayment
• Paying off early where possible
• Avoiding multiple overlapping deals
• Reducing credit limits after repayment

If you want a structured approach to managing spending, tracking your expenses may be useful:
https://www.credit24.com.au/blog/how-to-track-expenses

When interest free deals make sense (and when they don’t)

When they can make sense

Interest free purchases may work when:

• An essential appliance breaks unexpectedly
• You have stable income and a clear repayment plan
• You could afford to pay cash anyway
• You fully understand all terms and fees

For example, an interest-free deal may be considered for essential purchases like white goods or furniture, but it’s still worth comparing other finance options:
https://www.credit24.com.au/white-goods-loans
https://www.credit24.com.au/furniture-loan

When to avoid them

Interest-free deals may be risky if:

• The purchase is impulsive
• You already have existing debt
• Your income is uncertain
• You’ve struggled with repayments before
• Fees and revert rates outweigh any interest savings

MoneySmart warns that many consumers underestimate the risk of revert interest rates and fees.⁶

If you’re already juggling repayments, you may find this guide useful:
https://www.credit24.com.au/blog/how-to-get-out-of-debt

Alternatives to interest free purchases

Personal loans like Credit24

Unlike interest-free deals, Credit24 personal loans offer:

• Clear, upfront pricing
• No revert rates
• Fixed repayments
• Loans from $500 to $10,000
• Flexible terms
• No early repayment penalties

They may be useful for:

• Consolidating multiple interest-free balances
• Avoiding high revert interest
• Funding essential purchases with more certainty

If you want to understand personal loans more clearly, these guides may help:
https://www.credit24.com.au/blog/what-is-a-personal-loan
https://www.credit24.com.au/blog/personal-loan-vs-credit-card

You can also explore debt consolidation options here:
https://www.credit24.com.au/debt-consolidation-loans/
https://www.credit24.com.au/credit-card-consolidation-loan

Apply now

Other payment options

Depending on your situation, alternatives may include:

• Saving and paying cash
• Lay-by for non-urgent purchases
• No Interest Loan Schemes (NILS) for eligible households
• Credit cards with short interest-free periods (used carefully)
• Negotiating a cash discount with the retailer

Budgeting can also help reduce reliance on credit:
https://www.credit24.com.au/blog/how-to-do-a-budget
https://www.credit24.com.au/blog/best-money-saving-tips-australia

If you're setting longer-term money goals, this guide may help:
https://www.credit24.com.au/blog/financial-goals

Frequently Asked Questions

What does interest free mean exactly?

Interest free means no interest is charged only if all conditions are met. Fees may still apply, and interest may be charged if repayments are late or the balance isn’t cleared on time.

What happens after an interest free period ends?

Any remaining balance usually attracts a revert interest rate, which can be high (often above 20%). This may apply immediately after the interest-free period expires.

Can I pay off interest free finance early?

Many interest-free deals allow early repayment. Paying early may reduce fees and help avoid the risk of revert interest.

If you want strategies to repay loans faster, this guide may help:
https://www.credit24.com.au/blog/how-to-pay-off-loan-early

Do interest free deals affect credit scores?

They can. Applications may create credit enquiries, and active accounts may affect borrowing capacity. Multiple deals may lower your score depending on your overall credit profile.

You may also find this guide helpful:
https://www.credit24.com.au/blog/credit-score-for-personal-loan

Can I use multiple interest free deals at once?

You can, but it may increase risk. Stacking deals can increase repayment pressure and credit exposure, which may contribute to financial stress.

How do interest free deals differ from buy now pay later?

Interest-free finance is regulated credit with formal contracts and reporting requirements. Buy now pay later often avoids interest but may rely on fees and still carries financial risk.

Sources

¹ ASIC MoneySmart – Interest-Free Deals
https://moneysmart.gov.au/other-ways-to-borrow/interest-free-deals

² ASIC – Credit and Interest-Free Offers
https://moneysmart.gov.au

³ ACCC – Consumer Credit Risks
https://www.accc.gov.au

⁴ ASIC – Credit Card and Retail Finance Costs
https://moneysmart.gov.au

⁵ ASIC – Credit Reporting Impacts
https://moneysmart.gov.au

⁶ MoneySmart – Managing Interest-Free Purchases
https://moneysmart.gov.au

Disclaimer

IPF Digital Australia Pty Ltd, trading as Credit24, ABN 59 130 894 405. Australian Credit Licence 422839.

The information in this article is general in nature and does not consider your objectives, financial situation, or needs. Lending criteria, fees, and charges apply. For product details, eligibility requirements, and full terms and conditions, visit www.credit24.com.au.