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Interest-free deals let you take goods home or go on a holiday and pay off the cost over time. But interest-free doesn't mean cost-free.
What is an interest-free deal?
An interest-free deal lets you buy something now and pay it off over time without paying interest during a set promotional period. Fees and other charges such as account keeping fees may still apply.
They're often used for expensive items such as furniture, appliances, electronics, holidays or home improvements.
An interest-free deal can help you spread the cost of a purchase. But if you don't understand the costs and conditions, it could end up costing more than you expect.
How interest-free deals work
With an interest-free deal, the purchase is usually linked to a store card or credit card.
The retailer gives you a set period, such as 12, 24 or 60 months, to repay the purchase without being charged interest. While the retailer may be the one introducing you to the interest- free deal, they are not the lender on the contract. Check your contract for details.
You'll usually make regular repayments during the interest-free period. Depending on the deal, you may:
- Pay by equal instalments. You make the same regular repayment over the interest-free period totaling the amount borrowed.
- Pay by minimum repayment. Making the minimum repayments will not pay off the total amount borrowed by the end of the interest-free period. You will need to pay the balance before the interest-free period ends to avoid paying interest.
- Defer payment. You don't make any payments until the end of the interest-free period.
Check how the repayments work before you sign up
If you still owe money when the interest-free period ends, interest may be charged on the remaining balance. Interest rates can be as high as 29% - higher than your average credit card.
An interest-free deal is not the same as:
Costs of an interest-free deal
Although you may not pay interest during the advertised period, there may be other costs to pay.
You may be charged fees on interest-free deals, which may be added to the amount borrowed. Fees may include:
- establishment fees
- payment processing fees
- account keeping or service fees
- annual fees on the credit or store card
- late fees if you miss a payment
Some interest-free deals also require you to apply for a store card or credit card. If they do, check what interest rate applies after the promotional period ends.
Before you sign up, work out the total amount you'll pay, including any fees.
In July 2026 the Federal Court imposed penalties of $35 million against Harvey Norman Holdings Ltd and $20 million against Latitude Finance Australia for misleading conduct and false or misleading representations they made in a national advertising campaign promoting a 60-month interest free and no deposit payment method for goods purchased at Harvey Norman stores.
The Court found the advertising was misleading because it did not adequately disclose that consumers had to use a specified credit card and pay applicable fees.
Tips for managing an interest-free deal
Know the costs. Check the fees, charges and interest rate that applies after the interest-free period ends.
Repay more than the minimum. Minimum repayments may not be enough to pay off the balance before the interest-free period ends. If there's money left owing, interest may be charged.
Review the contract and understand how the repayments will be calculated. Split the balance owing by the number of months in the promotional period and pay that amount monthly. By doing so, there will be no money left owing after the interest- free period ends.
Know when the deal ends. Keep track of the end date so you don't get caught by surprise. The lender doesn't have to remind you when the interest-free period ends.
Check your statements. Make sure you're on track to repay the balance in time.
Avoid extra spending. If the deal is linked to a credit card or store card, using it for other purchases can increase your debt. Other purchases may not receive the promotional interest free rate and can make the account harder to repay.
Alternatives to interest-free deals
Don't feel pressured to sign up for an interest-free deal or a 'limited time interest-free' offer. There are other ways you can pay.
No Interest Loans. If you're on a low income a No Interest Loan (NIL) can help you pay for essential household items. You pay no interest or fees. You only repay what you borrow.
Lay-by. Pay off the item over a number of equal repayments. You won't be able to take the item home right away, but there's no interest either.
Savings. Use our savings goals calculator to see how much you need to put aside regularly to reach your savings goal.
Get help if you can't make repayments
If you're struggling to meet the payments on an interest-free deal, contact the lender. You have the right to apply to the lender to make your loan more manageable because of financial hardship.
You can also talk to a financial counsellor. They offer a free and confidential service and can help you get your finances back on track.
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