Guide to interest-free finance

Interest-free financing is a handy way to get what you want when you don’t have the cash. Find out here how it works.

Businesses love when people buy their products and people generally enjoy buying new things. The only hindrance to this happy relationship is the money that’s required to make the purchase.

Interest-free financing is a new shopping method that can benefit both businesses and shoppers by letting you pay off a purchase in instalments. This type of finance differs from traditional loans as the payments are interest-free.

How does interest-free finance work?

Interest-free finance works in much the same way as the interest-free deals major retailers have offered for years. The only difference is that you are getting finance from a third-party provider that is available at a range of different stores. In a way, it works in a similar way to layby, but you receive your purchase upfront. Here’s how it works:

  • Sign up with a provider. Sign up either online or in store. You can usually get on-the-spot approval.
  • Make your purchase. Some providers only work with partnered merchants, whereas others are accepted anywhere that takes credit card.
  • Pay back your loan. Repayments are usually made in instalments, such as four instalments over a year, or monthly like a credit card.

Interest-free: What’s the catch?

By offering interest-free financing, businesses have taken away one of the biggest barriers to closing a sale. It allows shoppers to spend money they don’t have. That’s the main catch, it encourages spontaneous spending and bad credit habits.

As well as this, there are fees and interest charges for late payments. “Interest-free” really means an interest-free period, after which you will have to pay a high interest rate. The minimum repayments may or may not be enough to pay back your loan before the interest-free period is up. It’s up to you to ensure you pay the loan back fully before that point.

There are a number of fees associated with using some interest-free finance products. Most will charge you if you make cash withdrawals or don’t make repayments on time.

Which providers offer interest-free finance?

ProviderHow it worksCostsMore
OpenpaySelect Openpay at the checkout online or in-store. Repay in fortnightly instalments.
  • Processing fees of $2.50 to $3.95 for long plans
  • Late fees
Read the review
AfterpaySelect Afterpay at the checkout online or in-store. Repay in four interest-free instalments.
  • Late payment fees of $10 and a further $7 if you still haven't paid the next week
Read the review
Certegy Ezi-PayCreate an account online or at the checkout and receive your credit approval. Repay in interest-free fortnightly instalments.
  • Establishment fee of between $35-$90
  • Monthly account-keeping fee of $3.50
Read the review
zipMoneySelect zipMoney at the checkout and wait for approval. Repay your purchase interest-free over three, six or 12 months. Outstanding balances after this period will incur interest.
  • Standard annual percentage rate after the promotional period
  • Monthly fee when a balance is outstanding
Read the review
zipPayCreate an account with zipPay and then spend up to your credit limit at participating merchants. Repay fee-free for 60 days, with outstanding balances after this incurring a $5 monthly fee. Minimum payment of $40 per month.
  • $5 fee each time your account has an outstanding balance after first 60 days
  • Late fee of $5 when no payments are made in a 30-day period
Read the review
OxipaySign up for an Oxipay account and shop with merchants online or in-store. Repay what you owe in four fortnightly instalments.
  • $15 payment default fee
  • $30 collections fee if Oxipay need to start the collections process
Read the review
BrighteSign up for a Brighte account online to pay for home improvements or home energy installations. All plans are interest-free.
  • $75 BrightePay application fee
  • $2.99 fortnightly payment processing fee
  • $3.50 monthly account-keeping fee
  • $4.99 late payment fee
Read the review
LombardApply online or in-store with participating merchants. There is an interest-free term but you can take longer to repay.
  • $99 annual fee
  • Standard variable rate
  • Interest rate for cash advances
CreditLineShop at participating merchants for an interest-free promotional period. Your choice of three 0% interest plans.
  • Establishment fee of $25
  • Monthly account servicing fee of $4.95 for balances over $10
  • $20 late fee
  • ATM and EFTPOS withdrawal fees
  • Payment advance
Read the review
OnceChoose from two cards that offer various interest-free plans, including 0% for six months on purchases over $250 and 0% for 48 months at participating retailers.
  • $99 annual fee
  • Standard variable rate of 22.99% p.a.
  • Interest rate for cash advances

What features do these interest-free finance providers offer?

Each provider offers the following features with their interest-free finance service:

  • Loan term. Loans terms vary greatly depending on the provider and the retailer. For small-value purchases, it might be only six months, but it could be up to three years for more expensive transactions.
  • Repayment frequency. Again, it varies depending on the provider. The line of credit products generally require monthly repayments, whereas merchant payment options are commonly paid back in four instalments.
  • Convenience. All interest-free finance products can be applied for and approved in minutes at the point of sale or online.
  • Paperless. The application process and loan management is done online, so you won’t need to physically print or sign anything.
  • Wide acceptance. Line of credit debit cards are accepted anywhere normal credit cards are accepted. The merchant payment option is only available at partner merchants. However, there is a large and growing number of businesses offering this payment option.
  • Ongoing. Unlike a loan, the line of credit products do not expire once you pay off your debt. You can keep the card and use it again when required.

What should I consider before I apply?

While interest-free finance may be enticing and suitable in some cases, there are a number of factors to consider before using it:

  • Fees. All line of credit providers charge some form of fee. Most fees are associated with cash withdrawals and missing repayments. Some charge a fee for every single transaction.
  • Interest. Interest is charged after the interest-free period. Interest rates can be high, in some instances up to 29% p.a.
  • Minimum repayments. The minimum repayments are unlikely to repay the loan within the interest-free period. If you do not make additional repayments you will be charged interest.
  • Credit record entry. Interest-free products are still a type of loan and are recorded on your credit history as such. Be cautious of over using, or not repaying these products.

It's important to compare a range of interest free offers before signing up. You can also consider a credit card with a 0% p.a introductory interest rate offer.
Picture: Shutterstock

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One Response

  1. Default Gravatar
    RobertMarch 22, 2017


    Thank you for your, a very honest and helpful website,
    My question is this, Is there any interest-free finance provider who can be accepted anywhere that takes their credit card?
    The reason for my question is this: When shopping at a participating partnered merchants they jack their prices up to compensate for the interest-free finance provider unlike when paying cash you get a good discounted deal for your purchase?

    Thank you.

    Kind regards,

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