Compare Australian Interest Free Credit Cards

Ever wondered whether interest-free credit card deals are right for you? Have a read of our quick guide, which will run you through the different types of 0% interest offers available and the tricks to use these cards like a pro.

How does an interest free credit card work?

An interest free credit card is usually an offer that provides you with a 0% interest rate on purchases or an existing balance over a specific introductory period and then reverts to an ongoing higher rate. 

With these offers, you will have a limited time where no interest is charged on your balance. Keep in mind that any balance remaining at the end of the promotional period will be charged the new interest rate until it is cleared.

These deals are usually only available for a limited time, so you should ensure your credit card application will be approved before the promotion expires. Like all credit cards, 0% interest cards still have monthly minimum payments, usually 3% of your balance, despite charging no interest.

What types of interest free credit cards are available?

There are various interest-free credit card options, each serving a different purpose. 

0% purchase rate offer 

• Pay no interest on purchases for limited promotional period

Need an interest-free credit card to pay for a significant upcoming expense like a wedding or small home refresh? Then it sounds like you could be in the market for a credit card with a 0% purchase rate deal. With these offers, as long as you meet the minimum repayments each statement period, all purchases you make (excluding ATM withdrawals) will be interest-free for a set period. The current average credit card interest rate in the Mozo database is 17.00% p.a., and it’s even higher, at 19.95% p.a. for rewards credit cards, so a 0% purchase rate offer can save you a lot in interest payments.

Balance transfer offer

• Pay little to no interest on an outstanding balance

 If you want to pay off some debt, you might consider a balance transfer offer. A balance transfer is when you take the existing debt you've built up on an old credit card and move it to a new one at a much lower interest rate, often even 0%. The current average balance transfer offer length in the Mozo database is 17.25 months, with the shortest being 6 months and the longest being 36 months. You should also remember that there is sometimes a balance transfer fee, generally ranging from 0% to 3% of the transferred balance.

0% interest, monthly fee credit cards 

• Never pay interest on purchases, instead pay a monthly fee

Unlike 0% purchase rate offers, credit cards in this relatively new category never charge interest. No interest cards operate similarly to a Buy Now Pay Later service, with a credit limit between $1000 and $3000 and a scaled monthly fee from $10 to $30, which can sometimes be waived if conditions are met. 

Debit cards

• There no interest when you’re spending your own money

While technically not a credit card, debit cards are linked to either Visa or Mastercard networks, which means you can use them wherever these cards are accepted. The beauty of opting for a debit card is that you’re spending your own money, so you won’t cop any interest charges for borrowing money from the bank.

What are the pros and cons of interest free credit cards and offers?

Although an interest free credit card, a 0% purchase rate offer or 0% balance transfer offer can help you save on interest payments or pay off a balance sooner, there are some possible drawbacks.

                                                                   Pros:

• Save money

An obvious advantage to a zero interest credit card is that you don’t pay any interest during the introductory period, saving you money.

• Pay off your balance faster

All credit card repayments that are made while the zero interest offer is valid go straight to your balance, allowing you to pay it off sooner without paying interest.

                                                                Cons:

• Revert rate

If you don’t manage to pay off your entire balance before the introductory period expires, your interest rate will revert from zero to a significantly higher rate. For balance transfers, the rate usually reverts to the cash advance rate, while revert purchase rates vary card-to-card. The current average credit card purchase rate in the Mozo database is 17.00% p.a., while the current average cash advance rate is 14.55% p.a..

What are interest free days?

Did you know that most credit cards usually come with either 44 or 55 interest-free days?

This means that if you pay the full amount you spent during the statement period by the due date, you won't be charged any interest.

Your interest-free period will begin at the start of your credit card statement period. As long as you pay your balance in full each month by the due date, you’ll get the same interest-free days for each statement period.

How do interest free days work?

Here’s where things can get a bit tricky. To put it simply, you don’t necessarily have the same amount of interest-free days to pay each credit card purchase off in.

If you make a purchase on the first day of the interest-free period, then you'd have the maximum number of interest-free days to repay your credit card balance to avoid being charged interest.

But if you make a purchase in the middle of the interest-free period, you’d need to pay your credit card balance within half the time to dodge any interest charges.

How many interest free days do credit cards have?

While your credit card might come with 44 or 55 interest-free days in total, this does not mean that you’ll have that many days to pay each purchase off from the purchase date.

Scenario:

You take out a new credit card which offers 44 interest-free days. On the first day of your credit card statement period, you go and treat yourself to a new pair of $200 shoes. To avoid paying interest on the shoes, you’ll need to pay your credit card balance off within 44 days.

Then, on the 26th day of your credit card statement period, you spoil yourself to a new $300 portable speaker. Since you bought the speaker on the 26th day of the statement period, unless you want to be charged interest, you’ll only have 18 interest-free days left to pay the speaker off in.

Balance transfer offers and interest free days

Please be aware that interest-free days don’t usually apply if you’ve taken up a balance transfer offer, though this isn’t always the case for all providers.

Some providers actually offer 0% interest on balance transfers in addition to an interest-free period on new credit card purchases. Others will immediately charge interest; even if you pay off the purchase in full by the statement due date, you won't be eligible for interest-free days on purchases with most cards while you're paying off a balance transfer. So it’s always wise to double-check the PDS (Product Disclosure Statement) just to be sure.

What happens if I don’t repay my credit card balance in full?

If you don’t pay your credit card balance off in full before the interest-free period ends, you won’t just be charged interest on your purchases; you’ll also lose the privilege of having interest-free days for the next month.

How do I get my interest-free days back?

All you need to do to get those interest-free days back is pay your credit card debt off in full and your new interest-free period will commence from the day your balance is repaid.

Top interest free credit card tips:

While interest-free credit cards are a great way to ditch sky-high interest rates, there are some rules to follow to ensure you use the card to your advantage without falling into credit card debt. Here are some of our top tips:

1. Set a budget

Whether you're looking to use an interest-free credit card to make purchases or as a way to ditch debt, it's super important to set and stick to a solid budget.

0% Purchase rate: While you'll be free of interest for a set period, make sure to only spend what you can afford to repay before the interest-free period ends. The best way to avoid spending above your means is to set a solid budget that you can stick to.

0% Balance transfer:

Before you take out a balance transfer deal, first, you need to determine exactly how much you'll need to repay each month because just paying the minimum won't necessarily clear the debt within the balance transfer period.

For instance, with a 10-month balance transfer offer and a $5,000 debt, you would need to repay $500 monthly to clear the debt within the balance transfer period.

2. Choose the right interest free term (3, 6 or 12 months interest free)

Think about how long you'll need the interest-free period. This is especially important if you're planning to use the interest-free card for long-term expenses.

12-month interest-free credit cards are pretty popular in Australia, but when you consider Mozo's database shows 0% purchase rate terms ranging from 3-24 months, make sure you find a term option that suits you best.

The same goes if you're looking to roll your debt across to a balance transfer card, as you'll need a term that you can realistically repay the balance off before the BT offer reverts to a higher rate.

Play around with our credit card debt payments calculator to get an idea of which term would suit you best.

3. Look for a low annual fee

When you start searching for an interest-free credit card, you shouldn't just search for one with the longest term; you'll also want to find one with an affordable annual fee.

Think about it, what's the point in going for an interest-free card if a pricey ongoing fee negates the benefit?

4. Check the revert interest rate

Suppose you plan on keeping the plastic in your pocket after the interest-free period comes to an end. In that case, it's worth checking that the card reverts to a competitive ongoing interest rate, ideally one that's below 15%.

5. Set up automatic repayments

Once you've got the card in your pocket, you can make your repayments a total breeze by setting up a regular direct debit from your bank account to the lender. This way, you can avoid missing repayments.

6. Avoid cash advances

Remember, the 0% offer only applies to purchases or the balance transfer. So if you withdraw cash from an ATM, you'll cop a cash advance rate, which, according to the Mozo database, usually sits above 20%.

On top of this, interest-free days don't apply for cash advances, so you'll be charged that interest instantly.

7. Pay your balance off before the interest-free period ends

This tip may be last on our list, but it is probably the most important! Paying off your balance in full within the introductory period means you can enjoy an interest-free period.

This can come in handy if you need to fund a big-ticket item or pay off any debt.

Where can I find great-value interest free credit cards on Mozo?

Do you think you've got a handle on using an interest-free card the right way? Then start comparing deals in the table above, or you can search our entire product database by using our credit card comparison tool or check out our new guide on the best credit cards. 

Alternatively, if you're looking to blast some debt, use our Switch & Save Calculator to see how much you could save by transferring your debt to an interest-free deal today!