Interest free credit cards

What is an interest-free credit card?

Interest-free credit cards are credit cards that allow the cardholder to pay no interest on purchases, balance transfers or both. These kinds of zero interest credit cards usually only offer this for a limited time, but there are a handful of cards that never charge interest.

It’s important to note that 0 interest credit cards are different from a normal credit card with an interest-free period. These credit cards typically charge no interest on purchases made with the card for up to 44 or 55 days, provided you pay your closing balance in full and on time each month.

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How do interest-free credit cards work?

With a 0% purchase rate credit card, you are charged no interest on purchases regardless of whether you pay off your balance in full. However, like other credit cards, you still need to make the minimum repayments. You can either get a lifetime no interest credit card or a no interest for a limited time.

There are also credit cards with 0% balance transfer offers. A balance transfer is when you transfer your existing credit card balance to a new card. With a 0% balance transfer offer, you are charged no interest on your transferred balance for a limited time.

Is interest-free credit really interest free?

Credit cards with ‘0% purchase rate offers’ and ‘0% balance transfer offers’ are only interest free for a limited time. You will be charged interest when the offer period ends. In comparison, a credit card with a  lifetime 0% interest rate will not charge you interest ever. However, it’s important to note that there could be other fees and charges associated with having a credit card.

Explore further: How much are credit card fees?

What are the different types of interest-free credit cards?

There are three main types of interest-free credit cards: lifetime 0% interest cards, credit cards with 0% purchase rate offers and credit cards with 0% balance transfer offers.

Lifetime 0% interest cards

Lifetime 0% interest cards have an ongoing 0% interest rate. This means you will never be charged interest on purchases made with the card. Instead, these cards typically charge a flat monthly fee if you use the card or carry a balance. At the time of writing, cards include:

• CommBank Neo: 0% interest rate and no late fees. Three credit limit options ($1,000, $2,000 and $3,000). Monthly fee ($12, $18 or $22 based on your credit limit), which won’t be charged if you don’t use your card and pay your total balance owing in full. Minimum repayments of $25 or 2% of your closing balance, whichever is greater.
• NAB StraightUp: 0% interest rate and no late fees. Three credit limit options ($1,000, $2,000 and $3,000). Monthly fee ($10, $15 or $20 based on your credit limit), which won’t be charged if you don’t make any purchases and have an outstanding balance of $0 during the whole statement period. Fixed minimum monthly payment ($35, $75 or $110 based on your credit limit).
• Westpac Flex: 0% interest and no late fees. $1,000 credit limit and $10 monthly fee, which won’t be charged if you pay your outstanding balance on your previous statement in full by the due date. Minimum monthly repayment of $40.
• Community First Credit Union n0w: 0% interest and no late fees. Three credit limit options ($1,000, $2,000 and $3,000). Monthly fee ($9, $14 or $19 based on your credit limit), which won’t be charged if you don’t use your card and have a $0 balance for the whole calendar month. Minimum repayments of $20 or 2.5% of outstanding balance, whichever is greater.

These cards are typically ‘no-frills’, meaning you won’t get the same perks as a premium card. For example, you won’t be able to earn reward points or receive complimentary insurances. The CommBank, NAB and Westpac credit cards also do not allow cash advances.

When comparing lifetime 0% interest cards, consider the monthly fee and whether you’ll meet the conditions to get this waived. If it’s likely that you will use the card or carry a balance, check whether the monthly fee works out cheaper than taking out a low rate card with no annual fee. It’s important to choose a suitable credit limit based on your spending habits – a higher credit limit means higher monthly fees. Also consider if you are able to make the minimum monthly repayments on-time, consistently, as part of your budget.

0% purchase rate offers

Credit cards with 0% purchase rate offers allow you to pay no interest on purchases for an introductory period. On Canstar’s database, offers currently range from 12 months to 20 months. For example, if you had a credit card with a 0% purchase rate offer for 12 months, this means purchases you make won’t accrue interest for 12 months. There are currently no 36-month interest free credit cards or 60-month interest free credit cards on Canstar’s database.

At the end of the introductory period, the purchase rate reverts to the card’s standard purchase rate. This new rate will apply to any outstanding balance on the card and any new purchases you make.

If you are comparing cards with 0% purchase rate offers to find the best interest free credit card, consider factors like the length of the offer, the revert purchase rate, fees and features. You can compare no and low fee credit cards below with Canstar and select the ‘0% purchase rate offers’ filter.

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0% balance transfer offers

A credit card with a 0% balance transfer offer allows you to pay no interest on the balance you transfer for a limited time. This can give you some breathing room to pay off your debt. On Canstar’s database, offers currently range from six to 30 months.

At the end of the offer period, the balance transfer rate will revert to a higher rate. If you haven’t paid off the whole amount transferred, your outstanding balance will attract this rate.

If you are comparing cards with 0% balance transfer offers, consider factors like the length of the offer, the revert rate if you don’t pay off your debt in time and the fees that apply. You may be charged an annual fee and a balance transfer fee (a percentage of the amount you transfer to the new card). See the longest 0% balance transfer offers currently available.

Some credit cards with 0% balance transfer offers also have 0% purchase rate offers. This could suit people who have existing credit card debt to pay off, but also need to pay for upcoming expenses.

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When will I be charged interest?

You won’t be charged interest on a lifetime 0% interest card. However, you can be charged interest on credit cards with 0% purchase rate offers and 0% balance transfer offers. Here’s when you can be charged interest:

0% purchase rate offers

• If you still carry a balance at the end of the introductory period
• If you make purchases at the end of the introductory period
• If you use the card for things other than purchases, such as balance transfers and cash advances, you will typically be charged the balance transfer rate and cash advance rate respectively

0% balance transfer offers

• If you don’t pay off your balance transfer amount in full by the end of the offer period
• If you use the card to make purchases, you will typically be charged the purchase rate
• If you use the card for cash advances, you will typically be charged the cash advance rate

How to compare interest-free credit cards

When comparing interest-free credit cards, consider the following factors:

• How long is the interest-free period? The longer the interest-free period, the more time you will have to repay your purchases or balance before the higher rate kicks in. Lifetime 0% interest cards have an ongoing interest-free period, but you may be charged monthly fees.
• What is the revert rate? Also bear in mind the revert rate. This is the interest rate that will apply if you don’t pay off your purchases or balance before the offer period ends.
• How much are the fees? Try to find a card with no or low annual fees. With lifetime 0% interest cards, you are charged a monthly fee and it is typically more for higher credit limits.
• Are there any additional features? Check whether the card offers any additional features (like complimentary insurance or the ability to earn rewards points) and whether you think this offsets the fees.

You can compare interest free credit cards using Canstar’s comparison tool.

Is a 0% interest credit card a good idea?

There are a number of pros and cons to consider if you’re thinking about signing up for an interest-free credit card in Australia.

• Potential pros of an interest free credit card: Interest free credit cards often have low maximum limits, meaning you will not be able to accrue as much debt on them; similarly, given that they do not charge interest, you won’t be faced with an expensive interest bill if you carry a balance.
• Potential cons of an interest free credit card: You’ll still need to pay fees for an interest-free credit card, and these can add up, making them potentially as expensive as other kinds of credit cards; these kinds of cards also tend to be no-frills, meaning you won’t have access to perks like reward points.

If you are considering a credit card, it is a good idea to take the time to read through any key disclosure documents, such as the Target Market Determination (TMD) and Key Facts Sheet, as part of your decision-making. While credit cards can bring benefits, such as helping in an emergency (alongside an emergency fund), there can be drawbacks too, like interest, fees and charges. And if you’re not careful and don’t make regular on-time repayments, a credit card can have a negative impact on your credit score.

→ Find out more: Pros and cons of credit cards

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