The Truth About Interest-Free Purchases

We all know what they say: If it seems too good to be true, it probably is. But is this the case for interest-free purchases?

Unfortunately, yes.

In many cases, an interest-free purchase isn’t really the retail miracle it looks like.

Join us as we reveal the darker side of no-interest offers and how they can actually cost you more in the long run.

What is an interest-free purchase?

This term refers to a retailer’s offer of letting you own an item now while paying for it later. Sometimes you’ll be required to pay an initial deposit for the purchase, while other deals will let you take it home without any upfront payment.

As the name suggests, this type of purchase comes with a repayment window in which you won’t be charged any interest on the credited amount. However, what seems like a buy-now-pay-later dream can quickly turn into a nightmare once that interest-free window closes.

Excessive Interest on “No-Interest” Purchases

Drowning Piggy Bank | Cigno Loans

Most interest-free purchases are only interest-free for a limited time. If you pay back the full amount within that timeframe, you might escape the deal unscathed. But if you’ve still got credit owing when time is up, be prepared for an exorbitant interest rate (potentially up to 30%) to come into play.

Even if you intend to pay back the full amount within the terms of the contract, be sure to check the fine print to find out what kind of interest they will charge if things don’t go according to plan.

It’s also worth doing some calculations when deciding how much of the purchase to pay off each week/month to ensure you accrue the entire amount comfortably in time. Interest-free purchases are often designed with minimum repayment instalments that won’t cover the whole expense within the set time, so sticking to the minimum isn’t a good idea unless you’ve done the maths to make sure it’ll work out.

No Interest, But Plenty of Fees and Charges

Your no-interest arrangement might come with a range of fees and charges such as:

  • Late payment fees
  • Establishment fees
  • Monthly service charges (which can really add up over long contracts).

Everyone’s guilty of occasionally ticking the “I have read the terms and conditions” box without actually doing so, but this is one situation where it’s vital to check the terms thoroughly. Understanding the potential costs of your interest-free purchase can help you decide if it’s really worth it.

Interest-Free Credit Card Offers

Interest Free Credit Card Offer | Cigno Loans

Some interest-free offers come with a store card, which essentially functions as a brand-specific credit card. These cards often carry a higher interest rate than standard credit cards, and they won’t have the same interest-free window as your actual purchase. In most cases, you’ll be better off using your regular credit card for additional purchases – compare the interest rates to confirm this.

Alternatives to Interest-Free Purchases

If you’re considering a no-interest offer, it’s likely because you can’t afford to buy an item outright at the moment. An interest-free arrangement is rarely the ideal way to purchase the product sooner.

Instead, one of these alternatives may be more suitable:

  • Enquire about lay-by if the store offers it and you don’t need the item immediately
  • Open a separate savings account to build up funds for this specific purchase
  • Get a small cash loan to cover the expense.

Whatever path you choose for your purchase, it’s important to research all your options and read the terms carefully to ensure you’re making the right decision. Feel free to contact our friendly team to explore the option of taking out a small personal loan up to $1,000.

Disclaimer: Please be aware that Cigno Loans’ articles do not replace advice from an accountant or financial advisor. All information provided is intended to be used as a guide only, as it does not take into account your personal financial situation or needs. If you require assistance, it is recommended that you consult a licensed financial or tax advisor.


Ordered by the Federal Court of Australia

The Federal Court of Australia has found that Cigno Australia Pty Ltd (Cigno Australia) and BSF Solutions Pty Ltd (BSF Solutions) have breached the law by engaging in unlicensed credit activity and charging prohibited fees.

In the period from July 2022 to 3 October 2023, over 100,000 consumers have been lent a total of $34 million, and charged fees of over $70 million, under the ‘No Upfront Charge Loan Model’ operated by BSF Solutions and Cigno Australia. At no time has either BSF Solutions or Cigno Australia held an Australian Credit Licence.

The Court also found that Mark Swanepoel (director of Cigno Australia) and Brenton James Harrison (director of BSF Solutions) were involved in these breaches of the law.

With effect from 24 May 2024, the Court has granted permanent injunctions preventing Cigno Australia and BSF Solutions from:

  • demanding, receiving or accepting fees or charges, including amounts of loan principal, from consumers in relation to credit provided under the ‘No Upfront Charge Model’; and
  • engaging in further credit activity pursuant to the ‘No Upfront Charge Loan Model’, including by entering into new agreements with consumers, for so long as they do not hold an Australian Credit Licence.

Cigno Australia was ordered by the Court to, by 5th July 2024, send written communications to consumers who between July 2022 and December 2022 entered into agreements with Cigno Australia and BSF Solutions under the ‘No Upfront Charge Loan Model’.

The Court will later determine whether (among other things) Cigno Australia and Mark Swanepoel ought to pay a pecuniary penalty in respect of this conduct, and whether Mark Swanepoel should be restrained from carrying on a business engaging in credit activity.

Cigno Australia, BSF Solutions, Mr Swanepoel and Mr Harrison intend to appeal the decision of the Court and have filed an application for leave to appeal. If the appeal is successful, some or all of the orders of the Federal Court of Australia may be set aside.

Where can you get more information?

Where to go for further support

You can access legal advice in your state at: Free legal advice –

If you are experiencing trouble with debt, or money worries in general, contact:

  • the National Debt Helpline on 1800 007 007 or online chat (9:30am to 4.30pm, Monday to Friday).

If you need someone to talk to, contact:

  • Lifeline on 13 11 14 (24 hours) or their crisis support online chat or
  • Beyond Blue on 1300 22 46 36 (24 hours) or their webchat