Can you charge interest on an overdue invoice?
Can you charge interest on an overdue invoice — and how?
Short answer
Yes, you can charge interest on overdue invoices — but only if you've communicated the terms in advance. You cannot retroactively add interest to invoices that said nothing about late fees.
**The rule:** Your right to charge interest depends on whether your contract or invoice stated the rate before the work was done. The clearest approach is a clause on every invoice: "A late fee of 1.5% per month applies to balances unpaid after [due date]."
**Typical rates:** - 1.5% per month (18% APR) — the most common commercial rate in the US - 2% per month (24% APR) — the practical upper limit for most commercial relationships - Prime + 2–5% — used in some contract templates
**State limits:** Most US states cap consumer interest rates (usury laws), but B2B contract interest is generally less regulated and 1.5–2% per month is well within acceptable limits in all states. For consumer invoices, check your state's usury ceiling — typically 10–24% APR depending on the state.
**How to calculate monthly interest:** - Balance × monthly rate = monthly interest charge - Example: $1,000 × 1.5% = $15/month
**Practical reality:** Many businesses state late fees but waive them for good clients to preserve the relationship. The value of stating them is behavioral — clients who know a fee is accruing are more motivated to pay than clients who see no cost to delay. State the fee; enforce it selectively.
**What you need to collect:** 1. The rate must be stated on the original invoice or in your contract 2. Calculate the accrued amount and add it to your follow-up demand 3. If the client disputes the fee, you can negotiate — but you're negotiating from a position of legal right