How much late payment interest can I charge on an invoice?

Only what your payment terms state, within state law. A common clause is 1-1.5% per month (12-18% per year) on overdue balances, sometimes with a flat late fee.

How do I calculate interest on a late payment?

Multiply the amount by the monthly rate and prorate by days: amount × rate × days ÷ 30. Add any flat late fee to get the total due.

Is a late fee the same as interest?

No. A late fee is a one-time fixed charge for missing the due date; interest is a finance charge that keeps growing with each day the balance stays unpaid.

Do late fees apply automatically?

Only if the contract or invoice terms provide for them. Without a written term, you generally cannot add fees or interest after the fact.

Finance

Late Payment Interest Calculator

When a bill or invoice goes past due, the balance usually grows two ways: a one-time late fee and a monthly finance charge that accrues with the days. Enter the terms to see the updated total.

Your numbers

Result

Total due

$1,015.00

Interest: $15.00
Late fee: $0.00
Original amount: $1,000.00

Amount due after 30 days late
Item	Amount
Original amount	$1,000.00
Late fee	$0.00
Interest (1.5%/month ≈ 18.0%/year)	$15.00
Total due	$1,015.00

How late payment interest is calculated

The common structure is a flat late fee (a fixed dollar amount, if the contract sets one) plus a monthly interest rate — the finance charge — prorated by the days overdue: interest = amount × monthly rate × days ÷ 30. A typical invoice finance charge is 1% to 1.5% per month, which is 12-18% per year. The total due is amount + late fee + interest.

What the contract and state law allow

Late fees and interest must come from the agreement — an invoice can only charge what its payment terms state, and many US states cap interest under usury laws (limits vary by state and by whether it's consumer or business debt). Credit cards, rent and taxes each follow their own rules. Always check the contract language, e.g. "1.5% per month on overdue balances".

What this calculation simplifies

It uses simple interest prorated by day, the most common convention for invoices and bills — not compounding month over month. It also leaves out collection costs and attorney fees that some contracts add. If you invoice clients, state your late terms clearly up front and send the first reminder before charging anything.

Informational and educational result. Not a substitute for professional advice.

Frequently asked questions

Sources

Invoice payment terms and finance charges — common US practice

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