How Much Can I Charge % For Late Fees? [Country Selector Tool]
Late Payment Fee Guidelines at a Glance
- Most countries allow late fees — but they must be specified in your contract before enforcement.
- EU countries: Typically ECB rate + 8% (around 11-13% annually) plus €40 fixed recovery fee.
- English-speaking countries: Usually no statutory rate — negotiate 1.5-2% monthly in contracts.
- Key requirement: Late fees must be "reasonable" and included in written terms to be enforceable.
- Best practice: Use interest for large invoices (>$500), fixed fees for smaller amounts.
Cash flow issues represent one of the biggest threats facing small-to-medium enterprises (SMEs) globally. With late payments becoming the new norm, late fees and interest on overdue balances provide great motivation for prompt payment.
But depending on where your business is based, different restrictions may apply. In this article, we’ll offer some guidance on how much interest you can charge in different parts of the world and how this can be translated into your payment terms.
When determining how much interest you can charge on overdue invoices, keep in mind that the figure you settle on should be fair and reasonable.
Late fees are there to serve as a deterrent and shouldn’t be a source of profit. Remember too that while your country may allow you to charge interest, your customer must have agreed to your payment terms for it to be enforceable.
You’ll find links to further information in each of the country-specific sections listed below.
Please note that the information found in this blog serves to inform but does not constitute legal advice. For information specific to your industry, we recommend contacting a legal professional.
How Much Can I Charge For Late Fees In The US?
If you’re an American business interested in getting paid faster, charging late fees on overdue invoices is a great solution. But how much you can charge varies depending on where in the country you are based.
In the US, the % of interest you can charge for late payment varies per state but averages between 1.5-4% per month.
To ensure you’re following the legal guidelines in your state, we recommend reading How Much Can I Charge For Late Fees In The US? In this article, we cover each state in detail, giving you the relevant information to start charging late fees with confidence.
How Much Can I Charge For Late Fees In Canada?
Canadian businesses are allowed to charge fixed penalty late fees or interest on overdue invoices at a rate that is deemed “reasonable”. While there is no specific guidance about how much interest you can charge a customer, it should not be exploitative.
The majority of Canadian businesses using interest-based late fees charge a monthly rate of 1.5-4%. If you are dealing with overdue invoices with balances of less than CAD $1000, it may be more effective to charge a fixed fee of CAD $20-50.
Read more about invoicing best practices in How Much Can I Charge For Late Fees In Canada?
How Much Can I Charge For Late Fees In The UK?
Unlike many other parts of the world where interest is at the discretion of the parties in question, the UK has clear guidelines for charging interest on unpaid balances.
Businesses in the United Kingdom can charge interest at a rate of 8% + the Bank of England base rate per annum.
We recommend using interest-added payment terms for balances over £500 and a fixed fee model for lower-value invoices. This ensures that you are providing a suitable deterrent depending on the overall balance owed.
Find out more about charging fees as a UK business in How Much Can I Charge For Late Fees In The UK?
How Much Can I Charge For Late Fees In Singapore?
As a business in Singapore, you can determine your own preferred interest rate for overdue balances, providing your service doesn’t fall within the COVID-19 (Temporary Measures) Act.
The C19 Act regulates the fees that can be charged by certain industries, such as housing. However, the majority of Singapore businesses have no such restrictions.
Want to know more about the best practices for charging late fees in Singapore? We cover contract terms, fixed penalties and when to waive fees in How Much Can I Charge For Late Fees In Singapore?
How Much Can I Charge For Late Fees In New Zealand?
New Zealand is fairly flexible in terms of what you can charge on overdue invoices. Although there is some guidance provided by the Credit Contract and Consumer Finance Act (CCCFA), the emphasis is on late fees and interest charges being charged at a rate that is considered “fair”.
Businesses in New Zealand can charge late fees on overdue invoices at a rate of no more than 0.8% of the total unpaid balance per day. The recommended maximum charge for a fixed penalty late fee is NZD $30. We recommend that New Zealand businesses apply fixed penalties to low-balance invoices and interest to high-balance invoices.
Learn about this and more in How Much Can I Charge For Late Fees In New Zealand?
How Much Can I Charge For Late Fees In Australia?
Poor cash flow is proving to be one of the biggest challenges facing Australian businesses. In order to counteract the damage created by late payments, a growing number of businesses are charging interest on balances or applying a fixed penalty fee.
Australian businesses are entitled to charge interest on overdue balances at a rate of up to 10% per annum. While best practice dictates that interest should only be charged on high-balance invoices, lower-value invoices can have fixed penalty fees applied to provide a similar deterrent.
We discuss this in more detail in How Much Can I Charge For Late Fees In Australia?
How Much Can I Charge For Late Fees In South Africa?
Adding late fees to overdue invoices is gaining popularity with South African businesses as “late payment culture” continues to threaten livelihoods.
While restrictions exist to prevent landlords from overcharging late fees, there is little formal guidance for other South African industries.
We recommend following best practices when setting your late fee figures and following in the footsteps of other businesses.
In South Africa, most businesses charge late fees at a rate of 1.5-4% of the total invoice amount per month. While this doesn’t amount to much on a low-balance invoice, it can deter late payment on larger balances.
Read more about your business’s invoicing rights in How Much Can I Charge For Late Fees In South Africa?
Can I charge late fees if my customer is in a different country?
Yes, but the applicable law depends on your contract terms. Most international contracts specify which country's laws govern the agreement. If not specified, it's typically the supplier's country law that applies. Always include a "governing law" clause in your international contracts to avoid confusion.
What's the difference between statutory and contractual late fees?
Statutory late fees are set by law and apply automatically (common in EU countries). Contractual late fees are negotiated between parties and must be agreed in writing (common in US, Canada, Australia). Even in countries with statutory rates, you can often agree to different rates by contract, subject to reasonableness limits.
Do I need to send a reminder before charging late fees?
In most jurisdictions, no reminder is legally required if your contract clearly states late fees apply automatically. However, best practice is to send at least one reminder before applying fees. Automated reminders through Paidnice can handle this professionally while maintaining good customer relationships.
Can I charge compound interest on late payments?
This varies by country and contract terms:
- Allowed with clear terms: US, Canada, Australia (if specified in contract).
- Generally simple interest only: Most EU countries.
- Prohibited or restricted: Some jurisdictions limit compounding.
Always specify whether interest is simple or compound in your payment terms.
What if my country doesn't have a statutory late fee rate?
If there's no statutory rate (like in Australia, New Zealand, or most US states), you must:
- Include late fee terms in your contract/invoice.
- Ensure fees are reasonable (typically 1-2% monthly).
- Apply fees consistently to all customers.
- Consider industry standards in your sector
Without written agreement, you typically cannot charge any late fees.
Are there any industries where late fees are restricted?
Yes, several industries face special restrictions:
- Consumer lending: Subject to strict usury laws in most countries.
- Healthcare: Many jurisdictions limit medical debt interest.
- Residential rentals: Often capped at lower rates than commercial.
- Government contracts: May have specific prompt payment rules.
Always check industry-specific regulations in your sector.
How do I enforce late fees internationally?
International enforcement can be challenging but these steps help:
- Clear contracts: Include specific late fee terms and governing law clauses.
- Professional invoicing: Use automated AR tools for consistent application.
- Local collection partners: Work with agencies familiar with the debtor's jurisdiction.
- Consider arbitration: Include arbitration clauses for faster resolution than courts.
What's the best late fee structure for my business?
The optimal structure depends on your business model:
- High-value B2B invoices: Use percentage-based interest (statutory rate or 1.5-2% monthly).
- Small invoices (<$500): Fixed fees work better ($25-75 depending on amount)
- Mixed client base: Create different fee structures for different customer segments.
- International sales: Consider using the most restrictive rate across all jurisdictions for simplicity.
Automate Your Late Fees Today
Now that you know how much interest you can charge on overdue invoices, it’s time to put it into practice.
Paidnice was developed to seamlessly integrate with Xero invoicing software, allowing you to automate late fees with minimal effort.
Set interest rates or fixed penalties, then apply them to specific categories of clients and let Paidnice do the rest.
Intrigued? Watch Paidnice in action to find out how it works.
Please note that the information found in this blog serves to inform but does not constitute legal advice. For information specific to your industry, we recommend contacting a legal professional.
