As an American business considering charging late fees, it’s essential to understand your rights and obligations. As late fee laws differ from state to state, we’ve collated all the relevant information into one place to offer a jumping-off point.
By understanding the legal requirements and best practices in your state, you’ll be in the best position to apply enforceable late fees while maintaining healthy relationships with your clients. So, without further ado, let’s take a look at each US state’s approach to late fees.
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. Last updated Sept 13th 2023.
Ready to explore how late fee laws in your state impact what you can charge on overdue invoices? Below, we cover the maximum late fee you are allowed to charge in each state, as well as the grace period you must allow your customers.
What is a grace period?
A grace period is the amount of time immediately after a balance becomes overdue that isn’t liable for late fees. The grace period you allow your customers can vary. In some parts of the world, the expectation is that businesses give a 30-day grace period; in other areas, there is no grace period at all.
✅ No Max Late Fee
🔴 7 Day Grace Period
In Alabama, there is no maximum late fee specified by law. Businesses in Alabama must allow a grace period of seven days following the due date before applying late fees.
✅ No Max Late Fee
🔴 7 Day Grace Period
In Alaska, the law does not specify a maximum late fee you can charge. Businesses in Alaska are required to allow a grace period of seven days following the due date before applying late fees.
✅ No Max Late Fee
🔴 5 Day Grace Period
In Arizona, there is no maximum late fee for overdue invoices. After a balance becomes overdue, Arizona businesses should allow a grace period of five days before applying late fees.
✅ No Max Late Fee
✅ No Grace Period
In Arkansas, there is no maximum late fee specified by law. Businesses in Arkansas are also not obliged to provide a grace period before applying a late fee; however, we recommend allowing seven days as best practice.
✅ No Max Late Fee
✅ No Grace Period
There is no maximum late fee applicable to overdue invoices in California. California businesses are also not required to provide their clients with a grace period before charging late fees on overdue balances, however, we recommend allowing seven days as best practice.
✅ No Max Late Fee
✅ No Grace Period
In Colorado, the law does not specify a maximum late fee you can charge. Businesses in Colorado are not obligated to provide a grace period before applying late fees, however, we recommend allowing seven days as best practice.
✅ No Max Late Fee
🔴 9 Day Grace Period
In Connecticut, there is no maximum late fee for overdue invoices. After a balance becomes overdue, Connecticut businesses are obligated to allow a grace period of nine days before applying late fees.
🔴 5% per month
🔴 5 Day Grace Period
The maximum late fee applicable to overdue invoices in Delaware is 5% of the overdue balance per month. Delaware businesses must also provide their clients with a five-day grace period before charging late fees on overdue balances.
🔴 5% per month
🔴 5 Day Grace Period
In Washington, D.C., the maximum late fee a business can charge is 5% of the overdue balance per month. Businesses in D.C. should allow a grace period of five days following the due date before applying late fees.
🔴 Maximum late fee 5% of the amount of the payment past due
🔴 15 Day Grace Period
In Florida, the law specifies the maximum late fee a business can charge is 5% of the overdue balance. Businesses in Florida must allow a grace period of fifteen days following the due date before applying late fees.
Source. 2012 Florida Statutes
✅ No Max Late Fee
✅ No Grace Period
In Georgia, there is no maximum late fee for overdue invoices. After a balance becomes overdue, Georgia businesses may immediately apply late fees without the need for a grace period. However, many businesses allow seven days of grace as a goodwill gesture.
🔴 8% per month
✅ No Grace Period
The maximum late fee applicable to overdue invoices in Hawaii is 8% of the balance per month. Hawaiian businesses do not, however, need to provide their clients with a grace period before charging late fees on overdue balances. Still, many businesses offer seven days of grace as a gesture of goodwill.
🔴 5% of the amount of the payment past due
🔴 10 Day Grace Period
In Idaho, 5% late fee is the maximum late fee for overdue invoices. After a balance becomes overdue, businesses in Maine must allow a grace period of 10 days before applying late fees.
✅ No Max Late Fee
🔴 5 Day Grace Period
In Illinois, there is no maximum late fee for overdue invoices. After a balance becomes overdue, businesses in Illinois must allow a grace period of 5 days before applying late fees. However, we recommend allowing seven days as best practice.
✅ No Max Late Fee
✅ No Grace Period
In Indiana, there is no maximum late fee for overdue invoices. After a balance becomes overdue, businesses in Indiana do not need to provide a grace period before applying late fees. However, many businesses allow seven days of grace as a gesture of goodwill.
🔴 See below
✅ No Grace Period
In Iowa, the maximum late fee for overdue invoices is $60 per month for a balance of under $700 and $100 per month for balances over $700. Businesses in Iowa do not have to offer a grace period, but many choose to allow seven days.
✅ No Max Late Fee
✅ No Grace Period
There is no maximum late fee applicable to overdue invoices in Kansas. Businesses also do not have to provide their clients with a grace period before charging late fees on overdue balances, however, we recommend allowing seven days as best practice.
✅ No Max Late Fee
✅ No Grace Period
In Kentucky, there is no maximum late fee specified by law. Businesses in Kentucky do not need to offer a grace period before applying late fees. However, as best practice, we would advise offering seven days as a goodwill gesture.
✅ No Max Late Fee
✅ No Grace Period
In Louisiana, the law does not specify a maximum late fee you can charge. Businesses in Louisiana are not obligated to offer a grace period, but many wait seven days following the due date before applying late fees.
🔴 4% per month
🔴 15 Day Grace Period
In Maine, 4% per month is the maximum late fee for overdue invoices. After a balance becomes overdue, businesses in Maine must allow a grace period of 15 days before applying late fees.
🔴 5% per month
✅ No Grace Period
In Maryland, the maximum late fee that can be charged is 5% of the overdue balance per month. Businesses in Maryland do not need to allow a grace period before applying late fees, however, we recommend allowing seven days as best practice.
✅ No Max Late Fee
🔴 30 Day Grace Period
There is no maximum late fee applicable to overdue invoices in Massachusetts. Businesses do, however, need to provide their clients with a 30-day grace period before charging late fees on overdue balances.
✅ No Max Late Fee
✅ No Grace Period
In Michigan, the law does not specify a maximum late fee you can charge. Businesses in Michigan do not need to offer a grace period following the due date before applying late fees. However, as best practice, we would advise offering a seven-day grace period as a goodwill gesture.
🔴 8% per month
✅ No Grace Period
In Minnesota, there is an 8% per month cap on late fees for overdue invoices. After a balance becomes overdue, businesses in Minnesota are not required to allow a grace period, however, we recommend allowing seven days as best practice.
✅ No Max Late Fee
✅ No Grace Period
There is no maximum late fee applicable to overdue invoices in Mississippi. Businesses are also not required to offer a grace period before charging late fees on overdue balances. However, many businesses allow seven days of grace as a gesture of goodwill.
✅ No Max Late Fee
✅ No Grace Period
In Missouri, there is no maximum late fee specified by law. Businesses in Missouri are not obligated to allow a grace period following the due date of an invoice, but many offer seven days as a goodwill gesture.
✅ No Max Late Fee
✅ No Grace Period
In Montana, the law does not specify a maximum late fee you can charge. Businesses in Montana may decide whether to allow a grace period, with many opting for a seven-day window as a gesture of goodwill.
✅ No Max Late Fee
✅ No Grace Period
In Nebraska, there is no maximum late fee for overdue invoices. After a balance becomes overdue, businesses in Nebraska do not need to provide a grace period before applying late fees. However, as best practice, we would advise offering a seven-day grace period as a goodwill gesture.
🔴 5% per month
✅ No Grace Period
In Nevada, the maximum late fee for overdue invoices is 5% of the total overdue balance per month. After a balance becomes overdue, businesses do not have to provide a grace period before applying late fees; however, many allow seven days.
🔴 5% per month
✅ No Grace Period
In New Hampshire, the law specifies a maximum late fee of 5% per month. Although there is no obligation to offer a grace period in New Hampshire, many businesses offer a seven-day window before applying late fees.
✅ No Max Late Fee
✅ No Grace Period
There is no maximum late fee applicable to overdue invoices in New Jersey. Businesses in New Jersey do not need to offer their clients a grace period, but it’s best practice in the state to allow seven days before charging late fees.
🔴 10% per month
✅ No Grace Period
In New Mexico, 10% of the overdue balance per month is the maximum late fee that can be charged. Businesses in New Mexico do not need to offer a grace period. However, as best practice, we would advise offering a seven-day grace period as a goodwill gesture.
🔴 $50 or 5% per month
🔴 5 Day Grace Period
In New York, the maximum late fee is $50 or 5% of the outstanding balance per month, whichever is lower. After a balance becomes overdue, New York businesses must allow a grace period of five days before applying late fees.
🔴 $15 or 15% per month
✅ No Grace Period
In North Carolina, the maximum late fee is $15 or 5%, whichever is greater. Businesses may provide a grace period before applying late fees if they so choose. We recommend offering seven days as best practice.
✅ No Max Late Fee
✅ No Grace Period
There is no maximum late fee applicable to overdue invoices in North Dakota. Businesses are also not obligated to provide their clients with a grace period before charging late fees, although many offer seven days as a goodwill gesture.
✅ No Max Late Fee
✅ No Grace Period
In Ohio, there is no maximum late fee for overdue invoices. After a balance becomes overdue, Ohio businesses do not need to allow a grace period before applying fees. However, as best practice, we would advise offering a seven-day grace period as a goodwill gesture.
✅ No Max Late Fee
✅ No Grace Period
In Oklahoma, the law does not specify a maximum late fee you can charge. Businesses in Oklahoma are also not required to offer a grace period, however many allow an additional seven days before applying late fees.
🔴 5% per month
✅ No Grace Period
The maximum late fee for overdue invoices in Oregon is 5% of the balance per month. Businesses also need to provide their clients with a four-day grace period before charging late fees on overdue balances.
✅ No Max Late Fee
✅ No Grace Period
In Pennsylvania, there is no maximum late fee specified by law. Businesses in Pennsylvania may charge late fees without offering a grace period, however, many choose to provide a seven-day window.
✅ No Max Late Fee
✅ No Grace Period
In Rhode Island, the law does not specify a maximum late fee you can charge. Businesses in Rhode Island may apply fees without offering a late payment window. However, as best practice, we would advise offering a seven-day grace period as a goodwill gesture.
✅ No Max Late Fee
✅ No Grace Period
There is no maximum late fee applicable to overdue invoices in South Carolina. Businesses are not required to provide their clients with a grace period before charging late fees on overdue balances, although many allow seven days.
✅ No Max Late Fee
✅ No Grace Period
In South Dakota, there is no maximum late fee for overdue invoices. After a balance becomes overdue, businesses may apply late fees without the need for a grace period, however, we recommend allowing seven days as best practice.
🔴 $30 or 10% per month
🔴 5 Day Grace Period
In Tennessee, the maximum late fee specified by law is $30 or 10% of the monthly balance, whichever is greater. Businesses in Tennessee must allow a grace period of five days following the due date before applying late fees.
✅ No Max Late Fee
🔴 5 Day Grace Period
In Texas, the law does not specify a maximum late fee you can charge on overdue invoices. Businesses in Texas must allow a grace period of one day following the due date before applying late fees.
✅ No Max Late Fee
✅ No Grace Period
In Utah, there is no maximum late fee for overdue invoices. After a balance becomes overdue, Utah businesses can choose whether to offer a grace period. We recommend offering a seven-day grace period as a goodwill gesture.
✅ No Max Late Fee
✅ No Grace Period
In Vermont, there is no maximum late fee for overdue invoices. After a balance becomes overdue, Vermont businesses are not required to offer a grace period. However, as best practice, we would advise offering a seven-day grace period as a goodwill gesture.
✅ No Max Late Fee
🔴 5 Day Grace Period
There is no maximum late fee applicable to overdue invoices in Virginia. Businesses do, however, need to provide their clients with a five-day grace period before charging late fees on overdue balances.
✅ No Max Late Fee
✅ No Grace Period
In Washington, there is no maximum late fee specified by law. Businesses in Washington are not required to provide a grace period before applying late fees, but many choose to offer seven days as a goodwill gesture.
✅ No Max Late Fee
✅ No Grace Period
In West Virginia, the law does not specify a maximum late fee you can charge. Businesses in Virginia are also not required to allow a grace period before charging late fees. As a best practice, many Virginia businesses offer seven-day grace periods by choice.
🔴 $20 or 20% per month
🔴 5 Day Grace Period
In Wisconsin, the maximum late fee is $20 or 20% of the overdue balance, whichever is greater. After a balance becomes overdue, Wisconsin businesses should allow a grace period of five days before applying late fees.
✅ No Max Late Fee
✅ No Grace Period
There is no maximum late fee applicable to overdue invoices in Wyoming. Wyoming businesses do not need to provide their clients with a grace period, but many allow seven days before adding late fees to overdue balances.
In states where there is no regulation governing maximum late fees, the expectation is that you will keep your fee reasonable. As a business, this means not charging exploitative late fees and only charging what is necessary to offset the negative consequences of late payment.
As a general guideline, the majority of US businesses who use Paidnice charge interest of 1.5-4% per month or a fixed fee of $20-50.
Late fees are a highly effective way to encourage your clients to pay promptly, but it has traditionally been a very manual process. Even an accounts receivable software program, like Xero, requires someone to manually input the late fee into each invoice. That is until Paidnice was created.
Offering the ability to automate late fees, Paidnice makes it easy to get paid on time. Our software connects with Xero and gives you complete control, allowing you to customize the settings to suit your business. Our clients are paid 40% faster than those who do not use Paidnice, making it an essential addition to your accounts receivable platform. This is how it works:
Using your understanding of late fee laws in your state, set your interest rate for late payments and any applicable grace period.
Next, create a late payment policy and send it to your customers for them to agree to. For help with writing your policy, see examples of late fee policy, with templates you can use.
Then, let Paidnice automation do its thing, implementing fees based on your preferences and client groupings.
Want to see Paidnice in action? Watch our tutorial video and learn more about getting started with Paidnice today.
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.
