October 3, 2022

Maximum Late Fee Laws by State - 2022 Guide

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.

What are the maximum late fees by state?

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. 

Alabama

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. 

Alaska

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. 

Arizona

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. 

Arkansas

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.  

California

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.   

Colorado

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.   

Connecticut

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.

Delaware

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. 

D.C.

In 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. 

Florida

In Florida, the law does not specify a maximum late fee you can charge. Businesses in Florida are not required to provide a grace period before applying late fees. However, as best practice, we would advise offering a seven-day grace period as a gesture of goodwill.

Georgia

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.  

Hawaii

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.  

Idaho

In Idaho, there is no maximum late fee specified by law. Businesses in Idaho do not have to allow 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.

Illinois

In Illinois, the maximum late fee you can charge is $20 or 20% of the overdue balance, whichever is greater. Businesses in Illinois are not obliged to allow a grace period before applying late fees. However, we recommend allowing seven days as best practice.   

Indiana

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.  

Iowa

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. 

Kansas

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.   

Kentucky

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.

Louisiana

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. 

Maine

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.

Maryland

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.   

Massachusetts

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. 

Michigan

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.

Minnesota

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.   

Mississippi

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.  

Missouri

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. 

Montana

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. 

Nebraska

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.

Nevada

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. 

New Hampshire

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. 

New Jersey

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. 

New Mexico

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.

New York

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.

North Carolina

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. 

North Dakota

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. 

Ohio

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.

Oklahoma

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. 

Oregon

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. 

Pennsylvania

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.

Rhode Island

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.

South Carolina

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.

South Dakota

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.   

Tennessee

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. 

Texas

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. 

Utah

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.

Vermont

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.

Virginia

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. 

Washington

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. 

West Virginia

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. 

Wisconsin

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.

Wyoming

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. 

What if my state does not have a maximum late fee?

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 Latechaser charge interest of 1.5-4% per month or a fixed fee of $20-50. 

Simplify late fees with Latechaser

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 Latechaser was created. 

Offering the ability to automate late fees, Latechaser 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 Latechaser, making it an essential addition to your accounts receivable platform. This is how it works:

Step 1. Determine your late fee

Using your understanding of late fee laws in your state, set your interest rate for late payments and any applicable grace period.

Step 2. Setup your policy

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.

Step 3. Start using Latechaser

Then, let Latechaser automation do its thing, implementing fees based on your preferences and client groupings.  

Want to see Latechaser in action? Watch our tutorial video and learn more about getting started with Latechaser 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.