Can You Charge Interest on Overdue Invoices? (2026)

Yes. Every US state permits businesses to charge interest on unpaid invoices, but each one sets its own ceiling and disclosure requirements. Absent a contract term, states default to a low statutory rate — often 6–10% a year. Most small businesses instead specify 1–1.5% per month (12–18% annualized) directly in their terms, which is legal almost everywhere.

This is a general guide, not legal advice — verify current rules with your state statutes or an attorney before setting a policy.

Short answer: yes, with state limits

Yes, you can charge interest on an overdue invoice in every US state, but the ceiling and the notice requirement both vary by state, and neither is set at the federal level. There's no federal usury law that caps B2B invoice interest — that's a state-by-state question, governed by each state's usury statute or, for a flat fee instead of a running rate, its rules on reasonable liquidated damages. The one constant across nearly every state: you need to disclose the rate before the client owes it, either in a signed contract, a written estimate, or your posted invoice terms. Charge a number nobody agreed to and you're relying on a state's default statutory rate instead of your own, which is usually lower than what you'd pick yourself.

Interest vs a flat late fee: the legal difference

Interest and a flat late fee are governed by different legal tests, even though they look alike on an invoice. Interest is a rate — a percentage of the outstanding balance that accrues over time, so the longer an invoice sits unpaid, the more it costs. That's what state usury and interest statutes govern directly: Florida's cap, Texas's default rate, and New York's statutory rate are all interest-rate rules. A flat late fee, by contrast, is a one-time charge that doesn't grow with time, and courts generally test it differently — as a form of liquidated damages that has to bear a "reasonable relationship" to your actual cost of chasing the payment (California's Civil Code §1671 is the clearest example of this test). Confusing the two categories is the single biggest source of bad advice online — a roundup that quotes a state's landlord-tenant late-fee cap and applies it to a commercial invoice is citing the wrong law.

What rate is typical and what's considered reasonable

1% to 1.5% per month — 12% to 18% annualized — is where most US small businesses land, and it's conservative enough to clear nearly every state's cap or reasonableness bar without you having to check case law first. That range shows up consistently in small-business billing guidance — Paidnice cites it directly, and it sits a notch above the roughly 0.83%/month starting point in Housecall Pro's own guide — because it's well under the usury thresholds most states set for contracted commercial rates, while still being high enough to matter to a client deciding what to pay first. Going meaningfully above that — say, 3% a month — doesn't automatically make you non-compliant, but it shrinks your margin for error in a usury state and makes a court more likely to scrutinize the fee if a client ever disputes it.

Do you need a signed agreement first?

Yes — in practice, nearly every state either requires you to disclose an interest rate in advance or drops you to a low statutory default if you didn't. That disclosure doesn't have to be a formal contract; a rate stated in your written estimate, service agreement, or the terms printed on your invoice template is usually enough, as long as the client saw it before the work was billed. What doesn't work is adding interest language to an invoice after the fact, once a balance is already overdue — retroactive terms are the most common reason a small business's late fee gets successfully disputed. If you don't have wording yet, see late fee wording for invoice templates for language you can drop into an estimate or invoice footer before you start charging.

State examples: Florida, Texas, California, New York

State law sets your actual ceiling, and it's worth reading the real statute instead of a generic list, since most nationwide roundups conflate landlord-tenant late-fee caps with the separate law that governs B2B commercial-invoice interest. We're not attempting full 50-state coverage here — below are four states verified against primary or authoritative secondary sources, as of July 2026. For anywhere else, see state late fee and interest laws or check your own state's statute directly.

• Florida — interest above 18% simple annual is usurious under Fla. Stat. §687.02–687.03. A contracted rate at or under 18%/year (1.5%/month) is safe territory.
• Texas — absent a contract term, the default legal interest rate is 10%/year; contracted rates are subject to ceilings set out in Finance Code Chapter 303. Put your rate in writing or you default to 10%.
• California — there's no fixed statutory cap on commercial-invoice late fees; instead, courts apply a "reasonable relationship to actual costs" test under Civil Code §1671. A 1–1.5%/month rate is well within what's been treated as reasonable.
• New York — absent a contractual rate, the default statutory interest is 6%/year under Gen. Oblig. Law §5-501. Specify your own rate in your terms if you want more than that.

Calculating and applying interest without an accountant

The math is simple monthly compounding on the outstanding balance, and you don't need anything more than a spreadsheet or a calculator to apply it correctly. Take the annual rate you've disclosed, divide by 12 for a monthly rate (or by 365 for a daily rate if your terms specify daily accrual), and apply it to the balance still owed each period.

Worked example — $4,000 invoice, 1.5%/month, 45 days overdue:

Step	Calculation	Result
Monthly rate	1.5%	0.015
Days overdue	—	45 days (1.5 months)
Interest accrued	$4,000 × 0.015 × 1.5	$90
Total owed	$4,000 + $90	$4,090

If your terms specify daily accrual instead of monthly, divide the annual rate by 365 and multiply by the exact number of days overdue — at 18%/year that's roughly $0.049 per day for every $100 owed. Whichever method you use, apply it consistently and show the math on the invoice, or run the numbers through our late fee calculator instead of building a spreadsheet from scratch. A client is far less likely to dispute a fee they can verify themselves.

Automating interest so you're not doing the math by hand

Once you're tracking more than a couple of overdue invoices at a time, doing this calculation by hand for every client, every week, is where late fees quietly stop happening. LateFee connects to your Jobber invoices and applies a percent-based or flat fee automatically on the day past due you choose — after your final reminder by default — with a configurable cap so a rate never runs away on an old balance. Approval mode is on by default, so every fee queues for your one-click sign-off before it reaches a client. It doesn't replace the legal homework in this guide — you still set the rate and the terms — it just makes sure the rate you set actually gets applied every time, not just when you remember.

Frequently asked questions

Is there a federal maximum?

No. There's no federal usury law or federal cap on invoice interest for B2B transactions — interest rate limits are set state by state, which is why the number that's legal for you depends entirely on where your contract is governed, not on any national rule.

Can I charge interest and a flat fee together?

Generally yes, as long as both are disclosed in advance and the combined amount still holds up under your state's cap or reasonableness test. Stacking an undisclosed flat fee on top of interest is a faster way to draw a dispute than either charge alone, so if you use both, spell out both rates in your terms rather than surprising a client with the combination.

Does invoice interest compound?

Only if your terms say so. Simple interest applies the rate to the original overdue balance each period; compound interest applies it to the balance plus any interest already accrued, which grows faster. Most small businesses use simple interest because it's easier to explain and calculate, and several state usury caps are written in terms of simple annual rates — Florida's 18% ceiling among them.

What if my invoice never mentioned interest?

Then you likely can't charge your own rate on that invoice — you're limited to whatever your state's default statutory rate is, if any, and only after the amount is legally overdue. Add interest terms to your estimate, contract, or invoice footer going forward so the next invoice isn't stuck in the same position.