An extra charge added to an overdue invoice, usually a flat amount or a monthly percentage, meant to encourage clients to pay on time.
A late fee is the penalty for paying past the due date — often 1.5% per month on the outstanding balance, or a flat charge like $50. Its real job isn’t to earn you interest; it’s to make paying you on time the path of least resistance.
For sellers, a late fee only works if it’s stated up front — on the invoice and in the contract — and if you’re willing to actually apply it. A fee you never enforce trains clients to ignore your due dates. For buyers, honoring stated terms is the cheapest reputation you’ll ever build; a late fee is easy to avoid by just paying on time.
Check your state’s rules before setting a rate — there are legal caps on interest in some places, so confirm with a professional if you’re charging high percentages. When an invoice goes overdue, a calm, scripted reminder usually works better than the fee itself; our late payment reminder emails give you the wording.