How Much Interest Can You Charge on Overdue Invoices? 5 Limits That Set the Rate

A seller may charge interest on an overdue invoice at whatever rate the customer agreed to, and New York then decides how much of that agreement it will enforce. The rate printed at the bottom of the page is the beginning of the answer. The statute book supplies the rest, and in one situation it supplies a better number than the seller would have chosen.

Five limits govern the figure. They apply in roughly the order a dispute would meet them, from the formation of the contract to the day a court computes the award.

1. No Rate Exists Until the Customer Has Agreed to One

Interest on a late balance is a contract term, and a term needs assent. A services business that first mentions a monthly charge on its third past due notice has proposed something, not agreed to it, and the customer's silence does little to change that.

Sales of goods between merchants follow a more generous rule. Under section 2-207 of New York's Uniform Commercial Code, additional terms in a written confirmation are treated as proposals, and between merchants they become part of the contract unless the offer limited acceptance to its own terms, the new terms materially alter the deal, or the buyer objects within a reasonable time. Whether an interest clause on an invoice is a material alteration is a question the statute leaves to the facts of each transaction, and sellers who rely on the answer coming out their way have made a bet rather than a contract.

The safer course is dull. The rate goes into the quote, the order acknowledgment, or the master agreement, where the customer signs beneath it.

2. Without an Agreed Rate, the Court Supplies Nine Percent

The seller who never mentioned interest is not without it. CPLR 5001(a) provides that interest shall be recovered upon a sum awarded because of a breach of performance of a contract, and 5001(b) computes it from the earliest ascertainable date the cause of action existed, which on an invoice is ordinarily the day payment was due. CPLR 5004 sets the rate at nine percent per year, except where otherwise provided by statute.

The customer who pays late pays for the time. The only open matter is who wrote down the price of it.

A hypothetical shows the scale. A $20,000 invoice that sits unpaid for eighteen months accrues $1,800 a year at nine percent simple interest, or $2,700 by the time a judgment is computed, and the seller did nothing to earn that figure except wait and sue. Nine percent is a statutory default, so it arrives without a clause, without a signature, and without any argument about whether the customer saw the fine print.

That changes how a seller should regard its own invoice terms. A carefully drafted rate that the customer agreed to may produce more than nine percent, and an unsupported rate the customer never accepted may produce a fight about the rate that delays the recovery of the principal. Whether a contract rate, once agreed, carries through to judgment in place of the statutory figure depends on the contract's wording and is a matter for counsel before the complaint is drafted, not after.

Nine percent is also, it should be said, a figure set by the legislature for every contract claim in the state, from a fuel supplier's invoice to a broken lease. It was not designed for any particular industry. It fits most of them tolerably, which is what a default is for.

3. The Civil Usury Ceiling Is Sixteen Percent, and Most Business Customers Cannot Invoke It

New York's usury law begins with General Obligations Law section 5-501, which sets the rate on a loan or forbearance of money, goods, or things in action at six percent unless Banking Law section 14-a prescribes otherwise, and section 14-a sets the maximum at sixteen percent per year. That is the civil ceiling.

The first difficulty is scope. The statute speaks of a loan or forbearance, and a supplier that delivers goods and invoices for them has not, in the ordinary sense, lent anything; whether an agreed charge on a late balance is a forbearance within the statute is a question this page does not resolve, and a seller whose rate sits above sixteen percent should put that question to counsel before the rate goes into the terms.

The second difficulty cuts the other way, and it is the one sellers tend to overlook. Under General Obligations Law section 5-521, no corporation may interpose the defense of usury in any action, with a single exception: a corporation may still raise criminal usury, defined in Penal Law section 190.40 as a rate above twenty five percent per year. The Court of Appeals held in Adar Bays, LLC v GeneSYS ID, Inc. (2021) that a loan to a corporation found criminally usurious is void, principal and interest alike. The civil ceiling therefore protects the sole proprietor who buys on credit (and the partnership, and whatever other customer is not a corporation, a category whose edges around limited liability companies deserve their own inquiry rather than an assumption), while the incorporated customer may complain of the rate only if it clears the criminal threshold.

Size matters as well. Section 5-501(6) removes the caps, other than the criminal statute, from a loan or forbearance of $250,000 or more, and removes even the criminal statute from one of $2.5 million or more.

4. A Monthly Rate Is an Annual Rate Wearing a Smaller Coat

A charge of one and a half percent per month is eighteen percent per year before any compounding. The monthly figure looks modest on an invoice; the annual figure is what the usury statutes measure, and eighteen exceeds sixteen.

The legislature has itself written a monthly rate into one payment statute. Under General Business Law section 756-b, late payment on a covered private construction contract carries interest at one percent per month, which is twelve percent per year, and it applies because the statute says so, not because anyone agreed to it.

5. A Homeowner as Customer Changes the Arithmetic

The same CPLR 5004 that supplies nine percent contains an exception. In an action arising out of a consumer debt where a natural person is the defendant, the annual rate is two percent. A consumer debt, for this purpose, is a natural person's obligation arising from a transaction primarily for personal, family, or household purposes.

A contractor who renovates a restaurant and sues the restaurant's corporation for the balance collects under the nine percent default. The same contractor who renovates the owner's kitchen at home and sues the owner, if we are being careful about the categories, sues on a consumer debt, and the statutory default for that suit falls to two percent. The work is identical. The customer is not.

The exception runs in one direction only. It protects natural persons sued on household obligations, and it does not reach a business debt merely because an individual appears in the caption; whether a personal guaranty of a business obligation could ever qualify has not been settled on anything this page relies upon, and no seller should assume it either way.

The Rate From the Other Side of the Desk

Many businesses that ask what rate they may charge are, in the same quarter, paying a rate nobody ever called interest. A merchant cash advance is priced by a factor rate, and New York courts have held some advances to be true purchases of receivables and others, on their particular terms, to be loans subject to the usury statutes discussed above. The First Department reached the second conclusion about the agreements in the Attorney General's case against Richmond Capital Group in February 2026.

Delancey Street negotiates on the paying side of that question. As a business debt settlement company, not a law firm, it gives no legal advice and any usury defense belongs to independently licensed counsel; what it offers is a free initial review, kept confidential, of the advance contracts and the bank activity behind them. A rate is a sentence in a contract, and the law has always reserved the right to read that sentence more closely than either party did.