When a client pays late, you lose twice: once on the missing cash, and again on the time you spend chasing it. Charging interest on overdue invoices is one of the few ways to make late payment cost the client something — and in most US states, the law is on your side. Here's what freelancers can legally charge, how to calculate it, and how to include it in a demand letter without looking punitive.
The legal basis: usury laws and statutory interest
Every state sets a maximum legal interest rate (its usury limit) and, in most cases, a default statutory interest rate that applies when a contract doesn't specify one. For freelancers, the relevant rule is usually the state's judgment or statutory interest rate — the rate courts apply to unpaid debts. When your contract or invoice terms are silent, this is the fallback you can cite in a demand letter.
The critical distinction: you can almost always ask for reasonable interest as part of a settlement demand, even if the contract doesn't specify it. You're not a lender charging usurious rates — you're a creditor requesting compensation for delayed payment.
State-by-state statutory interest rates
Below are the default statutory or judgment interest rates for the states where most freelance work clusters. These are the rates you can reference when a written contract doesn't set its own rate. Always check your state's current figure — these change periodically.
| State | Statutory Rate (Annual) | Notes |
|---|---|---|
| California | 10% | Applies to obligations not covered by a contract rate; 7% if contract specifies but no rate stated. |
| New York | 9% | Statutory rate for breach of contract and unpaid debts. |
| Texas | 6% (or 18% if written agreement) | Default is 6%; up to 18% if a written contract specifies a rate. |
| Florida | Varies (Fed discount rate +) | Florida adjusts quarterly based on the Federal Reserve discount rate; check the CFO website for the current figure. |
| Illinois | 5% (under $25K); 9% otherwise | Lower rate for smaller claims makes Illinois less favorable for most freelance debts. |
| Washington | 12% | Applies to judgments and unpaid contract obligations. |
| Massachusetts | 12% | Contract claims accrue at 12% from the date of breach or demand. |
| Colorado | 8% | Applies if no contractual rate is set; adjustments are annual. |
| Georgia | 7% | Applies to liquidated (quantified) demands; unpaid invoices qualify. |
| Oregon | 9% | Simple interest on contract claims. |
How to calculate interest on a late invoice
The formula is straightforward: Principal × Annual Rate × (Days Late ÷ 365). For example, a $3,000 invoice that's 60 days late in California at 10%:
$3,000 × 0.10 × (60 ÷ 365) = $49.32
That number looks small per invoice, but it compounds across multiple late payments — and including it in a demand letter signals that you know the rules and take them seriously. Most clients pay the principal immediately rather than argue over $50 in interest.
When you need it in the contract
While statutory rates apply as a fallback, the strongest position is a written contract that spells out your late-payment terms explicitly:
- The interest rate (e.g., "1.5% per month" or "18% APR")
- When interest starts accruing (e.g., "30 days after invoice date")
- Whether it compounds or is simple interest
- Any flat late fee in addition to interest
A clause this clear is hard to dispute, and it converts interest from a negotiation point into a contractual right. Our demand letter templates include a line-item for accrued interest so you can add it automatically.
How to include interest in a demand letter
When you send a demand letter, list the interest as a separate line item — never bury it or make it the headline. The structure that works:
- Principal amount owed: $X
- Interest accrued (Y days at Z%): $X
- Total demanded: $X
- Deadline for payment (typically 7–14 days)
- Consequences if the deadline passes (collections, legal action)
This approach is transparent, defensible, and makes the demand look calculated rather than emotional — which is exactly what a court or a mediator wants to see if the letter doesn't resolve things on its own. For the full escalation sequence, read our guide on what to do about an unpaid invoice.
Interest isn't about the money — it's about making inaction more expensive than action. A client who sees $50 in accrued interest on a $3,000 invoice realizes the meter is running.
Generate your demand letter with interest included
DemandFlowww generates a professional demand letter in about 60 seconds for $29, including an optional interest line-item you can configure with your state's rate and the number of days late. Backed by a 100% money-back guarantee. If you're considering whether to go straight to legal help, see our comparison of demand letter vs. lawyer.