Definition
A late fee is a penalty charged to a debtor for failing to meet a payment obligation.
Analysis
Late fees have become a substantial source for credit card profits. Any creditor may charge a late fee if the debtor fails to adhere to the terms of repayment. Any fees must be listed within the loan contract or cardholder agreement.
Late fees have risen dramatically since the early 1990s. Most credit card issuers charge between $35 and $45 for a late fee. Credit unions also typically charge a late fee for delinquent payments, but those charges tend to be much lower.
Mortgage servicers and other lenders may express their late fee as a percentage of the payment, such as 1.5%, rather than as a dollar figure. Landlords also tend to charge a late fee if the rent is not paid on time.
Late fees are due immediately and cannot simply be added to the principal balance. Subsequent minimum payments rise to include any late fees charged.
