What fees or interest can be charge for a customer who is paying installment on a product?

UPDATED: Oct 2, 2022

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What fees or interest can be charge for a customer who is paying installment on a product?

If a customer purchases a product from you on payments, what fees and or interest can you lawfully charge them? Can you charge them a installment fee or a fee for taking payment instead of paying all at once? I read that the most you can charge in interest is 10%, is that correct?

Asked on October 21, 2019 under Business Law, Arizona


SJZ, Member, New York Bar / FreeAdvice Contributing Attorney

Answered 3 years ago | Contributor

You can charge any fee--such as for late payment, or paying over time rather than up front--to which they agree, subject to your state's (or if they are in another state, their state's) laws against "usury," or excessive interest. Many states will allow more than 10%, but 10% is a safe number--one that every state should honor--and is both large to encourage the behavior you want and easy to calculate; therefore 10% is a good rate or amount for this purpose. 
You need to incorporate the penalty into your terms of service or sale, or your contract, bill of sale, etc., so that you can show that customers, in going forward and purchasing from you, agreed to the impositino of the penalty.

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