Everything freelancers and small businesses need to know about charging late fees, interest rates, and collecting overdue invoices in Texas.
This information is provided for general educational purposes only and does not constitute legal advice. Laws change frequently. Consult a licensed attorney in Texas for advice on your specific situation. Last reviewed: 2026.
Usury laws cap the maximum interest rate that can be charged on overdue payments in Texas.
18% general; 28% certain commercial
Texas usury limit is 18% (Tex. Fin. Code § 302.001). Commercial loans may allow up to 28% depending on structure.
Business loans over $250,000 and certain commercial transactions may exceed the 18% cap. Licensed lenders have additional flexibility.
Understanding what you can and cannot charge for late payments in Texas.
Late fees must be reasonable and disclosed in advance. Penalty clauses that are disproportionate may be voided as unconscionable.
No statutory cap; reasonableness applies. Typical commercial late fees range from 1-2% per month.
Courts apply liquidated damages analysis. Fees must reasonably estimate actual damages.
Texas Prompt Payment Act sets deadlines and penalties for late payments in Texas.
30 days for government contracts; 35 days for private construction.
18% per year for government; 1.5% per month for private construction.
Texas has one of the strongest prompt payment frameworks. Tex. Gov't Code Ch. 2251 covers government contracts. Tex. Prop. Code Ch. 28 covers private construction with strong protections.
Certain industries in Texas have additional rules around payment timelines, liens, and collection procedures.
Construction: Tex. Prop. Code Ch. 28 mandates payment within 35 days with 1.5%/month penalty. One of the strongest in the U.S.
Government contracts: Tex. Gov't Code Ch. 2251 requires 30-day payment with 18% interest penalty.
Oil and gas: Texas mineral interest payments have specific timing requirements under Tex. Nat. Res. Code.
Use this compliant wording on your invoices to clearly communicate your late fee policy in accordance with Texas law.
Payment is due within 30 days. A late fee of 1.5% per month (18% per annum) will be assessed on unpaid balances, as permitted under Texas law (Tex. Fin. Code § 302.001).
This wording works because it clearly states the rate, when it applies, and references Texas legal standards. Always ensure your stated rate complies with Texas's usury limits.
Practical tips for invoicing within Texas's legal framework.
Before you can charge a late fee in Texas, your client needs to have agreed to the terms. Include your late fee clause directly on your invoice and in your contract.
Texas caps interest rates at 18% / 28% commercial. Charging above this limit can void your right to collect interest entirely and may expose you to penalties.
A reminder 3 days before the due date and a follow-up the day after dramatically reduces late payments. Automated reminders ensure nothing slips through the cracks.
If you ever need to escalate collection efforts in Texas, documented reminder history strengthens your position. Automated systems keep logs automatically.
ChaseBot handles the math, the timing, and the follow-ups so you can focus on your work.
Set compliant rates and let ChaseBot handle the math. Never accidentally exceed state limits.
98% open rate. Reminders that actually get seen. Automatic escalation sequences built in.
Stop sending reminders for already-paid invoices. ChaseBot syncs with Xero in real time.
Free tier: 5 invoices/month. No credit card required.
Compare Texas's rules with neighboring and commonly referenced states.
Get industry-specific invoice reminder templates and strategies.
ChaseBot automates invoice reminders with built-in compliance tools. Free plan, no credit card, 30-second setup.