Answer:
Step-by-step explanation:
What Is a Late Fee?
The term late fee refers to a charge consumers pay when they fail to make a payment on a debt such as a loan or a credit card, or any other type of financial agreement such as an insurance or rental contract by the due date. When a borrower misses a payment, the lender adds the late fee to the outstanding balance, which increases the following month.
Late fees encourage consumers to pay on time and are outlined in the contract or agreement. Borrowers must be notified about any changes to late fees in advance in writing by the lender.
KEY TAKEAWAYS
A late fee is a charge imposed on a consumer who fails to make the payment on a debt or other financial obligation by the due date.
All late fees must be explicitly outlined to borrowers and must be reasonable.
Late fees generally range between $25 to $50.
Late fees can increase account balances and can hurt a consumer's credit history.
How Late Fees Work
Lenders and other creditors make money in a variety of ways including by charging borrowers and debtors fees. Late fees are one of those levies. Late fees are imposed on people who don't fulfill their financial obligations by a certain date. For instance, a credit card borrower who fails to make their payment—at least the minimum—by the due date incurs a late fee that shows up on their next statement. Or a landlord may charge their tenant a late fee for not paying their rent on time.
All late fees must be explicitly outlined to borrowers, regardless of whether they're credit card agreements, leases, or any other type of contract. Creditors legally can't charge excessive late fees, which means they must be reasonable. In most cases, late fees typically range anywhere between $25 and $50.
Some creditors may provide a grace period before the late fee is charged. For instance, rent may be due for an apartment on the first of every month. But the landlord may allow the tenant to pay the rent by the 10th of the month without incurring a late fee. If rent is paid on the 11th or any day after that, the landlord may charge the tenant a late fee in addition to the outstanding rent. As noted, this must be clearly stated in the lease agreement.