Why late payment interest is not small change
An invoice goes unpaid, the payment deadline passes, the reminder gets no answer. For freelancers, trades businesses and small companies this is everyday life. German law gives creditors a simple tool for it: anyone who does not settle a money debt while in default must pay interest on it. That is what § 288(1) of the German Civil Code (BGB) says. Between businesses, a flat fee of €40 per claim is added.
This guide explains step by step when default begins, which rate applies, how to calculate to the day and how to combine several unpaid invoices correctly. You can recalculate every example with the late payment interest calculator. It is not legal advice: whether default occurred in an individual case can be disputed.
Step 1: Is the debtor in default at all?
Default interest is not owed simply because an invoice is due. The debtor must be in default. § 286 BGB provides three routes into default:
- Reminder after the due date (§ 286(1) BGB): the creditor clearly demands payment. Filing a lawsuit and serving a court payment order have the same effect as a reminder.
- Payment deadline fixed by the calendar (§ 286(2) no. 1 BGB): if the invoice says “payable by 31 March 2026”, the debtor is in default from 1 April without a reminder. A plain “payable within 14 days” is not always enough, because the start of the period depends on when the invoice was received.
- 30-day rule (§ 286(3) BGB): for payment claims, default occurs at the latest if the debtor does not pay within 30 days after the due date and receipt of the invoice. Towards consumers this only applies if the invoice specifically points out this consequence.
In addition, the debtor must be responsible for the delay (§ 286(4) BGB). With money debts that is almost always the case, because lack of money is no excuse. The details with date examples are in the article When is a debtor in default?.
Step 2: Determine the correct rate
Default interest is not a fixed number. It consists of the base rate under § 247 BGB plus a statutory surcharge:
- Consumer involved: base rate + 5 percentage points (§ 288(1) BGB).
- No consumer involved, payment claim: base rate + 9 percentage points (§ 288(2) BGB). Payment claims are payments for goods or services, i.e. the typical invoice amount.
- Old contracts: for business transactions concluded before 29 July 2014, 8 instead of 9 percentage points apply (Art. 229 § 34 EGBGB).
The base rate changes on 1 January and 1 July. Since 1 July 2026 it has been 1.52%; in the first half of 2026 it was 1.27%. The current rates are therefore 6.52% for consumers and 10.52% between businesses. How the base rate is set and how it has developed since 2002 is explained in the article The German base rate since 2002.
Important: what matters is whether the debtor is a consumer. A freelancer invoicing a private individual uses 5 percentage points. Invoicing the same amount to a limited company, it is 9 percentage points.
Step 3: Count the days
Default interest is calculated to the day. The formula is that of simple interest:
Default interest = amount · rate · days / (100 · 365)
In practice the days are counted as follows:
- The first day of default counts. After a reminder, interest is widely considered to run from the day after it was received (§ 187(1) BGB by analogy).
- The day on which the money reaches the creditor no longer counts.
- Actual calendar days are counted and divided by 365.
The law itself does not prescribe a day-count method; it only refers to the rate “per year”. The act/365 method is the most widespread for default interest. Some programs divide by 366 in leap years. For €10,000 over the whole of 2024 against a consumer, act/365 gives €851.76 and the leap-year variant €849.43. The difference is small, but it should be applied consistently in any letter to the debtor.
Step 4: Split at every half-year change
If the default runs past 1 January or 1 July, a new base rate applies from that day. You therefore split the period into sections and calculate each with its own rate.
Example: business, across 1 July
A graphic designer invoiced a limited company €3,500. Default starts on 15 Apr 2026 and the money arrives on 30 Sep 2026.
- 15 Apr to 30 Jun 2026: 77 days at 10.27% (1.27% + 9): 3,500 · 10.27 · 77 / 36,500 = €75.83
- 1 Jul to 29 Sep 2026: 91 days at 10.52% (1.52% + 9): 3,500 · 10.52 · 91 / 36,500 = €91.80
Together that is €167.63 default interest for 168 days, plus the €40 flat fee. The total claim is €3,707.63.
Example: consumer, within one half-year
A private customer does not pay a tradesman's invoice of €1,200. After a reminder she is in default from 1 Feb 2026 and pays on 1 May 2026. That is 89 days in the first half-year at 6.27%: 1,200 · 6.27 · 89 / 36,500 = €18.35. There is no flat fee towards consumers.
Step 5: Combine several invoices correctly
Often it is not one invoice but several, each with its own start of default. Each claim is then calculated separately, with its own start date and its own split into half-years. Only at the end are the results added up. Using a common average period leads to wrong results.
Example: an online retailer owes a supplier three invoices; the end date is 15 Oct 2026.
- Invoice 1: €2,400 in default from 4 May 2026: 58 days at 10.27% and 106 days at 10.52% = €112.49
- Invoice 2: €1,800 in default from 19 Jun 2026: 12 days at 10.27% and 106 days at 10.52% = €61.07
- Invoice 3: €950 in default from 3 Aug 2026: 73 days at 10.52% = €19.99
Together this gives €193.55 interest and three times €40, i.e. €120 in flat fees. The total claim is €5,463.55. In the calculator you can add up to ten invoices and see the split per invoice and per half-year in a table.
Step 6: Do not forget the flat fee
If the debtor is not a consumer, the creditor of a payment claim is additionally entitled to a flat fee of €40 in case of default (§ 288(5) BGB). This expressly also applies to instalments and part payments. The fee is set off against later legal costs, for example lawyer fees you claim for the same debt. More in the article The €40 late payment flat fee.
What default interest is not
- No compound interest: under § 289 BGB no default interest is charged on interest. Interest always runs on the outstanding principal only.
- Only the minimum: if you have validly agreed a higher rate, you can claim it (§ 288(3) BGB). The statutory default interest is merely the floor.
- Not the whole loss: further losses, such as overdraft interest caused by the missing payment, can be claimed in addition (§ 288(4) BGB), but must be proven.
- Cannot be excluded: an agreement made in advance that excludes default interest on payment claims is void (§ 288(6) BGB).
Typical mistakes in practice
- Starting interest too early: the invoice date is not the start of default. Without a reminder, calendar date or expired 30-day period there is no default interest.
- One rate for the whole period: using only the current base rate across several half-years is wrong.
- 9 percentage points towards private customers: the higher surcharge only applies if no consumer is involved.
- Counting the payment day: the day the money is credited no longer counts as a day of default.
How to enforce the claim
The calculated interest belongs in the reminder or at the latest in the court payment order. What matters is a traceable statement: amount, start of default, rate per period and result. How to apply part payments, when a court payment order makes sense and when interest claims become time-barred is covered in the article Claiming late payment interest. If litigation looms, the legal costs calculator gives an overview of the cost risk.
Conclusion
You calculate default interest in five steps: check default, determine the surcharge, count the days, split at every 1 January and 1 July, and add the sections. With several invoices you calculate each one separately. Between businesses €40 per invoice is added. The basics of the interest formula are explained by the interest calculator; the late payment interest calculator does the arithmetic with every base rate since 2002.