Interest on late payment: how much do you pay and how to calculate it?

Quick overview

• The statutory default interest in 2026 is 11.5% per annum.
• It is calculated as the CNB repo rate + 8 percentage points.
• Interest starts to accrue automatically the day after the due date.
• The creditor does not need to send any notice or reminder.
• A higher contractual default interest may be agreed in the contract.

Don’t know whether the creditor is asking you for legitimate interest or an unreasonable penalty? Our attorneys will review the contract and calculation and suggest a course of action.

Statutory and contractual default interest – how do they differ?

Default interest is a penalty that a creditor can claim in the event of late payment. The purpose of this interest is to encourage debtors to meet their obligations on time and to compensate creditors for the damage caused by late payment. Once the due date has passed, the creditor can start charging interest on late payment automatically without having to give the debtor special notice.

Default interest is most often applied to unpaid invoices, late loan payments, unpaid rent or payments owed to the state, such as taxes. Although the law provides for statutory interest on late payment, in some cases contractual interest on late payment may be agreed in the contract, which is usually higher. If the debtor fails to pay even after a reminder, other sanctions may follow in addition to interest, including legal enforcement or entry in the debtors’ register.

The basic types of interest are therefore:

• Statutory default interest – set by law, it cannot be arbitrarily high.
• Contractual default interest – agreed between the parties in the contract, but cannot be excessive.

The courts also assess whether the agreed penalties are excessive. Extremely high contractual interest or a combination of several penalties may be invalid in some cases.

The most common problem arises when a contract contains an unreasonably high contractual interest or a combination of several penalties at the same time. In such cases, part of the provision may be invalid. If you are unsure whether a contractual penalty is okay, an attorney can review the specific contract before you sign or during debt collection.

How is statutory interest on late payment calculated this year?

If you are late with your payment, you may be charged statutory late payment interest. This interest serves to compensate the creditor for late payment and also encourages debtors to meet their payment deadlines.

The amount of statutory interest on late payment is based on the repo rate set by the Czech National Bank (CNB) on the first day of the calendar half-year in which the default occurred, plus 8 percentage points.

In practice, we often deal with situations in which creditors calculate interest incorrectly – for example, on a higher amount, over a longer period or charge other unreasonable penalties at the same time. In business contracts, it is also often a problem that contractual penalties and interest are not clearly set at the same time.

Do you have a dispute about the amount of debt or penalties? A lawyer can check the correctness of the calculation and the legitimacy of the interest claimed.

A practical example of calculation:

Imagine that you had to pay an invoice of CZK 50,000 due on 15 January 2025, but you did not make the payment until 15 February 2025, 31 days later. The calculation of interest on late payment would be as follows:

1. Determine the annual interest rate: 12% (as above).
2. Calculate the daily interest rate: 12% / 365 days = approximately 0.0329% per day.
3. Calculate the interest for the period of default: CZK 50 000 × 0,0329 % × 31 days = approximately CZK 509,95.

In this case, the default interest would be approximately CZK 510.

The CNB repo rate may change during the year. However, the rate applicable on the first day of the half-year in which the default occurred is used to calculate the default interest.

Please note that if you have negotiated your own interest rate in the contract, this contractual rate applies.

When can interest on late payments apply to you?

Late payment interest is not just an abstract legal concept, but can apply to anyone who is late with a payment. When exactly are you at risk?

One of the most common cases is a late payment on a loan or credit. Banks and non-banking companies have clear repayment schedules and once you are late, it is interest on late payments that can start to accrue in addition to the fine.

A similar situation arises with rent or utility payments. If you do not pay your rent or electricity, gas or water bills on time, the landlord or utility supplier may demand not only the amount owed but also interest for late payment.

Businesses and tradespeople should keep an eye on when invoices are due. If you do not pay an invoice on time, the creditor may charge statutory interest on late payment. This problem also affects businesses that wait for their money – the longer a client delays payment, the more expensive the bill becomes.

Finally, we must not forget debts to the state. The tax office, health insurance or the social security administration can apply interest on late payments, which can quickly add up to considerable sums. It therefore pays to keep your repayments under control.

In our practice, we often find that people only start to deal with the debt when they receive a pre-action notice or a writ of execution. However, an early agreement with the creditor is often the easiest way to avoid further penalties and debt accumulation.

Interest calculators – they calculate everything for you

If you find yourself in a situation where you have to pay interest on a late payment, you’ll want to know how to calculate it easily. The quickest and most convenient way is to use an online default interest calculator, which you can find on the internet. Simply enter a few basic details – the specific amount you owe, the number of days you are late with your payment and the calculator will calculate the extra amount you will have to pay in no time.

How to avoid interest on late payments?

Late payment interest can add unpleasantly to your debt, but there are ways to avoid it. The key is to keep a close check on your payment obligations and to react in good time if you are in financial difficulty.

The first step is to set up reminders and automatic payments. Most banks today allow you to set up standing orders or direct debits so you don’t have to worry about forgetting to pay. If you pay your bills manually, you can set up a reminder on your calendar or mobile app to remind you when they’re due.

If you already know you won’t be able to pay the obligation on time, don’t wait for the first reminder. Early communication with your lender will often prevent not only interest from accruing, but also subsequent legal action or foreclosure.

If you run into financial problems and are at risk of late payment, the best strategy is to contact the lender early. Many banks, landlords or energy suppliers are willing to agree to defer payment or to spread the debt over a repayment schedule. The sooner you address the situation, the better your chances of being accommodated.

It is also important to read the terms and conditions of loans, leases or other commitments carefully. Some contracts contain not only interest on late payments but also high penalties or hidden fees. If you understand the terms well, you can avoid unpleasant surprises and unnecessary costs.

Summary

Late payment interest is a penalty for late payment that accrues automatically after the due date. In 2026, the statutory default interest is 11.50% per annum, calculated at the CNB repo rate plus 8 percentage points. Interest can be charged on late payments of loans, rent, invoices and debts to the state. Contractual interest on late payment may also be agreed in contracts, but must not be excessive. If you are unsure whether the calculation is correct or whether the penalties are justified, it is worth having the contract and the amounts claimed checked by a solicitor.