How Is Credit Card Late Interest Calculated?

When there is a delay in debt payments, you inevitably face not only the principal amount but also the interest added on top of it. Especially in credit card, personal loan, and utility bill payments, late interest is a frequent reality and can lead to costly consequences for individuals without a timely payment habit. However, it is possible to understand how this type of interest works, learn under which circumstances you can contest it, and implement methods to avoid it altogether. In this article on Papel Blog, we explain in detail everything from what late interest is and how it is calculated, to how to contest it and the precautions you can take.

 

Late interest is a type of interest applied to the debtor to compensate the creditor for the loss incurred when a debt is not paid on time. This interest starts to accrue after the due date of the debt and is generally calculated monthly. This type of interest is frequently encountered in credit card, loan, and utility bill payments. For example, if a payment below the minimum due is made on a credit card debt, late interest is applied to the unpaid amount.

Conscious credit card use will help you avoid such situations. You can find all the necessary information to become a responsible credit card user in our Credit Card Usage Guide article.

 

Late interest comes into play when a payment below the minimum due is made or no payment is made at all. In such cases, late interest is calculated on the unpaid minimum amount, and the rate is generally higher than the contractual interest rate.

Contractual interest, on the other hand, is applied to the remaining balance when the debtor pays at least the minimum due. This interest is used during the maturity period and typically has a lower rate. For instance, after the minimum owed on a credit card debt is paid, contractual interest is applied to the remaining balance.

To avoid encountering such interest, it is essential to make your credit card and loan payments on time and, if possible, pay the entire debt.

 

If a debt is not paid by its due date, the debtor is charged late interest to compensate the creditor for the delay. When calculating late interest, the unpaid amount and the duration of the delay are taken into account. This interest, which starts accruing after the due date, is generally calculated daily or monthly as follows:

 

Late Interest = Daily Late Interest Rate × Number of Days × Amount Subject to Interest

 

The daily late interest rate is obtained by dividing the monthly interest rate by 30.

For example, if the monthly late interest rate is 4.5%, the daily rate would be 0.15%.

 

Late Interest = Monthly Late Interest Rate × Number of Months × Amount Subject to Interest

 

Late interest rates and calculation methods may vary depending on the bank and current legal regulations. For up-to-date and detailed information, we recommend checking your bank’s official website or contacting customer service.

 

To maintain financial stability, it’s important to avoid interest as much as possible. Here are some precautions you can take:

 

Track your income and expenses regularly, and don’t forget to create a budget plan. It’s also helpful to build an emergency savings fund. This way, you can reduce the risk of resorting to interest-bearing loans in sudden cash needs.

 

You can set up a standing order with your bank or financial institution to make regular payments. With this system, you don’t need to track the due dates of your bills — your payments are made automatically on time.

 

Bill reminder apps send notifications for upcoming payment dates, helping you make timely payments. These apps are handy in situations where you cannot give automatic payment instructions.

 

In Turkey, it is possible to contest the application of late interest under certain conditions. However, for the objection to be valid, some legal conditions must be met. To increase the likelihood of your objection being accepted, you should carefully follow legal deadlines, present the necessary documents, and carry out the legal procedures correctly.

 

• Absence of default conditions: For a debtor to be considered in default, the creditor must send a formal notice. If no such notice has been issued or the debtor is not in default, the demand for late interest may be legally invalid.

• Exceeding legal interest limits: The agreed interest rate between the parties must not exceed legal limits. For example, under the Turkish Code of Obligations, the agreed default interest rate cannot exceed a certain multiple of the legal interest rate.

• Unjust or excessive interest demands: If the creditor demands an unjust or excessive interest rate, the debtor may contest this. Courts evaluate whether the interest rate is fair and appropriate.

 

• Objection to debt collection: If the creditor initiates enforcement proceedings and includes a late interest claim, the debtor may object at the enforcement office within 7 days of receiving the payment order. This objection may target both the principal and the interest.

• Filing a lawsuit: If the debtor’s objection is rejected or if they want to bypass the enforcement office, they can file a lawsuit directly in court claiming that the interest demand is unlawful. In such cases, the debtor must prove the illegality of the interest claim.

• Objection to tax debts: For late interest imposed by tax offices, taxpayers may file a lawsuit in the tax court within 30 days. These cases examine the legal basis and calculation methods of the late interest.

 

• Tracking deadlines: Deadlines for objections and lawsuits are pretty short. Therefore, it’s crucial to track the dates on which documents, such as payment orders or tax assessments, are served.

• Evidence and documentation: During the objection or litigation process, the debtor must present documents showing that the interest claim is unjust. For example, payment receipts, contract clauses, or proof that the creditor sent no notice can be crucial.

• Legal advice: Seeking support from a legal professional on matters such as late interest can help prevent the loss of rights.

 

 

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This blog post contains general information, not legal, financial, or investment advice. The content is prepared for informational purposes only, and you are advised to seek professional advice for your specific circumstances. The expressions in this article do not carry any binding nature or responsibility and reflect only the author’s evaluation. All your decisions are your responsibility, and Papel Electronic Money and Payment Services Inc. accepts no liability for any consequences arising from them.