Charging a Late Fee? Do they REALLY works?

Harv45

New member
Hello, I am wondering if late fees really works? Do you get a profit from charging customers a late fee? Are there restrictions in the USA on this like loans are regulated?

Or are you just wasting time not seeing any of this coming to you as the customer can just leave and "abort" his excess charges? Given that chasing them aren't normally worth it?
 

pixelhosts

New member
First of all you shouldn't think of it as if you charge a fee do you make profit, after all a late payment fee is their to encourage the client to pay on time yet if that client has not paid for his service in the first place then will he actually pay a late fee aswell. In my opinion charging a late fee does not work, and as a client would put me off from going with that service when they are others out their that don't charge a late fee. Try thinking about what you can do to keep that client with you for longer and keep them as a loyal customer so they are more willing to pay for their services on time.
 
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Harv45

New member
First of all you shouldn't think of it as if you charge a fee do you make profit, after all a late payment fee is their to encourage the client to pay on time yet if that client has not paid for his service in the first place then will he actually pay a late fee aswell. In my opinion charging a late fee does not work, and as a client would put me off from going with that service when they are others out their that don't charge a late fee. Try thinking about what you can do to keep that client with you for longer and keep them as a loyal customer so they are more willing to pay for their services on time.

Thank you very much for explaining your opinions to me. I could very much understand why it would may be worth more while to focus on retention practices rather than "making" them pay on time and/or the late charges. :)
 

Artashes

Administrator
Staff member
Let's say a client decided to end the service with a hosting provider and he/she really doesn't have the time to go through the whole process officially through a billing ticket request. If a client would just stop paying for service with numerous reminders that he/she receives by the system anyway, it likely means the client is no longer interested in the service and doesn't want to get charged anymore. So if you go ahead and charge the client a late fee, what would that accomplish except now angry client?

I understand that not letting the company know about you no longer needing the service is a little lazy and a little douche-y, but that probably happens more commonly.

Most companies just have it outlined in terms that they would terminate the account if the client doesn't pay for 30-45 days. It then becomes client's fear that he may lose access to files if he doesn't do something. Charging an account reinstating fee (or access to files fee), in that case, makes it a lot more fair.
 

Harv45

New member
Let's say a client decided to end the service with a hosting provider and he/she really doesn't have the time to go through the whole process officially through a billing ticket request. If a client would just stop paying for service with numerous reminders that he/she receives by the system anyway, it likely means the client is no longer interested in the service and doesn't want to get charged anymore. So if you go ahead and charge the client a late fee, what would that accomplish except now angry client?

I understand that not letting the company know about you no longer needing the service is a little lazy and a little douche-y, but that probably happens more commonly.

Most companies just have it outlined in terms that they would terminate the account if the client doesn't pay for 30-45 days. It then becomes client's fear that he may lose access to files if he doesn't do something. Charging an account reinstating fee (or access to files fee), in that case, makes it a lot more fair.

I see, it is true that I seen those sort of fees more often than a daily/weekly/monthly late fee charge.

I could see that being a more "middle ground" agreement rather than charging a regular late fee on top of the invoices.

You could even do it where the customer has to pay ALL of the outstanding invoices PLUS the said extra charges. That way they has less room to "screw around with you" if they really need their data.
 

Floxera-Jose

New member
We use Blesta and we have a plugin that allowed us to charge a late fee, however we prefer not to use it. However, is in our TOS that we can charge a let fee. When we have clients that get a little late in payment is invoice, or don't pay at all we suspend the service, and that is more than enough. If the client want to keep with us, he will open a ticket asking for a few more days until he have money, or other explanation, and we understand things like that can happen. However if we get no answer, we just cancel the plan and move on.
 
I think that late fee it is not good in our time. You must be more loyal to your client. In our days is big competition in hosting and you can lose your clients, if you will use late fee.
 

easyhostmedia

Well-known member
Try thinking about what you can do to keep that client with you for longer and keep them as a loyal customer so they are more willing to pay for their services on time.

Would you want to keep a client that does not pay bills on time.

I think late fees work, as it informs a client if they don't pay on time then they have to pay a fee.

We charge 20% or £2 whichever is greater late fee after 2 days overdue and at the same time of account suspension and so far any client that has been late pays this without question.
 

easyhostmedia

Well-known member
Let's say a client decided to end the service with a hosting provider and he/she really doesn't have the time to go through the whole process officially through a billing ticket request. If a client would just stop paying for service with numerous reminders that he/she receives by the system anyway, it likely means the client is no longer interested in the service and doesn't want to get charged anymore. So if you go ahead and charge the client a late fee, what would that accomplish except now angry client?

I understand that not letting the company know about you no longer needing the service is a little lazy and a little douche-y, but that probably happens more commonly.

Most companies just have it outlined in terms that they would terminate the account if the client doesn't pay for 30-45 days. It then becomes client's fear that he may lose access to files if he doesn't do something. Charging an account reinstating fee (or access to files fee), in that case, makes it a lot more fair.
Our system will still go through the same automated process as set in our TOS and billing policy, if they just fail to pay then after 14 days past due date hosting is terminated, they then have a further 7 days to pay any dues to get their files off our backup server after 7 days the files are removed from backup server and then invoices passed to debt collection as we send invoices 14 days before due date and various reminders and terminate 14 days after due date even after suspension their files still on server, so still using services.
 

VimlyHost

Member
I don't think late fees work at all.

Think about it logically, if you bought a service like Netflix that renews monthly, and you failed to renew it, would you be more likely to renew it if you were charged more?

I certainly wouldn't, in the age of automated billing there's little reason to fail payment, unlesss the client no longer wants the service.

That's why it's good to have a simple cancellation procedure, through clients Area and other channels like chat (assuming Account identity is secure).

And some other people suggest debt collection agency's if they don't renew, but at the need of the day, unless it's a dedicated server etc, and it was expensive to provide, there's no point in debt collection agency's as enforcement will likely cost more than the client ever paid, or the service costs.

In the offline world, or anywhere outside the hosting industry, I've not seen anywhere charge late fees.

- Kieran
 

DanielN

New member
I can confirm that they don't work.
I tried them both and I experienced a higher return rate if I don't use late fees.
It seems to me that once customers see the late fees they will find another host rather than pay it. I guess they think something like this: "ahh late fee? This is bull****" :D
 

hostingress

New member
I can confirm that they don't work.
I tried them both and I experienced a higher return rate if I don't use late fees.
It seems to me that once customers see the late fees they will find another host rather than pay it. I guess they think something like this: "ahh late fee? This is bull****" :D

Agree with you..
 

invpsus

New member
We at one time renounced Late Fees, as this negatively affects the loyalty of our customers.
I think the use of this option is not the best idea
 

whmcsguru

Active member
Here's the thing (and it's really not that hard to understand):

If you don't want to pay a late fee, then pay your bills on time. That's all. That's it. No more discussion.

In the real world (you know, that thing that exists outside of your computer, your monitor, and your social media BS?), there's no discussion. if you're late, you're charged a fee.

In the real world, you can't simply skip out on rent, on utilities, on your mortgage, your car payment, your cell phone payment. This has a real consequence.

Just because you think nobody knows you on the internet is no reason to act like a complete ass and refuse to pay your bills.
 

SenseiSteve

HD Moderator
Staff member
When you're contractually obligated to pay a bill at scheduled intervals, I wonder why anyone wouldn't expect late fees if they don't pay on time. If they migrate elsewhere, don't you think they're going to do the same to that provider?
 

easyhostmedia

Well-known member
We at one time renounced Late Fees, as this negatively affects the loyalty of our customers.
I think the use of this option is not the best idea

So if you late on your Mortgage, your mobile bill, your car payment, utilities what do they do, they will always add a late fee.

You have a bill to pay by a certain date, if you dont pay then you car charged a late fee as it costs the provider.

in hosting all your files are on your providers server, you dont pay, but expect the provider to look after your files/website for nothing, even if they suspend your account you files are still on their server until the time they terminate your account and your files are removed from the server.
 

whmcsguru

Active member
in hosting all your files are on your providers server, you dont pay, but expect the provider to look after your files/website for nothing, even if they suspend your account you files are still on their server until the time they terminate your account and your files are removed from the server.

Exactly !!

I can't count the people I've run across over the years that have thrown a fit about a late fee. Hell, I'm a reasonable guy, all you have to do is say "Hey, Tom, I'm going to be a bit late this month", and I'll waive this.... But, when it comes to hosting, this is the only business I know of where the customer expects the business to hold onto their data after they refuse to pay.

Put it this way:
If you rent a storage facility (container, garage, whatever), if you don't have your rent paid up, your crap is tossed out (or pawned) after a reasonable period of time. The same scenario exists here... Customers don't pay their rent, and they whine and piss and moan because their host threw out their stuff.
 

Harv45

New member
Exactly !!

I can't count the people I've run across over the years that have thrown a fit about a late fee. Hell, I'm a reasonable guy, all you have to do is say "Hey, Tom, I'm going to be a bit late this month", and I'll waive this.... But, when it comes to hosting, this is the only business I know of where the customer expects the business to hold onto their data after they refuse to pay.

Put it this way:
If you rent a storage facility (container, garage, whatever), if you don't have your rent paid up, your crap is tossed out (or pawned) after a reasonable period of time. The same scenario exists here... Customers don't pay their rent, and they whine and piss and moan because their host threw out their stuff.

Exactly! That what I ended up doing, don't pay? We give you a few days (suspended) but after that? The data and backups are out! No discussions.

Now of course as you mentioned if it "one off" thing then sure but if that is abused then we would need to have a word with the customer.
 

bigredseo

HD Community Advisor
Staff member
Late fees are there to discourage people from not paying their bill on time, which helps keep YOUR costs down too. Every utility or service has a late fee or penalty of some sort.

Depending where you live, there are regulations on what you can charge for a late fee, and how much of a percentage that works out to. In Nebraska, there is a maximum percentage of 8% allowed to be charged as a late fee for leasing and renting (which includes web hosting as Nebraska considers it a lease of computer space).

So if you're charging $10/month for hosting, you can charge a late fee of $0.80, and that's a ONE TIME fee, you can not compound it for every month they are late.

Also, you'll need to verify with your accountant on how you're handling the books as to how you'll write off a late fee, if you're treating it as a loan to a user with fees attached etc.

Late fees have their place, but check with your state. Personally, it's so much easier to just collect the payment, suspend the user for non payment, then 30 days later terminate etc. If you want to perform white glove service, take a copy of the files for them and store them for "X" weeks or whatever, make the phone calls to help them out - but after that, it's out the door.
 

easyhostmedia

Well-known member
Exactly! That what I ended up doing, don't pay? We give you a few days (suspended) but after that? The data and backups are out! No discussions.

Now of course as you mentioned if it "one off" thing then sure but if that is abused then we would need to have a word with the customer.

yes if a client approached up then we will remove the late fee, but only as a one off.

once we terminate an account (14 days after due date, which is 28 days after invoice generated) the latest backed up files remain on our backup server a further 7 days which we will only give to client once they pay the due bill. 7 days after termination the files are removed from the backup server.
 
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