What is a late payment fee?

A late payment fee is specifically a charge imposed by a creditor when a payment is not received by the due date. This fee serves as a financial penalty for failing to comply with the agreed-upon payment schedule on loans, credit cards, or other financial agreements. It encourages timely payments as part of responsible financial management. By charging this fee, creditors aim to motivate consumers to make payments on time, minimizing the risk of delinquency and the potential for larger problems in the future, such as impacting credit scores or leading to higher interest rates due to perceived risk.

In contrast, the other options describe different types of fees associated with credit accounts or services but do not align with the definition of a late payment fee. For example, exceeding a credit limit results in a different penalty, and fees for overseas transactions or credit limit increase requests typically relate to other aspects of credit management rather than payment timing.