Minnesota Prices the Same Unpaid Dollar at 4 Percent, 10 Percent, or 18 Percent. That Spread Settles More Cases Than the Merits Do.

Two Minnesota businesses are each owed $60,000, unpaid for two years, by a solvent debtor who does not dispute the number and simply will not pay.

The first is a subcontractor on a commercial building in Bloomington. The second holds a judgment against a school district. Same money, same delay, same intransigence. One of them is accruing roughly $10,800 a year and is entitled to its attorney fees. The other is accruing $2,400 a year and is entitled to nothing.

Nobody plans around this. Interest is treated as a rounding error in the settlement analysis — a line the paralegal computes after the number is agreed. In Minnesota it is not a rounding error. It is a spread of more than four to one across functionally identical obligations, and it silently determines which party can afford to wait.

The judgment rate is two rates, and the hinge is $50,000

Minn. Stat. § 549.09, subd. 1(c) does not set a judgment interest rate. It sets two, and sorts judgments between them.

Track one — the floating rate with a floor. Under subd. 1(c)(1)(i), the floating rate governs “a judgment or award of $50,000 or less or a judgment or award for or against the state or a political subdivision of the state, regardless of the amount, or a judgment or award in a family court action, except for a child support judgment, regardless of the amount.” For those, interest is simple, per annum, and set annually:

On or before the 20th day of December of each year the state court administrator shall determine the rate from the one-year constant maturity treasury yield for the most recent calendar month, reported on a monthly basis in the latest statistical release of the board of governors of the Federal Reserve System. This yield, rounded to the nearest one percent, or four percent, whichever is greater, shall be the annual interest rate during the succeeding calendar year.

Track two — a flat statutory ten percent. Under subd. 1(c)(2): “For a judgment or award over $50,000, other than a judgment or award for or against the state or a political subdivision of the state or a judgment or award in a family court action, the interest rate shall be ten percent per year until paid.”

The two tracks carry different degrees of certainty, and it is worth keeping them apart. The ten percent in track two is fixed by the statute itself — it does not float and no one publishes it annually. The track-one rate does float, set each December by the State Court Administrator.

For calendar year 2026 the track-one rate is 4% — and you can check that arithmetic yourself. The statute keys the rate to the one-year constant maturity Treasury yield for the most recent calendar month reported in the Federal Reserve’s statistical release, rounded to the nearest one percent, “or four percent, whichever is greater.” The monthly one-year constant maturity yield ran roughly 3.6% in October 2025, 3.7% in November, and 3.5% in December (Federal Reserve H.15). Every candidate month sits below four percent, so the rounding never matters: the statutory floor controls, and the floor is 4%.

That is why this rate is so sticky. The floor has been doing the work for most of a decade — the track-one rate has been 4% every year since 2016 except 2023 and 2024. A judgment creditor under $50,000 should assume 4% until short-term yields clear four percent by a comfortable margin, and should confirm the current year’s published figure with the State Court Administrator’s Office before relying on it in a computation.

Three consequences follow immediately, and none of them is intuitive.

The cliff at $50,000 is worth about $3,000 a year. A $50,000 judgment earns 4% — $2,000 a year. A $50,001 judgment earns 10% — a little over $5,000 a year. One dollar of verdict is worth roughly three thousand dollars annually in carrying cost. Any settlement discussion hovering around $50,000 is really a discussion about which statute applies.

Suing a public body caps you at 4% no matter the size. The state-and-political-subdivision carve-out has no dollar limit and runs in both directions. A $4 million judgment against a county accrues at 4%. That is a structural incentive for a public defendant to appeal, and it is a structural reason for a plaintiff to want the case over. “[P]olitical subdivision” is defined in subd. 1(e)(2) to include “a town, statutory or home rule charter city, county, school district, or any other political subdivision of the state.”

Preverdict interest is a separate, harder question. Under subd. 1(b), preverdict interest generally runs from commencement, a demand for arbitration, or a written notice of claim, whichever is first — but the statute then makes it contingent on settlement offers. “The prevailing party shall receive interest . . . only if the amount of its offer is closer to the judgment or award than the amount of the opposing party’s offer.” If the losing party’s offer was closer, the prevailing party gets interest only on the lesser of the offer or the judgment, and only up to the date the offer was made. Subdivision 1(b) also excludes preverdict interest on future damages, punitive damages, and “judgments or awards not in excess of the amount specified in section 491A.01” — the conciliation court jurisdictional provision, which at subd. 3a sets the general limit at $20,000.

That is a fee-shifting-style mechanism hiding inside an interest statute, and it rewards a party that makes a serious written offer early. It is used far less than it should be.

Construction payables run at 1-1/2 percent per month — and carry mandatory fees

Minn. Stat. § 337.10, subd. 3 is a different animal entirely. It is not a judgment rate; it is a statutory term read into the contract.

A building and construction contract shall be deemed to require the prime contractor and all subcontractors to promptly pay any subcontractor or material supplier contract within ten days of receipt by the party responsible for payment of payment for undisputed services provided by the party requesting payment, including payments under subdivision 4. The contract shall be deemed to require the party responsible for payment to pay interest of 1-1/2 percent per month to the party requesting payment on any undisputed amount not paid on time. The minimum monthly interest penalty payment for an unpaid balance of $100 or more is $10.

One and a half percent per month is eighteen percent a year on a simple basis — the statute states the monthly rate, not an annual one, which matters if you are computing over a partial month.

Three features make this the most powerful of the four regimes:

• Fees are mandatory, not discretionary. “A party requesting payment who prevails in a civil action to collect interest penalties from a party responsible for payment must be awarded its costs and disbursements, including attorney fees incurred in bringing the action.”
• There is a self-help remedy. “If an undisputed payment is not received within ten days, the prime contractor or subcontractor of any tier that has not received the undisputed payment may suspend work under the building and construction contract until the undisputed payment is received.”
• The clock is short and specific. Ten days from the payer’s receipt of payment for undisputed services — not ten days from invoice, and not ten days from substantial completion.

Read the trigger carefully. Subdivision 3 runs down the chain: prime contractor and subcontractors to subcontractors and material suppliers. It is keyed to money coming in. Also note the word doing the most work in any dispute: undisputed. A payer who articulates a good-faith dispute is outside the provision as to the disputed amount, which is why these fights are usually about characterization rather than arithmetic. See The Clauses Minnesota Voids in Construction Contracts for the rest of chapter 337, including the retainage rules in subdivision 4.

The private note: 6 percent, 8 percent, and two exemptions that swallow the field

Minn. Stat. § 334.01, subd. 1 still speaks in the currency of 1900: “The interest for any legal indebtedness shall be at the rate of $6 upon $100 for a year, unless a different rate is contracted for in writing. No person shall directly or indirectly take or receive . . . any greater sum, or any greater value, for the loan or forbearance of money, goods, or things in action, than $8 on $100 for one year.”

Six percent is the default. Eight percent is the ceiling. Both are almost always displaced.

• Subdivision 2 exempts, with stated exceptions, “a loan, mortgage, credit sale, or advance made under a written contract, signed by the debtor, for the extension of credit to the debtor in the amount of $100,000 or more.” That subdivision was amended in the 2025 session (1Sp2025 c 4 art 2 s 10) and now carries carve-outs referencing § 58.137 and, for a conventional loan or contract for deed, § 47.20, subd. 4a. Read the current text before relying on it.
• Section 334.011, subd. 1 supplies a floating cap below that threshold: for “a contract for the loan or forbearance of money, goods, or other things in action in an amount of less than $100,000 for business or agricultural purposes,” a person may “charge interest at a rate of not more than 4-1/2 percent in excess of the discount rate on 90-day commercial paper in effect at the Federal Reserve Bank in the Federal Reserve District encompassing Minnesota.” Loans financing the borrower’s residence are excluded.

A caution on that benchmark, and it is a real one. The Federal Reserve Banks no longer set a “discount rate on 90-day commercial paper.” The Board’s H.15 release today publishes market commercial paper rates derived from trade data on a national basis, and a separate discount window primary credit rate — neither of which is the Reserve Bank rediscount rate the statute describes. Anyone relying on § 334.011’s cap should pin down, at the time of the loan and in writing, which published series they are using and why. Do not assume a number.

The consequence of getting it wrong is severe and it is not a rate adjustment. Under § 334.011, subd. 2, “[i]f a greater rate of interest than that permitted by subdivision 1 is charged then the entire interest due on that note, bill or other evidence of debt is forfeited,” and a borrower who paid it “may recover in a civil action an amount equal to twice the amount of interest paid.” For the full usury framework, see Minnesota’s Usury Cap Is 8%.

The same $60,000, three regimes

Assume $60,000 owed and unpaid for one full year, undisputed on the merits.

Arithmetic is straightforward simple interest on the stated rates and is offered only to illustrate the spread; actual accrual depends on entry date, partial payments, and the § 549.09, subd. 2 accrual and execution mechanics.

What should I actually do?

If you are a claimant:

1. Compute the interest before you set your demand, not after. At 18% with fees, a construction claimant can rationally decline a discount that a judgment creditor at 4% cannot.
2. Send a written notice of claim, and date it. Under § 549.09, subd. 1(b), preverdict interest can run from a written notice of claim — but “[t]he action must be commenced within two years of a written notice of claim for interest to begin to accrue from the time of the notice of claim.”
3. Make a real written settlement offer early. Subdivision 1(b)’s offer/counteroffer mechanism determines whether you get preverdict interest at all. An unreasonable offer is not merely unpersuasive; it is expensive.
4. On construction payables, invoke subdivision 3 in writing and separately from the underlying claim. The mandatory fee award attaches to “a civil action to collect interest penalties.”
5. Know whether your defendant is a political subdivision before you value the case. It caps your post-judgment rate at 4% regardless of the amount.

If you owe the money:

1. A 4% obligation is cheap money and everyone in the room knows it. If you are a public entity or the judgment is $50,000 or less, delay has a low price — which is precisely why plaintiffs’ counsel will push for early resolution and why an early discount may be available.
2. A construction payable is the opposite. Eighteen percent plus mandatory fees plus the counterparty’s statutory right to suspend work is a combination that gets more expensive on three axes at once.
3. If you dispute an amount, dispute it in writing, promptly, and specifically. Subdivision 3 reaches “undisputed” amounts. Silence is not a dispute.

The observation

An interest rate is the price the legal system charges for patience — and Minnesota does not charge one price. It charges four, and the differences are not calibrated to anything about the obligations. A $60,000 construction payable and a $60,000 judgment are the same debt in every economic sense. Minnesota prices one at more than four times the other.

Two of these spreads are, on reflection, deliberate policy. The construction rate is high on purpose, paired with fee-shifting and a right to suspend work, because the Legislature decided that slow payment down the subcontractor chain was a problem worth making expensive. The public-entity rate is low on purpose, because judgment interest against a city is paid by taxpayers.

The $50,000 hinge is harder to defend. It is a cliff, not a slope, and it means the marginal dollar of a verdict near the threshold is worth thousands of dollars a year. That is the kind of line that changes trial strategy for reasons unrelated to what happened between the parties.

The lesson for practice is narrower and more useful than any of that. Two claims with identical merits and identical damages are not worth the same amount, and the difference is usually visible before you file. Most of the time nobody looks. The rate is the last line of the demand letter instead of the first line of the case assessment — which is exactly backwards, because it is one of the few variables you can know with certainty on day one.

Madgett Law, LLC represents Minnesota businesses and individuals in collection, construction payment, judgment enforcement, and commercial lending disputes. If you are owed money, or being asked for it, and the timeline is the real issue, send us a message or call 612-470-6529.

Sources: Minn. Stat. § 549.09, subd. 1(b) (preverdict interest; offer and counteroffer; exclusions), subd. 1(c)(1) (floating rate; state court administrator determination on or before December 20; “or four percent, whichever is greater”), subd. 1(c)(2) (ten percent per year until paid on judgments over $50,000), subd. 1(e)(2) (definition of political subdivision), subd. 2 (accrual); § 337.10, subd. 3 (prompt payment to subcontractors; 1-1/2 percent per month; mandatory costs and attorney fees; right to suspend work); § 334.01, subd. 1 (6 percent default, 8 percent ceiling), subd. 2 (contracts of $100,000 or more, as amended by 1Sp2025 c 4 art 2 s 10); § 334.011, subd. 1 (business and agricultural loans under $100,000; 4-1/2 percent over the 90-day commercial paper discount rate), subd. 2 (forfeiture of entire interest; recovery of twice the interest paid); § 491A.01, subd. 3a (conciliation court jurisdictional limits) — all from the Minnesota Office of the Revisor of Statutes, 2025 Minnesota Statutes. Chapters 334, 337, 491A, and 549 checked against the Revisor’s Table 2 (Statutes Affected by Session Laws) for the 2025 Regular and 1st Special Session and the 2026 Regular Session; § 334.01, subd. 2 was amended in the 2025 1st Special Session as noted, and none of the other provisions cited above was amended in either session. Calendar-year rates from “2026 Interest Rates on State Court Judgments and Arbitration Awards,” Minnesota Judicial Branch, State Court Administrator’s Office (mncourts.gov); as published by the State Court Administrator. The ten percent rate for judgments over $50,000 is fixed by § 549.09, subd. 1(c)(2) itself and does not depend on that publication. The 4% track-one figure was independently derived from the statutory formula: monthly one-year constant maturity Treasury yields for October, November, and December 2025 (Board of Governors of the Federal Reserve System, H.15 Selected Interest Rates, one-year constant maturity series) were each below four percent, so § 549.09, subd. 1(c)(1)’s “or four percent, whichever is greater” floor governs regardless of which month was used or how it was rounded. Confirm the current year’s published figure with the State Court Administrator’s Office before relying on it in a computation. Publication practice of the Board of Governors of the Federal Reserve System from the H.15 Selected Interest Rates release (federalreserve.gov/releases/h15/).

This article is general legal information about Minnesota law, not legal advice, and reading it does not create an attorney–client relationship. The floating judgment interest rate under § 549.09, subd. 1(c)(1) is set annually and changes; confirm the current year’s rate before relying on any figure here. The illustrative calculations above are simple-interest examples, not computations of any particular obligation. Whether a payment is “undisputed” under § 337.10, subd. 3, and whether the § 334.011 cap applies to a particular loan, are fact-specific questions. No outcome is promised or implied.