Tipping With a Credit Card. How Does It Work?
It can be a little confusing when you come to tipping with a credit card. When you use cash, you can give the exact amount you wish to tip with no qualms. But, with a credit card, many of us are unsure of how to tip properly.
For those who work in hospitality and varying service industries, tips tend to form a significant portion of their wages. Occupations such as waitering, hairdressing, painting and decorating, and handymen and women rely on tips from customers to recognize the service they have provided.
Even if tips make up a little portion of someone’s pay packet, they are always welcomed with open arms.
In recent years, more and more people are carrying fewer and fewer sums of money on their person. This is because credit and debit cards are being used more frequently. This has led to a reduction in tips in some quarters as people do not know how to tip with their cards.
So, the question remains – can you tip with a credit card and, if so, how do you do it?
Well, we are here to answer those questions for you. In today’s article, we will be discussing tipping with the use of a credit card. Whether you’re accepting or providing tips with a credit card, we will give you a rundown of how the process works below.
How Do You Tip With A Credit Card?
When tipping with a credit card, you should write down the amount you wish to tip on the receipt. This helps to confirm the total amount including the bill and tip on top that will be charged to your credit card.
The process of tipping with a card is unlike using cash. This is because credit card tips are processed and then paid out at a later date to the service provider. This can take up to a day or two to change from a “Pending” payment to a “Completed” payment.
While credit cards are wonderfully convenient for tipping and paying for that matter, cash tips tend to be a better option under some circumstances. This is because of the delay in tip payment from the credit card issuer.
If you’re at a restaurant and want to tip with your credit card, you need to follow a simple process. This is what you should do:
- Ask for the bill – When the bill arrives, always check it over to see if the price is correct and confirm it matches up with what you ordered.
- Inspect the pre-tax amount of your bill to give you tipping guidance – In The United States, if you’re eating at a restaurant, the general rule of thumb for a tip is 15% to 20% of the pre-tax bill.
- Calculate the amount you wish to pay in the tip and then write this on the “Tip” line of the receipt – There are usually two copies of the receipt with one being marked as a “Merchant Copy” while the other is marked as a “Customer Copy.” For your records, you can write the tip on the “Customer Copy.”
- Add your tip to the bill and write this total next to the line marked “Total” – Remember, the total that you write down cannot be charged to your card unless you sign your signature.
- Write down the total amount for your records – We highly recommend checking your credit card statements and compare these to your receipts. This will ensure that you do not get charged incorrectly and spend more than you the bill stated.
Accepting Tips From A Credit Card
If you’re on the other side and are accepting tips for your service, then adding the tip to a card is a pretty simple process.
Overall, there are two ways in which gratuities and tips can be taken via card payments:
- Service charges
- Discretionary tips
Service charges are simply a percentage of the final total bill and are added to this final sum. Service charges tend to be set between 10% and 12.5% in general and are very common in the United States.
However, such service charges are becoming more common across the UK, especially in restaurants and cafes.
Service charges are suggested and set in place by the business. These act as an additional fee if the customer believes they received a good service. Nevertheless, they are optional and customers can decline to pay this charge if they feel the service was below a par standard.
Discretionary tips are a little different from service charges. In this instance, the customer decides how much they are willing to add to the final bill. They do this by using the chip and PIN terminal of a card reading machine and proceed to enter the amount they are happy to tip.
When the card user completes payment via their debit or credit card on a chip and PIN terminal, there is typically a prompt asking if the customer would like to supply a tip or gratuity on top of the final bill. This tends to appear before the PIN is entered.
If the customer is content with the level of service provided and would like to pay a gratuity, then they can key in the amount they are willing to tip. This will then be added to the total bill and taken from their debit or credit card.
If tips are taken through this method, they can be shared between staff in many ways. However, this can lead to potential issues. For instance, a cash tip is legally the property of the member of staff who receives it.
Although the company that employs this staff can have a say in how the tips are shared out, they can not claim this cash tip as revenue for the business itself.
It is much easier to share cash tips out such as using a tip jar and sharing the money equally. But, when tips and gratuity are paid via debit or credit cards, the payments become legally owned by the business.
Therefore, there is no legal requirement for the business to pay its staff any tips with some even choosing to keep the tips as income for the business.
There are ways around this such as a tronc scheme. This is a system of sharing out tips, service charges, and gratuities to employees. Think of it as a more formal version of a cash tip jar.
Tronc schemes will use a nominated tronc master who is solely responsible for collecting all of the tips as well as sorting the Pay-As-You-Earn (PAYE) tax that needs to be paid on tips. They also share the tips among the staff fairly and properly.
This tronc master will usually be a manager or senior member of staff but rarely the business owner.