How Bill Pay Gratuity Credit Card Works

When you go out to eat at a restaurant, get your hair done at a salon, take a taxi, or receive any kind of service where tipping is customary, you have the option to tip with cash or add the tip to your credit card payment. Tipping with a credit card offers convenience, safety, and the ability to earn rewards, but how exactly does it work? Here’s a detailed breakdown of how bill pay gratuity on a credit card works and the pros and cons of tipping with credit vs. cash.

How to Tip on a Credit Card

Tipping on a credit card is a simple process, though the exact steps vary slightly depending on if you are at a restaurant versus another kind of business. Here is the basic process

At a Restaurant

1. When you receive the check, review it to make sure all the charges look accurate.

2. Decide how much you want to tip based on the pre-tax subtotal. The standard restaurant tip amount is 15-20% in the U.S.

3. On the merchant receipt, write the tip amount on the “Tip” line and add it to the subtotal. Write the new total on the “Total” line.

4. Sign the receipt to authorize the tip and total amount to be charged to your card.

5. Keep the customer copy of the signed receipt for your records.

At Other Businesses

1. When you are ready to pay, either the staff will bring a mobile card reader to your table or you will go up to a register.

2. Select if you want to tip a percentage (e.g. 20%) or a custom amount. This will be added to your total.

3. Insert your card into the chip reader or tap/swipe your card. You may have to sign or enter your PIN.

4. Keep the customer receipt that prints out.

How Tips Get Processed

When you tip with cash, the service worker receives it immediately. But tips on a credit card get processed differently behind the scenes:

• The initial payment for the service itself is processed right away.

• The tip is transmitted along with the base payment but held separately.

• Within 1-2 business days, the full amount including the tip will post to your credit card account.

• However, the worker does not receive the tips until their next paycheck, which could be 1-2 weeks later.

• Employees who receive tips as part of a tip pool will receive their share after tips are collected and pooled.

This delay is because card payments must go through the payroll system. Federal law requires employers to pay tipped workers at least the full minimum wage when tips are included, so tips on cards are just part of their regular wages.

Credit Card Tipping vs. Cash Tipping

Tipping on a credit card provides advantages like rewards and record keeping. But tipping with cash has advantages for service workers. Here’s how they compare:

Credit Card Tipping Pros

• More convenient, especially if you don’t have enough cash on you.

• Safer than carrying large amounts of cash.

• Provides a record of your full transaction on your statement.

• Allows you to earn credit card rewards like cash back or miles.

Cash Tipping Pros

• Workers receive the money immediately instead of waiting for payday.

• Avoids any card processing fees deducted from tips.

• Workers may prefer cash, especially with income instability.

• Works for services that can’t accept cards, like hotel porters.

Overall, credit card tipping is widely accepted today and offers significant benefits for customers. But cash tips have advantages for workers that are important to consider.

Tips on Bills and How They Are Paid

Tips that are added when you pay your bill deserve special mention. These include:

• Restaurant bills

• Salon and spa bills

• Taxi fare bills

• Food delivery bills

• Hotel bills

For these transactions:

• You add the tip when you pay the bill, either by filling it in or selecting a percentage.

• The tip may be listed separately on your receipt/statement.

• The full amount including tip is charged together to your card in one transaction.

• Workers still receive tips on their paychecks, not immediately.

• Tips from bills may go into tip pooling/sharing arrangements.

So bill pay tips work the same way as other credit card tips. The tips just get bundled with the base service charge in a single transaction.

Tipping on Debit Cards

Debit card tipping works exactly the same as tipping with a credit card. The steps you take are identical. The only difference is the money is deducted directly from your checking account, rather than being charged to a credit account to pay off later.

Behind the scenes, debit card tips get processed the same way. Workers need to wait for payday to receive the funds instead of getting cash right away.

One thing to note is that debit transactions can incur fees if you use your PIN. So you may want to select “Credit” and sign when you have the option.

Potential Issues to Watch For

While paying tips on a card is generally smooth, here are some potential issues to look out for:

• Incorrect tip amounts – Always save your receipts and check against your statements. Contact the merchant if there are any discrepancies.

• Duplicate charges – If the same tip amount gets charged twice, report it to your card issuer immediately.

• Fraud – If you notice any suspicious or unauthorized charges with added tips, report them ASAP.

• Processing delays – Tips may take longer than usual to post around holidays when transaction volume is high.

• Declined payments – If your card is declined, try another card or pay the tip in cash.

• Server errors – If a server enters the wrong tip amount by mistake, work with the manager to resolve it.

• Technology failures – Have a backup payment method ready if their systems are down and you can’t tip on a card.

As long as you save your receipts and watch your statements, you should be able to identify and dispute any issues promptly.

Best Practices for Credit Card Tipping

Follow these tips (no pun intended) for seamless gratuity by card:

• Carry small bills for when card tipping isn’t possible, like with valet attendants.

• Double check amounts before signing receipts or authorizing charges.

• Save receipts to verify statement charges later.

• Tip in cash for immediate payout if you know workers rely heavily on daily tips.

• Ask about tip sharing practices if you want to adjust your tip amount accordingly.

• Watch out for pre-added tips on large parties or catering bills and adjust accordingly.

• Have a backup payment method in case your initial card fails.

The Bottom Line

Paying tips on a credit or debit card offers undeniable convenience compared to cash. However, cash tips have benefits for service workers. When possible, consider their preference, especially for providers who rely on tips as a major portion of their income.

Whichever method you choose, the most important thing is to tip reasonably for good service. Service workers will certainly appreciate it! Just be sure to keep your receipts and monitor your statements when using plastic.