How Bill Pay Gratuity Credit Card Works

Paying gratuity or tips using a credit card has become increasingly common in recent years However, the process can sometimes be confusing, especially when it comes to how and when the tip is processed In this article, we’ll explain exactly how paying gratuity with a credit card works and the pros and cons of using your card versus cash for tipping.

How to Tip with a Credit Card

Tipping with a credit card is straightforward at most businesses Here are the typical steps

• Receive your bill and review the charges to make sure everything is accurate.

• Decide on the gratuity amount you want to leave based on the total before taxes. For restaurants, 15-20% is standard in the U.S.

• On the tip line of the merchant receipt, write in the tip amount. There are usually two copies – one for the merchant and one for you.

• Add up the tip and total bill amounts and write the sum on the total line. Sign the receipt to authorize the charge.

• Keep the customer copy of the receipt to check against your statement later.

Once you authorize the transaction, the total amount including your tip will be charged to your card, usually within a business day

How Long for Tips to Process

While the full transaction shows up quickly on your card, it takes longer for the tip amount to reach the worker who served you. The delay occurs because tips on cards get paid out through the payroll process, unlike cash tips which go directly to the employee.

Legally, employers must pay out credit card tips by the next pay period. But in reality, it often takes 1-2 weeks from the date of your visit for employees to receive their credited tips.

So while paying gratuity on a card is convenient for customers, it does mean a longer wait for service workers to get their tips. Keep this lag time in mind when deciding how you want to tip.

Card Tipping vs Cash Tipping

Tipping with a credit or debit card has some advantages, but there are reasons cash gratuity could be better:

Credit Card Tipping Pros

• More flexibility on tip amounts, can tip higher percentages easily

• Full purchase amount shows on credit card statement

• Don’t need to carry cash just for tipping purposes

Cash Tipping Pros

• Employees get the money immediately instead of waiting on payroll

• No fees deducted from the tip amount like there may be with card tips

• Can tip specific employees directly instead of pooling tips

So while paying gratuity on a card is easier for customers, cash has some benefits for service workers. Consider carrying some cash if you want your server or other worker to receive their tip faster and without any deductions.

Fees on Credit Card Tips

When a credit card tip is processed by the employer, they are legally allowed to take out credit card processing fees before passing the money to employees. For example, if the processing fee is 3%, they can take 3% of the tip amount as a fee before distributing the tips.

Some other service businesses like food delivery apps also charge fees to workers when tips come in through the app rather than in cash. So employees don’t get the full tip amount if customers use a card.

Back of House Tipping

If you want to make sure your entire tip amount goes to the specific person who served you, cash is better since card tips often get pooled and split between front and back of house employees.

Back of house staff like dishwashers, cooks, and food preppers all contribute to the service but they rarely get direct tips from customers. So consider asking if back house staff get a share of the tips and potentially increase your tip amount if so.

How to Pay Bill and Tipping Separately

If you want to put your bill amount on a card but tip in cash, simply ask for separate transactions when paying your bill. For example at a restaurant:

• When your bill comes, ask the server to run just the food and beverage amount on your card.

• Tip the server separately in cash based on the pre-tax total.

• The card receipt will show just the bill total without the tip added.

• You’ll get receipts for both the billed amount and your cash tip.

This allows you to put the bill on your card but pass the tip directly to your server in cash right away. Just be clear when asking for separate transactions to avoid confusion.

Tips on Taxes

For tax purposes, employees are required to report all tips they receive, including cash tips. So don’t assume your cash tips are untaxed income to service workers.

Employers may also report an estimated tip amount for tax purposes if your card tips exceed a certain percentage of sales. So both cash and card tips are likely being taxed.

Should You Carry Cash for Tipping?

Carrying some cash specifically for gratuity purposes can be a good idea if you want service workers to receive their tips quickly and in full. Even small cash denominations like $5s can help supplement your card tips and show your appreciation for good service.

Consider tipping on your card for convenience but having $10-20 cash on hand for leaving quick cash tips when you receive exceptional service. Carrying smaller bills ensures you’re prepared to tip service workers directly in cash when the situation calls for it.

Key Takeaways on Card Tipping

• Enter the tip amount on the merchant receipt and total up bill + tip. Sign the receipt to authorize.

• Employees have to wait 1-2 weeks to receive credit card tips via payroll.

• Cash tips go directly to workers right away and avoid card processing fees.

• Ask to split payment into separate transactions to tip in cash but put bill on card.

• Carry some small bills to leave cash tips when you get great service.