Why you should never tip with your credit card when eating out

Tipping your server might feel like a no-brainer - pay the bill, add a few bucks for good service, and head out.

But if you’re tipping with a credit card, you might not be helping your server as much as you think.

In the US, when you leave a tip via credit card, a chunk of that cash might never actually make it into your server's pocket.

That’s because restaurants often deduct credit card processing fees from tips before handing them over. So, let’s say you tip $10 (just over £7) - your server might only see $9.70 or even less.

Credit card companies often charge businesses for processing each transaction (lechatnoir/Getty)

This is because credit card companies charge businesses fees for processing each transaction - usually around 2-4%.

And unfortunately, a lot of restaurants pass that cost onto their employees, using tips to pay their credit card processing fees.

It’s totally legal in many US states, but it's not exactly generous.

As one server told Delish, they only found out after years that a percentage of every card tip was quietly being skimmed off: "It felt like a slap in the face. I’d work hard, get tipped well, and still lose out."

The US Department of Labor states this on their website under the Fair Labor Standards Act: "Under the FLSA, when tips are charged on customers' credit cards and the employer can show that it pays the credit card company a percentage on such sales as a fee for payment using a credit card, the employer may pay the employee the tip, less that percentage. For example, where a credit card company charges an employer 3 percent on all sales charged to its credit service, the employer may pay the tipped employee 97 percent of the tips without violating the FLSA."

At the moment, only Maine, Massachusetts, and California have laws that prevent employers from deducting credit card fees from tips.

"It’s frustrating," Digital Food Production Assistant Colton Trowbridge told Delish, adding: "I don’t think that’s something that most people are aware of."

Since then, he has worked in several other spots where he and his fellow servers might have been losing out on credit card tip money because of processing fees, yet it was never really discussed.

He added: "It’s definitely not a big topic of conversation in the industry."

That means in most other states, if you've tipped a server using a credit card, there's a good chance they - or the tip pool they're part of - didn’t get the full amount you intended to leave.

Paying with cash means the server gets the full tip (Grace Cary/Getty)

What you should do instead is go old school and tip in cash.

It’s instant and ensures your server walks home with exactly what you gave them - no waiting for payroll or having their tip chipped away by fees.

Another downside to card tips is the delay.

Some servers say credit card tips can take days to show up or get pooled and split later.

A cash tip, on the other hand, goes straight into their pocket. Simple.

This isn't always the case, though.

In the UK, for instance, it's generally illegal for restaurants to take a cut of tips, whether paid by card or not. New laws have even strengthened workers' rights to receive 100% of their tips.

Still, cash is king if you want to be sure your server gets the full amount - especially in busy venues or chains where tips are often pooled.

So, next time you eat out, skip the tap-to-tip. Hand over some cash - it’s the most direct way to say thanks.

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