Though I have Paypal and Venmo accounts, I mostly use a credit card for convenience. I took my wife and mother-in-law out to dinner last night. I charged the dinner, and as I was signing the credit card receipt, my mother-in-law offered to leave the tip as cash. I declined her offer, but this initiated a discussion as to whether it is better to tip the server in cash or on the card. We are aware that credit card companies charge a service fee of 2%-3% and wondered if that applied to the tips as well.
Googling the topic this morning I found that:
- If you're going to leave a smaller tip in cash than you would on the credit card, servers would prefer the larger amount.
- How tips paid for by credit card are handled varies from restaurant to restaurant.
- Some restaurants cash their servers out at the end of the night. Others make servers wait until the money comes in from the credit card company.
- For restaurants that don't cash out servers until the credit card money comes in, cash-from-the-customer tips make it easier for the server to "tip out" (share with) their busboys, food runners, etc.
- Some servers do not claim all of their cash tips on their taxes.
- Some restaurants do take out the 2%-3% credit card charge when cashing out the servers.
When Googling, I found this:
"Cash is fast money, honey, meaning I can take it home at the end of the night and use it to put gas in my old clunker or buy a pack of cigarettes. Credit card tips might not get processed until later, so I’d have to wait for them to end up in my paycheck days later. Some restaurant owners will even deduct credit card processing fees (usually around 2-3 percent) from a server’s tips, so a nice 18 percent tip ends up somewhere around a mediocre 15 percent tip in my pocket. It’s a crap move, but so are lots of things in this industry."
— Ask the Salty Waitress, 03/01/2018
I'd like to point out that this is incorrect. When you tip a server using your credit card, the server gets 97% to 98% of the tip. For the example cited in Ask the Salty Waitress, the $18 tip would have been $17.64 or $17.46, not $15 as stated.
I will continue to tip via credit card for the convenience.
Getting tipsy is alive in the lab.