Credit cards and tips

How does it work in a restaurant when you pay by credit card? They bring you the paperwork, you fill in a tip and then sign it with a new total. Do they then cancel the original transaction and redo it with the tip included?

When the restaurant first runs the card, the request a block of credit, usually around 150% of the total. They do then run it a second time with the final total on it. Though the block of credit may remained blocked for 2-3 days.

There is a problem with tipping on a card. The card company charges the restaurant. There has been debate whether the restaurant eats this charge on behalf of the server for the tip amount or if the tip is diminished. There has been litigation on this. In essence, either the restaurant or the server has to pay for the tip amount.

When I worked in restaurants, we ran the card with the original amount as kind of an “interim” charge. Once the customer put a tip, we went back and modified the amount to show the original amount, plus tip, equals total bill. If no tip was added to the card, we still, I think, went back and marked the original charge as final. We never got a higher amount than the actual bill as a block of credit, at least on the server end, and I personally have never known my own credit card to be charged a “hold” amount for a restaurant bill. Not that it doesn’t happen somewhere; just not to me or in any of the places I ever worked.

Mr. Zambezi: I am not familiar with what you say. I’ve never known a restaurant or a server to have to pay the tip amount; servers certainly wouldn’t stand for it (they’re paying themselves the tip?) and the restaurants I worked at couldn’t stay in business if they had to pay, from their own monies, for all the credit card tips they took in. Besides, if what you say is true, that means that the customer is being charged for a tip that is going to … whom? The credit card company? Sounds like fraud to me. Do you have any more information on this? Or am I misunderstanding what you’re saying?

My favorite local restaurant puts a hold of 120% of the food total on my credit card. Then in approximately 2-3 days, it is replaced with the actual amount. I have noticed some restaurants only put a hold of the food total, and some are quick to debit the actual amount.

My favorite server at said restaurant, who is also a good friend, said it doesn’t matter to her if people pay cash or credit. She gets the full tip in cash in any regard, and she declares all her tips for tax purposes. Some servers evidently don’t report all their tip income and dislike credit cards because it documents their tips.

Not to hijack this thread, but rather to elaborate on it, I am curious on:

  1. What happens when someone writes a tip down and doesn’t sign the credit slip?
  2. What happens when someone signs the credit slip but doesn’t include a tip or total?
  3. Hi Opal!
  4. What happens when customers take both parts of the credit slip, leaving the server with nothing to turn in?
  5. If you only have $23 in your checking account, and the food bill is $22: Will the transaction on your debit card go through or will it be denied because it doesn’t have the necessary hold amount?
  6. Someone told me that he crosses off his credit card numbers (the last four digits) on slips to protect himself from credit card fraud. Does this adversely affect the restaurant or the server’s tips?

I set up the equipment that restaurants use to capture CC info. While there are differences in procedures and amounts authorized, it basically goes like this:

  1. Customer drops credit card.
  2. Server authorizes card. This means that the restaurant’s equipment calls your bank (actually the processing provider, but anyway). The amount authorized varies from system to system, and can be adjusted. Usually it’s 115% to 120% of the total bill.
  3. You sign the auth slip and fill in the tip and total lines.
  4. At the end of the night, the restaurant sends all its credit cards together for settlement. This is when the money is actually taken out of your account.

RainbowDragon, your questions:

  1. According to law, the restaurant is supposed to contact you and ask you to complete the authorization voucher. In the real world, this never happens, and your card is settled to the amount you wrote in.
  2. Again, depends on the restaurant. Some, especially bars, will add a predetermined percentage to your bill. The problem here is that the establishment must make you aware of that fact, generally on the menu. Most places don’t want to advertise that degree of greed.
  3. Hi Opal!
  4. Customers taking both slips are the bane of a server’s existence. It means that the server doesn’t get a tip. Further, there are people who do this on purpose, and they know it. If you’re too cheap to leave an appropriate tip, get used to Burger King.
  5. If you don’t have the set percentage a particular system uses in t your account, your card will decline. In your example, you’d have to have at least $25 in your account to successfully authorize a $22 bill. As an aside, authorization holds generally last for 48 to 72 hours. Say you authorize a card, then decide to pay cash. The server will void the authorization so your card isn’t charged, but it will deny you access to those funds until the hold clears.
  6. Your friend is very street smart. Unfortunately, most credit card theft is associated with the hospitality industry. In fact, when you report to your credit card company that there are charges on your account that you didn’t make, the first place the company looks is the last couple of places you ate out. The typical scam is for the server to copy your account number and expiration, then use that number to settle their tables that paid cash. They walk with the money, you get charged for half a dozen meals.

Hope that’s not too longwinded. It’s nice to know the is a use for some of the random knowledge I pick up.

If you can, in the US please eat out Thursday 10/11/01 at a restaurant supporting “Windows on the World”. Many hospitality employees lost their lives last month, and their families need help. As I understand it, participating restaurants will donate their profits for that day.
(Hope that didn’t violate the rules…)

Miss Bunny,

I would refer you to nations restaurant news. There were many articles about this a year ago. It seems that some employers in Californnia were trying to do this.

You may notice that many hair salons will not accept tips on credit cards. I suspect that it is for this reason.

Mr.Zambezi: thanks, I will try and read up on that. It sounds so bizarre. But some places will try to get away with anything. I can’t imagine how a server would put up with such a thing.

In this market where they are begging for servers, I do not understand why they put up with anything from management. Servers will go to great lengths to address some perceived wrong while a competitor across the street is begging for employees.

Now as to why managers would do something like that, I have more insight…

Actually, I don’t see the purpose of blocking out the last four digits on the charge slip. Particularly if you are adding a tip. The server simply calls up the prior authorization, which has all the numbers, to adjust the charge. This effectively negates the blacking out of the last 4 digits, does it not?

Also, according to my Credit Card Processor, the “swipe machine” will record all the numbers and a “reprint” command will pull up a duplicate reciept with all the numbers.

And all the numbers may be necessary for the merchant to re-enter the days receipts if the Credit Card Processor’s Computer crashes.

So blocking out the last four digits does absolutely no good. (If someone wants to use your credit card number, there are many ways to get it simply.)

I’m not sure why I feel compelled to contribute to this thread, but here goes more than you ever wanted to know about credit cards.

[ul][li]The institution that gives you your card is called the issuer.[/li][li]The organization that processes the card transactions is called the processor (suprisingly enough).[/li][li]The institution that the merchant has their bank account with is called the acquirer (this is the institution that is taking the risk that a credit card charge will be “charged-back” or disallowed).[/li][li]When the server enters the charge on a credit card terminal (this might be done automatically by a POS [Point Of Sale] system), the transaction performed with the processor is called a “pre-auth” (from pre-authorization). Although some establishments might be under the mistaken impression that they need to “boast” the total to account for a possible tip, that’s not the case.[/li][li]At some point, usually at least once a day, the merchat (restaurant, in this case) must settle their transactions. Each pre-auth is matched with a “close” transaction, for which the total can differ from the original pre-auth (the difference might be limited by the processor or acquirer as a risk management procedure). Most processors lump transactions into batches.[/li][li]The pre-auth “reserves” the funds against the card’s credit balance (although most major card systems maintain a seperate pre-auth total, that detail is usually hidden from cardholders). In the case of a debit card, this can mean that you can’t access that cash, even if the pre-auth was never settled with a close.[/li][li]A pre-auth that isn’t settled, it eventually expires (in 1 to 3 days, usually, depending on the issuer).[/li][li]As an alternative to a pre-auth and close pair, a merchant can perform a “sale” transaction (which encompasses both). Naturally, this is usually only used for merchants where tips are not common.[/li][/ul]Disclaimer: the above information applies to most U.S. card processors, as well as all Canadian processors that I know of.

Perhaps a criminal waiter or waitress might obtain your credit card number in less direct methods (like reprinting the statement). However rather than wait for a server to retrieve the slip, I will sign my slip and go. Anyone walking by my table might pick up the slip and use it for whatever purpose they see fit.

Thanks Galan for answering my questions!

Mr.Zambezi, missbunny

I believe the credit card company charges about 3% of the total transaction (American Express charges more). I know of at least one resturant that deducted 3% from the servers credit card tips. I think this is pretty rare, however. The owner of the resturant was a cheap bastard.