With tricky minimum wage laws, tax laws, restaurant policies and credit card fees, does leaving the tip in cash vs adding it to the credit card make a difference in what the server takes home at the end of the night?
Questions about tipping in cash versus on a card are the most common topic I’m asked about, so let’s finally set the record straight: For the most part, cash rules.
Like all generalizations, there are exceptions. First: If you have to tip much less in cash than you would on a card, go with the card. Say your bill is $100 and you have $15 in cash but would like to leave $22. Tip on the card; I’d rather have the extra $7.
The way servers’ tips are processed varies from restaurant to restaurant. Some servers I know don’t give a rat’s patootie whether you tip in cash or on a card because their restaurant has a different system than mine. Some servers get “cashed out” at the end of the night, meaning management gives them cash for tips left on credit card.
But this isn’t always the case. 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.
Another policy that varies is whether a restaurant expects servers to “tip out” other staff like bartenders or dishwashers who helped them out during their shift. In this case, it really helps to have cash on hand so you can slip the dishwasher a $20 for saving your ass when you were in the weeds.
One other big upshot of cash tips is that servers don’t have to claim all of them on their taxes. (Don’t come after me, IRS, I’m in no mood.) We’re taxed on how much we take home in tips, so it’s in servers’ interests to lower the amount they declare. If you’re netting on average 20 percent, you might only declare 12 percent of cash tips on your year-end taxes. Oh, you’re offended by the suggestion of “tax evasion”? Look, I’m just telling you how it is. Don’t shoot the messenger.
If you’re confused by all these pros/cons, take some advice from a server friend of mine: She doesn’t mind it when tables ask her how she’d like to be tipped—cash or card. That might be ideal for some servers, but I can also see how it might be tacky at a fancy restaurant or something. If you’re friendly with your server, though, why not ask her what she’d prefer? It makes my day when people remember I’m a human being.
Finally, I don’t want you to get the idea that plastic is always bad. If putting the tip on a card means you’re going to be more generous—don’t rich folks always want airline miles and stuff like that?—then I’ll take that “hell yeah” tip on your Amex any day, sweetie.
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