It seems like the list of places where tips are expected has gotten longer and longer. Considering 80% of Americans have at least one credit card, a lot of those tips are now getting paid by card.
Normally, when you make purchases with credit cards, you can see the charge right away. But if you keep a close eye on your credit card statement, you may have noticed that this isn't the case with tips.
When you add a tip to a purchase, the full amount doesn't show up on your statement immediately. It often takes one business day, and sometimes more, until the full, correct charge comes through. People sometimes wonder why, and there's a simple explanation.
How tipping with a credit card works, behind the scenes
From the consumer's end, adding a tip with a credit card is straightforward enough. You provide your credit card, you get a receipt with a tip field, and you fill in the rest.
For the business, each of these transactions is a two-step process. First, the merchant puts an authorization on your credit card for the amount of your bill. An authorization determines that there are enough funds in the account to cover a charge. This shows up as a pending charge on your credit card statement.
The next step is settling the transaction. Settlement is when the merchant finalizes the transaction with its payment processor. The amount of the settled transaction can be different from the amount that was authorized.
Let's say that you go to a restaurant and spend $100 for dinner. You give the server your credit card. The restaurant will put a $100 authorization on your card to verify that you can cover the charge. Once the transaction is approved, the merchant will bring you the receipt.
If you tip $20, the restaurant will settle the transaction for $120. You'll initially see a pending charge of $100, but that will later change to $120. This normally happens within one business day.
Not all tips take time to show up on your credit card statement
To clarify, tips generally only take time to appear on your credit card statement if you add them after the initial charge. That applies to the traditional method of tipping by card, where you write your tip on the merchant's copy of the receipt.
Many businesses now offer payment terminals that let you add the tip amount as you pay. You've probably seen these at some businesses, where the machine asks during checkout if you want to add a tip. It normally provides a few tip recommendations, and some places seem to love setting these annoyingly high.
Since these add the tip amount as you're making the transaction, the entire amount will usually show up on your credit card statement right away.
Don't forget to double-check the final amount
Tips normally get charged correctly, but mistakes happen. And since there's that delay before it shows up on your credit card bill, you won't see if there was an error right away.
That's why it's important to keep track of how much you leave as a tip and double-check your statement once the charge is finalized. You can tell it's settled when it's listed among your previous transactions and not under pending transactions.
If you ever get overcharged, contact the merchant to let them know and ask for the charge to be adjusted. If the merchant won't help you, and you're sure the amount is incorrect, you can dispute the charge with your card issuer. Instead of disputing the full amount, you'll dispute a partial amount. But to reiterate, issues like these are rare, and they can usually be resolved with the merchant.
