I've been charged exactly 20% tip twice at restuarant where I've tipped slightly less. Is this legal?
July 24, 2006 8:52 AM   Subscribe

I've been charged exactly 20% tip twice at restuarants where I've tipped slightly less. Is this legal?

I sometimes tip 'old school' and round things up or down to a whole number like 54 dollars instead of 54.29. I noticed on my bank statement that the restaurant charged me exactly 20% thus something like 54.29. I called to tell them about it an they told me "by law (or perhaps by the bank) we are allowed to charge 20% and then we will refund the difference in a few days." They didn't refund the difference. I've seen two restaurants do this to me. Neither time was the party more than 2 people. I never followed up as its a dollar at most, but Im curious as to whats going on here. Am I being ripped off by the server? If so, is management supporting this fraud?
posted by skallas to Work & Money (27 answers total)

This post was deleted for the following reason: Poster's Request -- frimble

I don't understand. How are you paying? Aren't you paying while you are at the restaurant? Don't you know the amount before you pay?
posted by teg at 8:59 AM on July 24, 2006

You're not the only one with this problem. See here. "Because of a setting in credit-card terminals distributed by the nation's largest consumer bank, thousands of restaurants, without even knowing it, could be temporarily charging diners an automatic gratuity on top of the agreed-upon bill, reducing the funds or credit available to card users and potentially alienating customers in the process." According to the article this is not promptly rectified in most cases. This is soon to be a major class action lawsuit, I would guess.
posted by beagle at 9:01 AM on July 24, 2006

Recall that the restaurant authorizes your card before you tell them what you plan to tip. Therefore when they submit the credit card authorization, they don't submit it for the amount of the check, but for (check amount + maximum reasonable tip).

This of course leads to sometime hilarious results, like when (usually drunk) people tip far, far more than they have in the bank.
posted by Doofus Magoo at 9:01 AM on July 24, 2006

Well there are two issues here, one with the debit card and one with the server.

When your card is run, it is automatically cleared with a pillow for a tip. I beleive this percentage is up to your bank. Once the rest. reconicles their report at the end of the night, the difference should show up in your account.

The second issue happens when a customer takes his or her charge slip or the server loses it. Some places go ahead and let the server enter a reasonable tip. If the customer calls and says they left a different amount the rest should change it in their computer and it should reconcile within a couple of days.

Its hard to tell whether you need to talk to your bank or the rest.
posted by stormygrey at 9:02 AM on July 24, 2006

Occasionally the restaurant will place an "authorization" against the card for an amount X, which is larger than the bill, but doesn't actually make the charge for that amount.

Another example: if you buy gas with a credit card, the pump makes the authorization first and doesn't know how much you'll pump. So it places an authorization for $75 or so, effectively making sure that amount of credit is available to you, then you pump the gas and it makes a charge for the actual amount. Restaurants don't know how much you'll tip, so they can't make the actual charge when they take the card to the register, but they want to make sure you have the money, so they might make an authorization for bill +20% as a routine matter to make sure you have the money and then charge whatever you wrote on the receipt.

So perhaps you're mistaking an authorization (which reduces the available balance on the card) with an actual charge.

Or perhaps this is totally wrong and you have weasel restauranteurs, which is certainly possible. If they are making an actual charge of the wrong amount, you should dispute it with the credit card company. It may seem silly to call the card company and say "They charged me $54.29 when it should have been $54" but it's the principle of the thing; you're taking one for the team, where the team is "everyone who dines at that restaurant".
posted by jellicle at 9:05 AM on July 24, 2006

Another story on this.
posted by beagle at 9:14 AM on July 24, 2006

Just a thought: pay in cash.

It's good for the waitron because they won't have to claim all of their tip as income, so the money you're giving them goes further and you won't have to worry about strange credit card shenanigans.
posted by overhauser at 9:16 AM on July 24, 2006

The most likely explanation is not some sort of weird Superman III-esque rounding scheme (restaurants have many more efficient ways to screw you out of your money), but simply that they authorized the 20% amount, and then neglected to update their system with the actual amount you wrote on the check before the charges for the night went through. Carelessness or laziness, but probably not fraud.

This practice is annoying, though, because I often end up tipping in cash even when paying by credit card—it's better for the server, as overhauser mentioned, and also, in a fighting-over-who-pays situation, one person will end up paying the bill and another the tip.
posted by staggernation at 9:21 AM on July 24, 2006

I work at a restaurant. The owners are quite adamant about impressing upon the waitors that eiditng the stated tip balance on a signed receipt is quite illegal. Furthermore, if the party wants to question the validity of the statement, if the restaurant cannot procure a signed copy with the stated tip/total, then the credit card company can default on the payment.

If you're worried about your payments, always fill in the tip AND the total, sign the bill and remind yourself of what you put down on your customer copy.
posted by stratastar at 9:35 AM on July 24, 2006

overhauser: As far as I know, tips given in cash still count as income—not reporting those tips as such would amount to tax fraud. At my food service job, we're required to report our tips when we clock out at the end of the night.

Now, at my food service job, we also receive our tips immediately—even if they're charged to a credit card. The shift leader will just cash that amount out of the drawer. I've heard, though, that at some restaurants, such as Bob Evans, they pay a ridiculously low hourly wage to servers, and on top of that, they don't take credit card tips out of the drawer immediately—instead they just put them on the next paycheck. Because of some combination of those factors, their servers often get paychecks that are in negative numbers, because the taxes/fees for the amount of their pay plus tips have been taken out of that amount, whereas if they were receiving cash tips, they wouldn't have the taxes/fees taken out for that cash.

But...that said, it's still a questionable practice not to report tips as income and thus not get taxed on that income. The system used by restaurants like Bob Evans truly needs to change, so workers don't get screwed—but until that point, servers should either quit working there or report their tips properly. To do otherwise would leave them open to tax evasion charges, should someone decide to follow up on it.
posted by limeonaire at 9:38 AM on July 24, 2006

So, some people don't actually fill in the tip section and complain when it is 20%? Is that the deal? Ask because tipping in America always strikes me as one of the most fascinating and embedded rituals. Wonderful to live in the UK and to not have to tip the barman by the way.
posted by A189Nut at 9:48 AM on July 24, 2006

I've had this happen. It cleared up a couple of days later.
posted by lampoil at 10:02 AM on July 24, 2006

And no, the server has no control over this. Seems that the credit card machine does it automatically.
posted by lampoil at 10:03 AM on July 24, 2006

I've seen times where the authorization charge is for *just* the amount on the bill, pre-tip. It goes in as "pending." Sometimes, a separate charge is issued for the tip, sometimes a separate charge is issued that includes the tip on top of it, and the first charge is dropped within a day or two, and sometimes (much more likely), the pending charge is updated appropriately in that a new charge with tip included is placed while the other is dropped so that it's seamless.

These things happen, and with credit, it's not a huge deal unless you're floating up at the limit (and even then...), but with debit, it can be a problem, since it's actual money being taken. See also: why you never use a debit card as an incidentals card for a hotel stay @ $150 a night. (They placed a "hold" on the card for that amount, and quickly drained my account, since I was only 17 at the time.)
posted by disillusioned at 10:10 AM on July 24, 2006

here's a tip to keep tabs on tips...always pay with an amount ending in your secret number. for example if the bill plus the estimated tip were $18.47, then I would round up to $18.59, and conversely round down to $xx.59 when necessary. making sure to leave a generous tip in all circumstances. then when the credit card bill comes you can see easily if ther is anything amiss.
posted by Gungho at 10:11 AM on July 24, 2006 [1 favorite]

Mod note: a few comments removed, take tax-cheating waiter discussions to email or metatalk
posted by jessamyn (staff) at 10:16 AM on July 24, 2006

I also try to tip in cash, even if paying the bill with a card. If I were to see a tip added to such a credit charge, the restaurant would hear about it. If they didn't satisfy me that the add-on was disappearing immediately, and that there would not be any more - ever - they would not get any more of my business. Why should they think I am going to tip on the credit slip at all?

Oh, and the day an employer gave me a negative paycheck would be the last day of work they'd get from me.

I am not interested in what difficulties a vendor or an employer has in predicting or reconciling their bookkeeping. If they can't figure those things out without shifting the burden onto me, even temporarily, let them fail.
posted by Kirth Gerson at 10:31 AM on July 24, 2006

Meetoo: I know for a fact that some credit card processing terminals at restaurants will authorize for the ticket price plus a tip markup, then settle for the actual tipped total, because I've watched the people at the IHOP key in my sale, and watched my debit card beep my cellphone on the auth a minute later for that much plus 15%.

So yes, credit card terminals that know they're in restaurants can do this. I would expect it to be in the terminal itself, but I'm not sure on that part.

Oh, and around here, the auth on pay-at-the-pump seems to be $20 to $40 -- even given what gas is going for these days.

Having to guess is the price we pay for the credit grantor not just *telling* the vendor how much we're good for.
posted by baylink at 1:43 PM on July 24, 2006

i've fought this battle before. i generally leave cash tips, as i know waitresses dont wanna report tip money. after the first time i was robbed, i wrote CASH TIP ON TABLE on the receipt.

they still charged me an additional 15%.

i went to the bank (wachovia). they did nothing.

i finally went to the restaurant and raised hell. i threatened to file with the BBB. i also wrote a letter to the editor, identifying the cheating restaurant by name.

the General Manager called me the very next day and gave me my money back and a free meal.

take your fight to the restaurant.
posted by Davaal at 2:15 PM on July 24, 2006

Some confusion might come from how banks indicate pending charges in online systems. USAA is pretty good about differentiating pending items from posted ones but my darling girlfriend's bank, Chevy Chase, was impossible to tell the last time I looked over her shoulder on something (about a year ago).

As far as dealing with this once you know it's been submitted wrong, like with most things the most important thing you can do is deal with the right people. You should contact the people charging you initially and make an effort to get it resolved. If they fail to do so, contact your credit card company via the phone number on the back (don't fuck around with going to a bank branch, in many cases they are powerless to assist you and in any case it's less convenient for you AND them to do it that way) and request a charge-back.

Having dealt with them from both sides I can tell you that the merchant will get a letter saying there's a complaint about XYZ, here's the pertinent date, name and transaction ID and amount in question. Submit supporting documents within 45 days or it's going to be refunded. I have yet to have it go beyond that from either side but there's more steps if neither side knuckles under.

Gungho's secret ending number idea is -brilliant-.
posted by phearlez at 3:26 PM on July 24, 2006

I always tip generously, and enforce doing so in even in large, mathematically challenged parties. That said, if a tip is automatically added to my check, they get that much and not a penny more. This nonsense about authorizing your card for more than the pre-tip amount is complete nonsense and should stop immediately. It's annoying when hotels and retal car companies do it, but somewhat understandable. There's no reason a restaurant needs to do this to make sure you've go the money to tip. If they're worried, they should collect your card at the start of the meal and pre-authorize it for $50 or something, but I'd like to see some place try that! It should not be on the consumer to figure out what the restaurant did, and if a company is shipping terminals that automatically do this, expect a ruckus.
posted by Mr. Gunn at 6:37 AM on July 25, 2006

It does seem a little ridiculous, when you think about it. In how many cases is a customer going to have just enough in their bank account or credit limit to cover the bill, but not 120% of the bill? Would that really happen often enough to make it worth confusing and alienating your customers?
posted by staggernation at 6:46 AM on July 25, 2006

In how many cases is a customer going to have just enough in their bank account or credit limit to cover the bill, but not 120% of the bill?

Irrelevant. When a merchant gets an authorization it's not just to insure you have the money, it's also a guarantee from the credit card issuer that the charge will be compensated at that amount. By getting it for 120% they insure they can receive at least that much.

A charge without an authorization does not have that guarantee, which may or may not be a problem. But why would a business not act to minimize their problems?
posted by phearlez at 10:40 AM on July 25, 2006

Because it gives the appearance of them cheating their customers?
posted by Kirth Gerson at 11:08 AM on July 25, 2006

Irrelevant. When a merchant gets an authorization it's not just to insure you have the money, it's also a guarantee from the credit card issuer that the charge will be compensated at that amount.

I'm not saying they shouldn't get an authorization, I'm saying they should just get one for the amount of the bill, not the bill plus hypothetical tip. My point was that in very few cases would an authorization go through for the bill, but be rejected for 120% of the bill.
posted by staggernation at 1:12 PM on July 25, 2006

In other words, if you verify that the customer can cover the bill, it's reasonably safe to assume they'll also be able to cover whatever tip they ultimately give.
posted by staggernation at 1:15 PM on July 25, 2006

staggernation - looking at my comment I see I edited it to the point where it was no longer clear :)

An authorization is a guarantee of payment but only up to the amount authorized. So if you come into my restaurant and eat $100 in food and I run an authorization for $100, I now have a guarantee from RFGBHN Megabank that when I submit that charge (as an authorization IS NOT a charge, though your bank may earmark that money unavailable) I am guaranteed that they will pay me up to the amount of $100.

SO, if you write down $7.23 as a tip (you cheap jerk!) and I submit that $107.23 claim the bank could then say "um... no, fuck off." I could then re-submit (maybe - if my agreement doesn't say the auth expires after a certain amount of time - this gets into pretty rarefied territory) and get my $100, but if I gave my employee the $7.23 already that means all I'm really going to get for my business is $92.77

Now, how likely is this to happen? Well, I'd say likely enough. A lot of people out there keep their credit cards maxed out and/or live hand-to-mouth in their bank accounts. Or they fuck up their checkbook balancing (if they do it at all) and start bouncing checks. If my charge submission goes in when you've overdrafted your account then I have a problem. They will pay me if I have an authorization for that amount, but if I'm over that they could possible kick it back.
posted by phearlez at 9:41 AM on July 26, 2006

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