Credit Card Processing for Restaurants

Dichotomy of Tip Theory In Different Industries

There is an interesting dichotomy of tip theory in different industries.

These days, I am constantly amazed at the variations in tip theory.

Who allows tips on credit cards and who does not?

At the end of the day, what is right for your business, and right for “now” in your industry is really up to you. That said, read more to ponder this controversial topic and learn what others may think.

No Tips on Credit Cards

On one hand, you have the industries and the business models who do not always allow a tip on credit card payments.

These often involve personal care services such as:

  • hair stylists and salons
  • facial and massage spas
  • nail salons

Whether it is posted at the front counter, or on a sign, the customer is told they cannot charge a tip to a credit card yet, the recommendation is to tip between 18% and 22% (depending on what you thought of the service.)

What if the customer is short on cash? How does that go over with the service provider, the stylist, aesthetician or manicurist?

Not very well as you can imagine.

In fact, similar to restaurants, the employees of these types of businesses rely heavily on tips and work hard to create a relationship with their customer. They care about their customers and work to deliver a personalized service to each person. They remember preferences, whether you like one thing over another and if you have kids, pets or a stressful job.

This in turn creates more loyalty and a likelihood the customer will return. In addition, they offer more generous tips for great – or outstanding – service.

Now You can Tip on Your Credit Card

There is a surprising trend in industries that are now offering customers to pay a tip via credit card.

  • car washes
  • pet groomers
  • valet service
  • coat check

This is made easier by click to order, tap to pay and apps, where some one can add a tip to a service even if paid previously via entry POS, a membership, monthly billing or, even on a free service offered by the venue.

Even if the tip is just a few dollars, the value of this income to the employee is high – and they hustle more – which helps the business serve more people.

Relationship of Tipping and Labor Retention

The ongoing shortage of quality labor and dedicated employees has started to shift the mindset of business owners, even in non-traditional areas. Places and businesses where cash tips were always normal, but now are being offered via easy, text or “click to tip” via an ap to not only encourage tipping, but higher tip amounts.

In fact, since 2009, the average tip percentage has risen to 22%. (Source: The Washington Post, “How technology is making us tip more than ever” 3/27/2015.) Whether this is a recognition of the value of service workers, or the “suggested tip values” on POS screens, it has worked to increase the likelihood that someone will tip even, when it wasn’t expected in the past.

Plus, if you like your employees and want them to stay longer, be loyal and value the customers, you may want to offer credit card tipping as an option. (You can still suggest cash tipping, which is often more preferred by the employee, but a delayed tip payout due to being processed on a credit card is still a tip.)

Tip on Credit Or Not?

Keep in mind that customers who like the the service provided and the atmosphere of a business, will often tip MORE when offered to add a tip to a credit card purchase.

No matter what your business, or how you choose to manage your overall expenses, keep in mind that there are reasons why people tip – or don’t. Be sure that you are making it as easy for them as possible.

Have other thoughts on this? Let us know. We can also share new ways to offset and mitigate expenses in your business. Schedule a quick call today to chat.