Should you tip with cash or a credit card?


These days, you can use a credit card or an app to pay for almost everything, whether it’s a cab ride, manicure or meal. In fact, sometimes it feels like cash is practically obsolete in the United States — but that doesn’t mean it should be. There are some cases when, even if you can pay with a card, it might be better to use cash. Tipping people in the service industry is one of those cases. Here’s why:

Servers may not get the entirety of a credit card tip

Credit card payments aren’t free; you’re just not the one paying the extras. “There are merchant fees for using a card,” said etiquette and protocol consultant Melissa Leonard, referring to the processing fees banks charge for each transaction. She also noted that companies have to pay FICA (Federal Insurance Contributions Act) taxes on credit card income, including tips. While some businesses may absorb those fees, others deduct them (or part of them) from servers’ (or other service providers, like hair stylists or manicurists) tips. Regardless, Leonard said, “it might be kinder to just pay in cash as the smaller establishments may already be struggling.”

And then there are other hidden (to customers) costs that may come out of tips — like the $.15 direct deposit fee reportedly charged to drivers by Postmates’ payment processing company or Doordash’s controversial tipping policy, reported by NBC News, that incorporates customer tips into the minimum delivery rate the company guarantees to drivers. It’s difficult to be sure, when paying with a card, how much of that tip will actually go to the person it’s intended for, whereas cash is certainly a safer bet.

Cash is direct and immediate

“Service workers generally, if given the option, would accept cash as their preferred method because it’s immediate [and] it’s in their hands,” said industry analyst Ted Rossman. As The Takeout’s The Salty Waitress pointed out, it can take time for credit card tips to make their way to restaurant servers who have to wait for managers to dole out the cash. In some cases, servers may not even get the money the same day as their shift. The same can be said for other establishments, like salons, that operate similarly.

And then there are apps like Uber, where you can add the tip anytime after the service is done — which could be hours, or even days, after the fact. Not only can that put your driver in the difficult position of waiting for payment; but it can also affect your own standing. “If you’re somebody who’s tipping a driver in cash, that might lead to a little bit of a quid pro quo when it comes to [ratings],” Rossman said. “Maybe they’re going to rate you a little more favorably, especially if they were on the fence and they’ve actually got that cash in hand. ...If you don’t tip until much later, they’re probably not going to know at the time that they rate you.”

Patrick T. Power/Shutterstock

There are exceptions

While service workers generally prefer cash, there are some instances where a credit card tip can be better. If you don’t have enough cash on you to leave a sufficient tip, go with the card — especially if doing so will lead to a significantly larger tip, The Salty Waitress wrote on The Takeout. It’s also worth considering behind-the-scenes employees whose salaries are largely made up of tips. “When tipping at a restaurant, it is not just going to your server,” Leonard said. “It will be divided between [them[, the bus[ser], those in the back cooking and so on. So at a restaurant, when you put the tip on your card, you can be sure it will be shared. But if you have an amazingly awesome server, you just might [want] to hand them an extra $20, $30 [or] $40 to say ‘Job well done.’”

And then there are digital services, like Grubhub, where the delivery people are contractors who can accept or decline jobs on a case-by-case basis. With Grubhub, Rossman said delivery people can see their expected payment before accepting an order — and much of that payment is tip. “They’re going to see pretty clearly ahead of time what they’re going to make from it,” Rossman said. “They’re a lot less likely to accept those lower value [deliveries that aren’t] tipped in the app — so in that case, tipping through the app [and via credit card] is likely going to get you much better and much faster service.”

If you want more insight, you can search online for forums where delivery people and other service employees shed light on their circumstances; and if you feel comfortable, Rossman added, you could ask your driver, server or delivery person what they prefer. Ultimately, whether you’re paying via cash or card, the most important thing is to consider the person providing your service and tip them fairly for their work.