Monday, August 12, 2013

Pay Your Bills Precisely - Credit Card Tipping at Restaurants


Businesses Don't Overpay Their Suppliers, Why Do You?

If you were running a business, and had to pay one of your suppliers would you ever round up? No, nobody would. You would pay your supplier what they were owed, what was agreed to, and what was fair. You would not round up, or let them keep the change.

Tipping With a Credit Card Lets You Be More Precise

When you pay with a credit card you can enter a precise tip amount, with cash, you are limited by the combination of change you receive and are carrying.

Consider my modest lunch purchase last week, the subtotal was $7.89. Let's consider the following scenario's:

  1. Pay with $10 cash, and let the server keep the change. This results in a 27% tip (based on the subtotal)
  2. Pay with $10 cash and get $2.10 in change (the penny has been abolished in Canada).
    1. Assume the change is a $2 coin, and a 10 cent coin. To maintain a 15% tip minimum, the tip would've been $2 resulting in a 25% tip
    2. Assume the change is a $1 coin, 4 quarters, and one 10 cent coin. To maintain a 15% tip minimum the tip would've been $1.35 resulting in a 17% tip. This would've required some math, and it's probable quickly looking at the change I might have left $1.50 or $1.60 instead.

While the service was good, it wasn't worthy of more than a 15% tip. 

Whether you think service is worth 15%, 20%, or higher, you should tip based on what you think the service is worth, not based on what combination of change you receive. Paying with a credit card helps ensure you can pay precisely how much you want.


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