Use the credit card slip to pay tip at hotels and restaurants

MUMBAI: For patrons of high-end restaurants, credit cards provide an opportunity to tip without having to rummage in wallets for small notes. Also, if one has a guest, adding a tip amount to the charge slip provides the payer some privacy. But the one thought that has probably gone through the mind of most patrons is how is this addition to the billed amount processed by the card company long after the card is swiped and authorization received.
Many fear that this is a system loophole. After all the card has already been swiped, the bill amount punched and authorized and the cardholder even receives a text message confirming the debit. But there's nothing amiss here. It is in fact a secret window that card companies have built into the payment system to ensure that the card is not shunned because of the waiter's concern over tips. And cardholders can rest assured there are enough safety features to prevent misuse.

"Adding tips to the credit card slip is an accepted practice worldwide. This is a feature built into the payment system where at the end of the day the merchant can make an adjustment of 10-15% of the invoice amount," says Uttam Nayak, country head for Visa. According to Nayak, unscrupulous merchants cannot inflate the bill because the system will not authorize beyond 10-15%, depending on what the preset limits are. The downside to the feature is that a large tip on a small bill for say two cups of coffee is likely to get rejected for the same reason.

This facility is available on almost all cards, but there are certain debit cards which require a pin authorization where subsequent adjustments are not allowed. So, if a waiter says that a particular card is not accepted, it is quite likely that's because the card is not amenable to subsequent revisions.

What happens to the tip money after it gets into the hotel's account depends on the hotel's policy. According to Swarendra Sahay, director-food and beverage, Hyatt Regency in Mumbai, most hotels have a service charge which is pooled in and distributed across staff - from the waiter to the front-desk staff to the chef to the manager. But, if a guest tips over and above the service charge, this too is pooled in, but distributed only to the restaurant staff. Sahay said this policy is followed in 18 of Hyatt's hotels across South West Asia. In some restaurants the waiters get to keep the cash tips.

Adding tips to the charge slip is a feature that is available only in hotels and restaurants. These establishments have special machines and the print-out of the charge slip has a separate column for tips. "The facility to top-up the amount is only there in POS machines in restaurants," says Amrish Rau, MD, ICICI Merchant Services. He adds that in case there is a dispute the onus is on the merchant to prove that there was a genuine intent. "The restaurant owner has to produce the charge slip and if it is clear that there is no overwriting the payment is made to the merchant," says Rau. For those who are really paranoid about unauthorized tips being added, Rau advices that the cardholder strike out the space for tips below the authorized amount but adds that there have not been any such dispute that comes to his mind.

According to Visa's Nayak, it is features like these in the payment system that facilitates well-oiled retail commerce in the US. "Two businesses which take a pre-authorization from the cardholder to charge their cards for any future are car rentals and hotels."

In case of car rentals, the company can take the risk of allowing the customer to retain the car for a longer period or to allow them to drop the car at a distant location. For hotels, the pre-authorization allows guests to check out by merely dropping their key at the reception desk while a cash-paying guest would have to wait until his room was checked.