Cash tips were easy: the money went in the jar and got split at close. Card tips are different — they flow through your processor, land in your bank account mixed with sales, and have to make their way back out to your team through payroll. In between are a few setup decisions that affect your fees, your staff's take-home, and your bookkeeping.
Whether you run a restaurant, a salon, or a tow truck, here's how card tipping actually works and the choices worth making deliberately.
Two ways tips get captured
Tip at the time of sale
The customer sees tip prompts on the screen and picks before the transaction runs. One authorization, one settlement, done. This is the standard for counter service and anywhere the customer is present — and it's the cleaner option for your processing, since the authorized amount and the settled amount match.
Tip adjust
The classic restaurant flow: the card authorizes for the check, the customer writes a tip on the paper receipt, and staff adjust the amount before batch close. It works, but every adjusted transaction settles for more than it authorized — miss an adjustment before the batch closes and the tip is gone for good.
Setting up tip prompts that actually work
If you use on-screen prompts, the defaults you choose matter more than most owners think:
Match the suggestions to your ticket size — percentage prompts make sense on a $60 dinner; dollar prompts ($1 / $2 / $3) feel fairer on a $6 coffee.
Always include a custom amount and a clear no-tip option. Guilt-trip screens generate resentment and, occasionally, disputes.
For tip-adjust environments, close out and batch daily — unadjusted tips and late batches can also cost you on rates, as covered in our guide to why acceptance method changes what you pay.
Getting the money to your team
Card tips deposit into your business account along with sales, so they have to be paid out through payroll — they're the employee's money, but they're also taxable wages that belong on the paycheck and the W-2. A few ground rules keep it clean:
Track tips per employee per shift — your POS reports this if it's set up right, and it makes payroll a copy-paste instead of a reconstruction.
Know your state's rules on processing-fee deductions. Some states let you deduct the card fee proportional to the tip before paying it out; others prohibit it. Don't guess.
If you pool tips, write the policy down — who's in the pool, how it splits, when it pays. Most tip disputes are really policy-clarity disputes.
Remember the fee math: you pay processing on the full amount including tip. On high-tip volume, that's a real line item — factor it into your pricing rather than being surprised by it on your statement.
Get your terminal set up right
Every modern terminal we deploy — Clover, Valor, and the rest — supports tip prompts, tip adjust, and per-employee reporting out of the box. The difference is configuration. If your tip flow involves handwritten math, missed adjustments, or end-of-night spreadsheets, get in touch or call 718-702-0186 — we'll set the terminal up to do the bookkeeping for you.