Living with credit, Shopping

Beware of payment prompts that can lead you to over-tip

Kelly Dilworth

As more restaurants and other service providers use mobile card readers to process payments, consumers are increasingly being asked to punch in a preselected tip amount of 15, 20 or even 25 percent – or they have to guiltily hit “no tip” – before the reader will authorize their payments.

Even small-dollar purchases, such as a cup of coffee or a bottle of water from a food truck, trigger the payment reader’s automated requests for tips.

The digital prompts are a boon for service workers, many of whom are paid a lousy wage and could really use the extra money. But for cardholders like me who are already on a strict budget and loathe to under-tip, these suggested tips can be a serious hazard to my financial health.

A nudge to over-tip

As Washington Post personal finance columnist Michelle Singletary recently noted in a column about automated tip suggestions: The preselected prompts often nudge people to significantly over-tip – including for takeout meals or trips to a buffet that involve little or no interaction with a server.

“You may intend to tip well, but take the time to look at what you’re being charged when using mobile payments,”  Singletary wrote in her column. “Watch out for the power of default.”

The power of default adds up. You may be surprised how much you’re tipping when you just mindlessly punch 20 or 25 percent.

For example, a $10 sandwich and a $2 drink at a fast-casual restaurant that doesn’t include table service will balloon to $15 if you punch 25 percent. Meanwhile, a $4 coffee drink will cost you $5 instead.

My colleague, Jenny Hoff, totaled her expenses (and tips) for a week when she first noticed these digital tip jars in 2016. When she bought coffees for the family, prepackaged breakfast tacos and the usual grab-and-go goodies, she clicked the 15 percent option every time.

The end result? She charged $112 (including tax) for the items, and the total in tips was $17. Over a year, she noted that would be $884 in tips alone.

A 50 percent tip for a frappucino?

Some payment processors will even suggest more than the standard 10 to 25 percent tip.

For example, Starbucks’ mobile payment app gives cardholders the choice of leaving a 50 cent, $1 or $2 tip for their baristas. For a tall frappucino that costs $3.95, that can amount to a tip as high as 50 percent.

Similarly, Square’s payment reader gives merchants the option of asking for a $1, $2 or $3 tip for a transaction that costs less than $10.

Some payment apps will let you manually input a tip amount so you can stay within your budget. However, taking that extra step also can make you feel stingy, deterring you from doing it.

Speaking from experience, it’s psychologically harder, and induces more guilt, to type 50 cents on an iPad payment reader than to drop a couple of quarters into a tip jar – even if you’re just tipping for a quick muffin and a coffee.

How tipping options can bust your budget

Personally, I haven’t always minded the automated tip suggestions.

When automated tips first started showing up at my favorite coffee shops and food trucks, I celebrated. As a math-phobe, I was thrilled not to have to calculate a tip myself.

I also was happy to reflexively hit 20 or even 25 percent whenever I was prompted. I’ve always made a point to tip as much as I can afford – a habit my mom drilled into me after repeatedly commenting on how hard it is to work at a restaurant. Her sister waited tables for years and suffered serious back pain as a result.

But now that my budget is getting tighter, I’m having a much harder time defending my tendency to tip without doing the math – particularly when I’m buying something that doesn’t take a whole lot of work to serve.

Adding a dollar to the bill each time I get coffee or a couple of dollars when I grab a sandwich from a food-service counter isn’t just adding up, it’s making those small-dollar luxuries suddenly feel much less affordable.

I was already stretching my budget whenever I indulged in a $3 sea salt latte or a $12 lunch out. Now, those extra tip dollars added to the bill are making me feel that, perhaps, I shouldn’t be eating out at all.

That’s not to say I regret tipping generously when I can, especially when I’ve received outstanding service. But I need to be more aware of how much I’m really spending.

If a mobile card reader suggests a tip, don’t be afraid to decline it and throw some coins into a tip jar instead. A business would much rather you tip fairly and keep visiting than stop coming because the inflated tips are taking too big a hit to your budget.

See related: Poll reveals who are the best and worst tippers, Tipping your waiter or waitress? Ditch the credit card, pay with cash, Do you check restaurant receipts? You should, A tip of the hat to tip-free restaurants

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