Councilman Wants To Stop Restaurants From Making Waitstaff Pay Credit Card Processing Fees

PHILADELPHIA (CBS) – A city councilman says some Philadelphia restaurants have been taking their credit card processing fees out of the tips intended for the wait staff. He’s introducing a bill today to stop the practice.

Councilman Jim Kenney won’t divulge the names of the restaurants, but he says he’s heard of several that deduct the three percent processing fee charged by credit card companies directly out of the money specified by customers for a tip. It’s a practice Kenney doesn’t like.

“If I’m leaving an 18-20 percent tip, I expect that to go into the pocket of the person who waited on me, not three percent skimmed off the top to go to the owner of the restaurant.”

Kenney is introducing a measure in council that would prohibit any employer from taking a credit card fee out of a gratuity. The bill will be debated in committee.

Reported by Mike Dunn, KYW Newsradio

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  • sassyladdy

    Go New England Clam Chowder!

  • Anonymous

    @ jenny May 6, 2011 at 9:0am: My guess is they wouldn’t do that good because it’s easier for people to use their cards than actually watch their cash money go from their hands to someone elses. I’m just guessing. I know I don’t like handing over cash unless it’s just to tip. But, to have to come out of pocket for say $75-$100 lump sum, people will re-think what they could be spending that money on, especially if they have kids.

    • jenny

      Yep. Exactly…which is why their business would suffer if it were all-cash. And people dine out on a whim; They may not carry cash to cover any impulsive meal that comes along. And they’d order less so as not to go over their cash on hand budget. And yet the businesses act like they are doing everyone else a favor to accept cards and fail to see the 2-3% fees as the cost of doing business to get good business.

    • jenny

      (and to clarify: when I said “they love cash” …I mean the businesses, not the customers…if that wasn’t clear)

      • Anonymous

        Hi, Jen: Yes, I knew what you meant. Thanks though. :0)

  • jenny

    Oh sure. They love cash. Then then can also be tax evaders more easily. Like a lot of the salon owners. …And always suspect is the “we don’t accept credit cards for the tip.” It’s not just about the credit card fees, but taxes. But clearly they have no appreciation for how much business is enabled by their accepting of credit and debit cards. How well would all of these businesses do if they were really all a cash business?

  • Controlling tips: how Philly scares away business | Philly Decline

    […] Councilman James Kenney – who wants the city to take over every tow truck business – also wants to force restaurants to increase their prices so tips do not go to pay for credit card processing […]

  • william jackson

    Why would the owners be allowed to tax the tips of the waitstaff.They live by the tips they receive. First you should name the resteruants, then make sure that all the patrons know to pay their tips in cash. That will fix them.

  • Also a business owner

    Maybe the restaurant owners could also start withholding servers’ tips to cover the cost of electricity, lease payments, and food costs, too. That would certainly help them “recoup” these costs as well.

    Obviously, that would be ridiculous – just as ridiculous as having servers cough up their tips to covering banking fees. I would never ask (much less force) my employees to cover my costs because I hadn’t priced my goods to take into account all my expenses. Clearly, restaurant owners who engage in this practice are trying to expand their profits on the backs of their hard-working servers.

    • Business Owner

      Why should the restaurant owner pay the fee on the gratuity portion of the bill?
      No one is expanding any profits on this. Merly recovering the 3% of the 20% gratuity it cost the business owner to run the transaction.

      • Socrates

        Why pay the processing fee on tips? Because the decision to accept credit cards was the business owner’s, not the waiter’s. The waiter has no say in the matter.

  • anaon

    Anon, no that would be 3% of the entire bill. The card processing fee deducted would be 3% the servers gratuity or .54% of the entire billl on a 18% gratuity ($3 vs 54 cents if the bill is $100) I don’t have a problem with servers paying part of the charge processing fee, as they are benefiting just as the restuarant is from the payment service, but a well-run restaurant may want to split those fees with the servers like SS/medicare taxes are as a benefit. The councilman is always free to pay his bill by CC and his tip in cash to ensure his gratuity is fee free.

    • sparky

      Restaurants should be compelled to disclose this practice to its customers. The practice will rapidly disappear once a little sunlight is cast on these roaches.

  • Fred Smart

    How is the City going to enforce this ?

  • Business Owner

    The credit cards companies charge 2.5-3.5% of the total amount charged inlcuding tip. The restaurants are not “skimming” anything. They are simply recouping the fees the credit card company has charged. Take that away and it will cost the restaurant thousands of dollars each year. The restaurant is not going to just eat those fees. The fees will wind up on every single plate whether you pay cash or credit.

    Similar to the “free” debit or “rewards” cards. The banks aren’t giving you anything free. They charge the business owner EXTRA every time you use it. The business owner must in turn raise prices to every patron regardless of how they pay to recoup the thousands of dollars in fees paid each month to the big banks.

    If the councilman wants to place blame, his argument should be with the big bankers raking all of us over the coals with obsurd fees, not the small business owner.

  • Anonymous

    Of course they prefer cash. That way the restaurant doesn’t report the tip on their W-2. So, if a patron leaves a cash tip, would it be appropriate to leave on 14% to make it equivalent to the taxed 18% tip?

    • Anonymous

      You are misunderstanding the math. It is 3% of the tip that is withheld, not 3% of the check. So if your bill is $100 and you leave $18 tip, the server is actually taking home $17.46. In that same vein, the restaurant is only seeing $97 of the $100 you paid them.

      If a server doesn’t want to pay the fee, they should work someplace that doesn’t take credit cards.

      • New England Clam Chowder

        And if they don’t want the cost of heating oil deducted from their paychecks, they should work someplace that doesn’t have heat.

        And if they don’t want the cost of electricity deducted from their paychecks, they should work someplace that doesn’t have electricity.

        And if they don’t want the cost of an bookkeeper deducted from their paychecks, they should work for a clown that doesn’t know what he’s doing.

        And if they don’t want me to call INS, they should work for practically nothing.

      • sassyladdy

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