On the surface, this sounds like a small decision. Either way, the waiter gets a tip, right?
In practice, there’s much more to it. Tipping in cash can have positive effects for the waiters, but it can also have tax consequences that you may not want to take part in. Take a look at the advantages of tipping in cash vs. credit and let us know in the comments how you tip and your reasoning behind it.
Advantages to Tipping in Credit
If you’re already paying in credit, it’s definitely easier to just add 15% and sign the receipt. If tipping in cash, you need to have the right denominations of bills or you’ll be forced to either underpay the server or pay them more than you planned on.
Better Expense Tracking
It’s much easier to track one transaction that gets recorded by your bank than to remember exactly how much you tipped in cash. Budget software can pull in the credit transactions automatically, but you’ll have to manually enter the cash amount or you’ll be left at the end of the month wondering where that $40 went.
If your credit card offers rewards or cash-back for purchases, putting the tip on a credit card could net you as much as 5% back on certain credit cards. If you consistently dine out and use credit, it could add up to significant savings each month. After all, you signed up for the credit card to get rewards, right?
Advantages to Tipping in Cash
Saves Time for the Server
Paying in cash helps the server because they can use that to make change during their shift. Instead of heading over to the cashier, having cash available ensures quick transactions and other happy customers. So many tipping in cash will give a boost to the server in tips from other customers!
Cash Can Be Hidden
While Credit is certainly more convenient, when you hand cash to your waiter, the waiter has two choices: Report that income to the restaurant owner to it gets recorded on their tax forms, or slip it into their pocket and avoid the IRS. With wages being low and waiters relying on tips for income, it’s hard to fault them to want to keep all of it, even if it’s considered tax fraud.
If you’re a concerned citizen who wants to treat your server right but doesn’t want to help them commit tax fraud, your best move is to tip generously if you can afford it. That way, the server gets a good tip even after taxes and you don’t have to carry around a guilty conscience for enabling someone to steal from the government.
Reader, should we tip in cash only to help out our waiters? Should we pay in credit to prevent people from evading taxes?