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Using your credit card at Restaurants

I own a restaurant. The number one reason for customer calls after a visit is credit card issues.

Restaurants these days are in a bind over credit cards.... by law we are not allowed to keep copies of credit card numbers or any other information beyond the last 4 digits of the credit card number and the amount of the charge along with the signature. If you don't want to pay two arms and two legs (we already pay an arm and a leg to the processors, around 3.3+ plus) you have to have your credit cards settled electronically. So we are dependent on our credit card processors.

In addition, these processors add an allowance for the tip to the authorization. Typically this amount is 20%. The reason for this is that the restaurant is only guaranteed the amount of payment that is actually authorized. Permission for your credit card company to do this is clearly stated in your credit card agreement, usually is 5 point type and page 73 after the limitations on warranties that applies in Outer Mongolia. Often it is printed in Latin.

Customers check their card statements online the next day and see a different amount on the bill than is on their charge slip. They then call the restaurant, upset that the restaurant, which in fact has not received any money at this point, has overcharged them. The pending charge will revert to the proper settlement amount in three business days, but the customer is left thinking the restaurant is pulling a fast one.

The other common issue is multiple authorizations to a credit card. From time to time, a server will make a mistake on the credit card authorization process. Then the authorization amount needs to be changed. Our credit card system sends your processor a message with the old authorization number and the new amount. Your processor is supposed to delete the old amount authorized and replace it with the new amount. I have no control over the process from my end. But sometimes both authorizations wind up on your card. Again these is nothing going on from our end that lets us know that this has happened. We can take the same exact steps to correct a mistake and 9 times it works perfectly and then on the tenth time is results in a double authorization. Since only a manager can do this, and I personally handle 60 to 70% of them, there is no rhyme or reason on our side to when this happens. There are a few cases where it is our fault, but that is because someone doesn't follow the proper steps. I am talking about when the proper steps are followed.

If you use a credit card, this temporary inconvenience can result is a future charge being turned down, but will not result in your being over your credit limit as nothing actually counts against your limit till the charge settles. In my almost 2 years of using our system which is Chase, the largest by far, it has never happened that the multiple authorizations have failed to drop off. In any case, having a charge turned down can be embarrassing and very inconvenient, but there is nothing the restaurant can do with regards to your credit card's company's speed in turning pending charges into settled ones. But if you use a debit card, the money is actually taken out of your account and you can be subject to overdraft charges. Never use a debit card!

So here is a summary of my credit card tips...

Don't use a debit card unless you have no other choice and then consider going to an ATM and getting cash. A mistake with a debit card is far worse than with a credit card.

Wait till the end of 3 business days after your dining experience before thinking a restaurant has mischarged you.

Recognize that accidents happen, I cannot tell you the number of times that I or my wait staff has been outright accused of dishonesty..... "That waitress, I guess she just decided to rip me off and add a bigger tip. What are you going to do about it?" Well, if thats how you approach it, I am going to ask you not to come back to my restaurant.

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  1. I always use my debit card and always will! I've never encountered any of the problems you've described, and I go out ALOT. However, in my neighborhood many places don't even bother accepting credit cards, which I now understand considering all the hassles you put up with!

    9 Replies
    1. re: bklyngrl

      Want to know why people use debit cards at restaurants instead of credit cards which afford a somewhat greater degree of protection? Appearances - pure and simple. When dining with a group, pulling out a debit card sends the message to other diners at your table that you've got the money to pay for the meal. Using a credit card - even when it's a business expense - tells people you're going into debt for a meal you couldn't otherwise afford. You may disagree, but it's been my experience that people notice this sort of thing.

      1. re: jim1126

        Just throwing something out there, no flame intended but am curious.

        In my age bracket 45-55, very few people use a debit card at dinner. In fact we rarely see anything other than gold or platinum amex cards, except for friends who work for banks and receive a credit card with no fees and low interest.

        Is what you describe something that you see in a younger crowd or are you in my age group. I have low-20's daughter who is just beginning to understand the meaning of pay as you go and am curious if this is an age thing.

        TIA

        1. re: jfood

          Amex is not really a debit card it is a charge card. Amex requires you to pay the balance off every month so it would be like showing you are not going into debt (that say amex has gotten much more flexable in the area of payment over time).

          In the past when people did not put thier entire life on their credit card (my mother still can't get over the idea of charging groceries), most people used cash for everything. The amex was the way the wealth said I can't be bother to carry cash like poor people so I will just carry this card instead. This is also why for so many years the amex was seen as better than having a MC or VISA.

          I'm not sure any of this is as true as it used to be. Our culture has changed so much that I think most people expect you to use your credit card becuase you are accumulating miles or points or cashback.

          1. re: bonmann

            Thanks bonmann, sorry for my slightly confusing post. I understand that AMEX is a charge, not credit. They do have programs that allow certain types of charges to be placed on a T&L crdit type payment program. It's a real pain versus just paying the bill every month.

            Jfood, Member since 1979.

        2. re: jim1126

          However, almost all debit cards I know of look like credit cards, don't they? It might say "debit card" and have a bank insignia on it, but more likely the VISA or MCard logo will be more visible to anyone watching someone put a card into the billfold for the waiter to pick up. Most people I know don't leave the card on the table, visibly showing the words "DEBIT CARD".

          1. re: jim1126

            Yes, curious here too and no flame also intended. My age bracket is 30-40 and its actually the opposite. When they first got popular, people using debit cards were perceived as being unable to manage their finances and credit and got cut off from credit cards. While credit cards were for people who could control themselves and take advantage of the cards properly.

            Most people in my peer group use credit cards as float and getting points/rebates. I get to keep my money for another few weeks. Yes its only a couple of points in the checking account for that float but its enough to buy a meal or two at the end of the year with the interest income.

            An as an aside, do people really pay attention to whatever message is being sent these days as to what type of card is used to pay? I see someone whip out a card, I don't bother looking to see what type it is. Its just a means of payment and I either cough up cash to pay my share or someone gives me money if I use my card. Sometimes we have a joking argument as to who needs their points more. Either way, I continue with the dinner conversation.

            1. re: jim1126

              I completely disagree. Some of us actually pay our credit cards off every month and wouldn't dream of "going into debt for a meal" -- using a credit card doesn't mean you can't manage your money, in fact that's part of how you build a credit history. Besides, it isn't immediately obvious when a card is put down whether it's a credit or debit card, as someone said below. Sorry, I just don't buy that theory. I've never known anyone to comment on or even notice how someone pays.

              1. re: jim1126

                I'm afraid I have to disagree. First of all, I never even notice what kind of card others at my table are using, and whether it's debit/credit/gold/platinum/green/rainbow, etc. is neither important nor of interest to me. Do you mean to tell me that others in my dining party are judging my financial status by the card I choose to use? NO WAY! And, if they were, they'd be wrong. I generally prefer to use my AmEx credit card (the balance of which is paid in full every month) unless the restaurant doesn't accept AmEx. And my choice has nothing to do with how much is sitting in my debit account on any given day. I'll have to ask my young-adult kids about how they decide what card to use when dining out. Maybe this is an age-related phenomenon.

                1. re: jim1126

                  I've been out to dinner w/a group of friends where all 4 of us have each thrown our card into a pile, for the bill to be divided 4 ways. I happen to use a debit card, but I haven't got a clue whether the others are using debit or credit. How would you tell the difference, w/out scrutinizing the card?

              2. I use credit cards a lot because I can't keep track of cash. In many years of using cc's at restaurants I have never called the restaurant or any business to complain about a charge. If there's a discrepancy or dispute, I contact the bank which issues the card and file an official dispute. It's their job to sort it out. I'm sure the establishment in question hates this too - I believe it freezes payment until the dispute is resolved.

                Now I think about it, I have only once disputed a restaurant charge. The amount on my cc statement was about $15 higher than my signed slip so I disputed it, sending the bank a copy of the slip. Seems the waiter had added a nice bonus to his tip. The bank upheld my slip and charged me the correct amount.

                1. I really feel for you. The finanical education in this country (United States) is severly lacking and our technology has now surpassed our education. Before people could check thier credit card balances every day, most people did not know that authorizations exsisted. Now they can see them but since no one ever explained them make very poor assumptions. Somehow it has become the job of retailers to explain the process. I know this is a big problem for gas stations as well. The only way to fix it is better finanical education for our general population.

                  1. I thank you for this information, since most of this is not known to the general public. And, I have to say that I agree with you regarding NOT using debit cards.

                    Why would anyone want to have funds withdrawn from their bank account immediately, when using a credit card can easily give you a grace period of 3 weeks or so? And, since I only use credit cards that issue rebates to me, I actually collect a couple of hundred dollars per year in cash that I could not "earn" if I used a debit card. Additionally, since I pay the entire balance each month, I don't pay any finance charges. Also, under Federal law, in the event of fraudulent use of your credit card, you are only liable for a maximum of $50. of those fraudulent charges. No such legal protection exists for the holder of a debit card that is used fraudulently!

                    Since the prudent consumer can easily find credit cards that do not charge an annual fee and that pay rebates to the card holder, this is really a "no-brainer" as far as I am concerned. Of course, if one does not have the will-power to control how much is charged to that credit card, that advantage does not exist.

                    5 Replies
                    1. re: Ted in Central NJ

                      "Earn" a couple of hundred dollars in rebates- What you are "earning" is a kickback out of the 2 - 3 - 4 percent merchants pay on credit card transactions. Some of them may not mind, but believe me, some do.

                      I am a merchant (but not a restaurant). I envy merchants in a position to not take credit cards. Of course I would rather get paid by credit card than turn a customer away. The present rant is not one I am about to inflict on my customers, although if they present a debit card I do encourage them to enter their PIN which costs me about the same as accepting a check. Credit cards are perfect for phone and internet orders. But damn. Those fees add up to many thousands - the nice vacation or kitchen remodel I never get around to.

                      Imagine the uproar if we were to suddenly institute a 3% national sales tax, collected by all merchants and built into the cost of everything. Well ha ha - that is pretty much what we have now, only instead of reducing the deficit, or whatever collective good an actual tax might accomplish, the cash flows into astounding profits and executive bonuses at a small number of huge banks. As if they don't pull down enough in interest and fees.

                      So if you are wondering whether to spend old fashioned green cash money or charge it, think about this. Big stores, chains, gas stations, etc negotiate the lowest credit card processing fees. When they figure in costs of dealing with currency- armored trucks, employee theft, trusted, better paid supervisors on the clock, then they come out ahead taking plastic. On the other hand, mom and pop kinds of places almost always prefer cash. If you ask your favorite neighborhood restaurateur about this, he or she will tell you to please come back as often as possible and pay any way you wish. Ask a little harder and you may start to hear what I am telling you now.

                      1. re: atheorist

                        If you think about what is going on with rebate credit cards (which I use and love) it is really people who can't pay their bills subsidizing those who can. Restaurants and other establishments have already priced in the 3 or 4 percent fees they pay to their processor when, so for me as a consumer, if I don't use my reward card, I am just leaving the money on the table. In essence, I am just recouping the price difference back to the point it would have been had credit cards never been introduced. Because rewards cards charge the highest interest rates, they make absolutely no sense unless you pay your bill in full every month. As a result people who are in debt still have to pay the higher prices at stores (becuse they are baked in), but do not get to recoup the additional costs with rebates.

                        Oh well.

                      2. re: Ted in Central NJ

                        As I stated above, I use my debit card for just about everything (and earn my share of 'rewards' as a 'prudent' customer). And there is protection for fraud on debit cards! I had an experience several years ago with fraudulent charges on my debit card, over $700, and I was not liable for any of it.

                        atheorist, I hear you! Many of the bars and restaurants in my neighborhood only take cash specifically to avoid those nasty credit fees they have to pay!

                        1. re: bklyngrl

                          and they are probably not declaring all the cash income either to avoid taxes.

                        2. re: Ted in Central NJ

                          "Why would anyone want to have funds withdrawn from their bank account immediately, when using a credit card can easily give you a grace period of 3 weeks or so?"

                          Because when I use my debit card I consider it like using cash - I don't care if it's gone immed. It's linked to my checking acct (obviously) and I don't write down my purchases or use a purchase register, so I want to see the $$ disappear from my account immed, before I forgot I spent it.

                        3. Thank you for these observations and inputs. I appreciate them

                          I would like, however, to gently take issue with one of the items and that involves the mistaken double authorization of charges. While I understand that everyone is human and mistakes happen, I have found on many occasions that the restaurant is more than happy to ignore my pleas to contact their processor and bank and tell them of the double charge. Let me give an example from last summer.

                          A friend and I were meeting up with 15 others for a going away party for friends. When we arrived, most of the people ordered full meals from soup to nuts while my friend and I had two small salads, a couple of cocktails, and split a dessert. Our total was about $40.00. We asked the server if they could split the bill for us so we could pay and leave (others wanted to stay and party). We received our bill and I paid with my credit card.

                          The next day, I got a call from the credit card lender telling me that there was a charge of over $750.00 on my card that seemed suspicious. I checked my account and the charge for our $40.00 was there, but so was the entire bill for the rest of the group. I called the restaurant and the manager told me that the server forgot to close out my ticket so even though I only owed $40, my card got authorized for $750.00, plus the $40.00. He then graciously told me that it would drop off in "3 to 5 business days."

                          Great, but that is a $750 hold on my credit. I asked him to contact the bank and have the second charge removed and he said he couldn't do that. When I asked for the bank system he used so I could call, he refused that as well. Seven days later and an authorization still pending, I called again and had to threaten legal action before the same manager said he would call the bank and have the authorization dropped. Ten minutes later, the authorization was gone.

                          I haven't been back to that establishment and never will go back either.

                          2 Replies
                          1. re: Seth Chadwick

                            I have talked to my processor about the issue and if the problem is on their syustem, they can reverse it. But often the problem is on the system of the card holder's bank over which I have no control. Before the last change to banking law, January 1 2006, I could get a report showing every tansaction sent out by my system to my processor. This report would clearly show that the authorization was cleared out by my processor, but the customer would still have two authorizations on their card. My processor would say there was nothing they could do and that the customer had to contact their own bank who had made the error.

                            There was no way for me to know if I was getting the run around or if this was the case. There are just too many layers to this particular onion.

                            1. re: deangold

                              dean,

                              I don't deny their are rules in place, by my story was to illustrate that there are often times when the restaurant owner/manager won't even lift a finger to help a customer. Had the manager let me talk to the processor or made a good faith effort to rectify the situation, then I would have given a pass, but in many instances it often seems as though the restaurant won't even try.

                              An attempt at customer service is better than nothing.