Glossary / Credit card tip

Credit card tip

A tip a guest adds on a credit or debit card payment. Your employer pays it out and, under federal law, may keep no more than the card fee.

Also called: card tip, charged tip, charge tip, electronic tip

A credit card tip, which the IRS calls a charged tip, is a tip a guest writes or taps in on a card payment. It's income just like cash, and it belongs in your report to your employer and in your daily tip record. Because it runs through the register, your employer already has a record of it.

Federal rules on getting paid:

The employer must pay you card tips no later than the regular payday, and it can't hold them while it waits for the card company to pay.
The employer may take the card company's processing fee out of the tip, but no more than the actual fee, and the deduction can't push your pay below the minimum wage.

Some states go further. California, for example, doesn't allow any deduction for card processing fees from tips. Check your state's page on the tipped minimum wage hub.

Card tips count toward No Tax on Tips, because the IRS treats tips paid in cash or charged as cash tips for the deduction. A common mistake is taking the card tip total on your payout or pay stub as your whole tip income. It leaves out cash and doesn't reflect tip-out you paid, so check it against your own log.

Example: A guest adds a $20 tip on a card and the processor charges 3 percent. Under the federal rule your employer may keep $0.60 for the fee and must pay you $19.40 by payday. In California you'd get the full $20.

All glossary terms

Sources

Checked against these sources on October 16, 2026.

Track it all with Cashout. Shifts, tips, unpaid breaks, taxes, and mileage, logged in seconds. iPhone · Android

Credit card tip

Related terms

Read more

Sources