6 Times You Should Never Tip in Cash, Experts Say
Adding tip to your credit card or using a service like Venmo are better options.
You may assume that your restaurant server, bartender, or taxi driver prefers a cash tip—it goes right into their pocket, after all. But in some instances, this is not the case. In the digital age, etiquette rules around tipping are changing, with nail salons accepting Venmo tips, fine dining establishments including the gratuity in your bill, and paper trails becoming more important. With all this in mind, we consulted finance and etiquette experts about the times you should never tip in cash. Read on for their advice.
READ THIS NEXT: 6 Places You Should Never Tip, According to Etiquette Experts.
When you're using an app.
There's a reason apps are synced with your credit card: It leaves a paper trail of all payments, including tips, which are recorded for tax purposes, in the event of fraud, or simply to help you track your expenses.
So, if you order food delivery through a service like GrubHub or take a ride via Uber or Lyft, it's advisable to leave a tip directly on the platform.
In some cases, accepting cash tips is even against the app's policies, points out Bryan Clayton, founder and CEO of GreenPal, a digital platform that connects customers with lawn care service providers. "This is done to ensure all transactions are traceable, safe, and fair, providing protection for both customers and providers."
"In larger establishments or companies, cash tips might not be equally distributed among all those who contributed to the service," Clayton adds. "Here, adding the tip to your card payment allows for fairer distribution according to the company's tipping policy."
When deducting it from your taxes.
John Madison, CPA and personal financial counselor at Dayspring Financial Ministry, says you'll want to skip the cash tip if you need to claim the expense on your taxes.
According to the Internal Revenue Service (IRS), business meals can qualify for a tax write-off. "The cost of the meal can include taxes and tips," they say. Madison adds that if you receive a food delivery to your office, you'll also want to document the tip.
Likewise, Madison says this can apply to business travel-related tips like those for Uber, taxis, valet parking, and baggage handling.
READ THIS NEXT: Never Use Cash for These 5 Purchases, According to Financial Experts.
When it's a business expense.
Yes, a business owner can write a meal off on their taxes, but if you're an employee who's getting reimbursed, you'll also want to forego the cash tip.
"For reimbursement purposes, if you are incurring a business expense that includes a tip, then the tip should be paid with a credit card," advises Tami Claytor, owner of Always Appropriate: Image & Etiquette Consulting. "The itemized expense will be recorded on the receipt as proof of payment."
This includes tips for dining out, taking a taxi, or ordering lunch for a meeting.
When you can get rewards.
If your credit card earns you rewards, it might be beneficial to add the tip there instead of putting down cash.
"The average U.S. household spends about $3,000 per year at restaurants," explains Scott Lieberman, founder of Touchdown Money. "If you tip 20 percent, that's $600 in gratuities. I use a credit card that gives me three percent cash back at restaurants so I'm getting $18 back. Hey, it's something!"
And when applied to travel or other purchases made directly with your credit card points, these rewards are often worth even more.
For more financial advice delivered straight to your inbox, sign up for our daily newsletter.
When traveling abroad.
"When you're a tourist in a completely different country, I would suggest not using cash to tip when at a restaurant, and instead use your credit card," advises Edwin Cannon, finance expert and founder of My Retirement Paycheck. "I say this because you can deplete your converted money quickly with tipping, and it can be costly to have to withdraw money frequently when abroad."
It also may be best not to carry around large amounts of cash when traveling, especially if you're in an unfamiliar place.
When you're short on cash.
Though this may seem obvious, it was the example most cited by all the experts we consulted.
Many restaurant employees indeed prefer a cash tip, "as they get them that day as opposed to the next pay period for card tips," notes Jules Hirst, etiquette expert and founder at Etiquette Consulting. But if you're short on cash, it's always better to defer to another form of payment.
"If the amount of cash is less than the amount you need to tip, I highly recommend using your credit card or your digital wallet instead," advises Matthew Roberts, COO and co-founder of My Choice Financial.
"Consider asking the server if they have Venmo or which digital platform they prefer or if you can just use your credit card for tipping," adds Roberts. Hirst says Venmo is also a great option for nail or hair salon tips.
"Even with transaction fees, most service people would still prefer receiving a larger tip on a credit card than an unfairly small one in cash," agrees Jake Hill, CEO of DebtHammer.
Best Life offers the most up-to-date financial information from top experts and the latest news and research, but our content is not meant to be a substitute for professional guidance. When it comes to the money you're spending, saving, or investing, always consult your financial advisor directly.