The Straight Scoop on EMV and Gratuities

Tuesday, January 05, 2016

We’ve all been there… that awkward moment when you’ve had disappointing service and have to figure out a gratuity. At least you were able to make that decision privately—away from the prying eyes of the server or cashier.

With the implementation of EMV in the U.S., there’s been some buzz around whether patrons will need to tip right in front of the server, taxi driver, salon stylist, etc. A big misconception is that tips can’t be adjusted for an EMV transaction and that they must be done at the time of the EMV transaction. To set the record straight, this is not true.

Accepting a tip and then adjusting later—after the customer has left—is the most common practice in the U.S. The good news is this will not change because of EMV. Awkward situation averted for the merchant and the customer.

On the other end of the spectrum and due to misinformation about EMV and tipping , some high-profile restaurants are making a bold move by implementing or piloting a “no tipping” policy. Instead, they may be increasing servers’ salaries—and in some cases, the price of a meal. Some eateries are opting to add a flat 18 percent gratuity to the bill, regardless of service or party size. Whether eliminating the tip will gain traction remains to be seen.

So in the meantime, how do merchants address the gratuity game with the introduction of EMV? There are two basic scenarios for authorizing tips on a credit card transaction.


Tip Adjusted After Authorization and Before Settlement

The merchant gets authorization for the transaction amount only. A tip can then be added by the customer and adjusted by the manager or waitstaff.

Below is an example of how a tip is adjusted after authorization.


Tip Added Before Authorization

The restaurant or business can include the tip in the total authorization amount. This model usually happens with pay-at-the-table or pay-at-the counter transactions.

Below is an example of how a tip can be adjusted before authorization.

As you can see, the ONLY difference between the two scenarios is inserting the EMV chip card into the terminal instead of swiping.

Currently the standard customer verification method for EMV cards being issued is chip and signature in the U.S., which means that the customer need only provide a signature to complete the transaction. The other method is chip and PIN—adding another layer of security by requiring a PIN, much like a debit card. Experts say that the U.S. will not adopt chip and PIN anytime in the near future. But if the predominant customer verification method changes, the tip adjustment model may change as well.


Trust Heartland

Heartland has the tools to get you EMV-ready.

  • Heartland’s Spectrum application supports tip adjustment for chip and signature
  • We deployed over 80,000 EMV ready terminals and pin pads since 2014
  • Our Portico Gateway’s application programming interfaces (APIs) allow a third party to adjust tips


As one of the largest payment processors in the U.S., Heartland can keep you secure and in the know about EMV’s impact on your business. Click here to learn more.