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Table of Contents

Lead Story

MPI restructuring, recovering


Industry Update

Discover stretches with strategic partners

Did Diebold patent the future of contactless?

WesPay studies the alternative payments heat

Virtual customers, virtual goods, real money

Prepaid Visa RushCard user wins jackpot


Gerald 'Gerry' Surell

GS Advisory Board:
Unsettled economic times - boon or bust? Part II

Check 21's 'Top Ten'

Alan Walsh


Wise up to wireless

Paul Rasori


Street SmartsSM:
Doing the price thing

Dee Karawadra
Impact PaySystem

Interchange for dummies

Steven Feldshuh
Tribul Merchant Services LLC

How to cure what ails health care

Aaron Bills
3Delta Systems Inc.

Mastering the interchange game

Ken Musante
Humboldt Merchant Services

Cash advance crossroads: High commissions or more sales?

Woochae Chung
American Microloan LLC

Company Profile

Sage Payment Solutions

New Products

Multiple functions, mini POS footprint

Blackstone Merchant Services Register System
Blackstone Merchant Services Inc.

Security in your keystrokes

BioPassword Inc.


Is an independent venture for you?


Statement of Ownership



Resource Guide


A Bigger Thing

The Green Sheet Online Edition

October 08, 2007  •  Issue 07:10:01

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Who pays interchange on tips?

I recently took a second job as a server at a noncorporate restaurant in Woodbury, Minn. We (as in the wait staff/tipped employees) have just been informed that instead of the restaurant taking responsibility for the whole portion of the interchange fees charged by credit card companies, we will have to pay for the portion of the fee that is the tip.

An example would be if Visa charges 2.5%, and we were tipped $10 on said Visa card, we would pay the 25 cents. This would now equal a tip of $9.75 instead of the original $10. Do you know if this is legal? Or could you suggest someone I could ask about this matter, as it is a highly specific question.

Laura Dennstedt Cardia Inc.


We referred your question to Attorney Adam Atlas, a member of our advisory board and frequent contributor to our publication. He said, "If the merchant were charging customers more to pay by credit card, then I believe the merchant would be operating in contravention of the Visa U.S.A. and MasterCard Worldwide rules. However, this is not the case.

"In this case, the merchant is making a decision as to how to allocate its costs for processing its transactions. Obviously, the merchant has decided to have its employees pay for part of the cost of acquiring funds through its merchant account. As far as the Visa and MasterCard rules, I do not believe that the merchant is in violation.

"Where there is a possibility of a violation is in the terms and conditions of employment of the server. The server should examine her employment agreement (if she has one) to see if this tax on tips is spelled out in the agreement. Another way to look at this is to interpret the tip as a direct payment from the customer to the server. For the merchant to deduct some of that payment is, in a sense, interfering in the agreement between the server and the tipping customer.

"From that perspective, the merchant and server should consider whether they are under an obligation to inform customers that something less than the full amount of the tip will be paid to the server. I believe this is more a matter of local-state labor law (in which I am no expert), than electronic payments law.

My recommendation to the server is to inquire with the local state labor standards bureau to see if there is any local state law or policy on title in tips paid to servers. Needless to say, morally, the practice is questionable at best."

We hope you find this perspective helpful.


Call us, write us

Would you like us to cover a particular topic? Is there someone you consider an Industry Leader? Did you like or dislike a recent article in The Green Sheet? What do you think of our latest GSQ? E-mail your comments to or call us at 800-757-4441.


On page 52 in the print version of "Discover dumps RAP, easi for new program," Discover Financial Services LLC Vice President of Acceptance and Client Relations Gerry Wagner's name is misspelled. It was published Sept. 10, 2007, issue 07:09:01. The name is spelled correctly elsewhere in the article. The Green Sheet regrets the error.

Notice to readers: These are archived articles. Contact names or information may be out of date. We regret any inconvenience.

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