The 20 Percent Solution

Whoa – a slew of quick responses from FrontBurner nation, most with similar stories, and one or two with the goods on what’s going on. One (with an implied reproach for my late awakening) says it’s very old, and another who used to write software for such programs has this to say about the why of it:

What they did was do a pre-authorize of your account at the amount of your bill + 20%. The idea was to determine if this amount would clear your account. If you didn’t have this amount available, it would have declined your transaction. Then, when you add the tip, the final amount is run back through and the transaction becomes final. The reason for this is to ensure you have enough available in your account to handle the bill + tip. They (the bank) doesn’t know exactly what you’ll tip, so the pre-auth is done at 20%.

OK, but the experience I’ve had before, as several people have also said, is for the amount without the tip to show up first on the “pending” transactions, then the amount with the tip later. So I don’t think it’s the bank by itself. But as a digital intelligence expert says (the range and expertise of our readers!):

This is not the bank. Individual restaurants/bars have the option to authorize the charge for the amount of the bill and an estimated tip. This is done automatically via the credit card processor. This simply sets aside funds to be sure they are available when the actual charge comes through the bank. It also makes sure, at the time of purchase, that there are sufficient funds in the account to cover the charge plus the tip. It’s common practice in the hospitality industry. When the actual charge comes through the bank, the pending transaction will reflect the proper amount.

OK, then. But is a “gratuity” gratuitous or not? Isn’t that the part of the meal – and I’m not trying to be a skinflint on the issue – that should be entirely at the discretion of the diner? Sorry, but it strikes me as presumptuous on the part of restaurants or banks to authorize a “gratuity” even temporarily. But then I’m not on the side of the banks.

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