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Suppose I go out to eat and I pay for my meal with a credit card. I sign the receipt and when the server goes back to finalize the transaction, they put way more money for the tip than I did.

At this point, is it on me to look at the bank account and recognize that I didn't spend that much and contact the restaurant and ask what is going on? Is it on their accounting department to catch the mistake, maybe fire the employee if it wasn't a mistake, and then work with the credit card company to return the money? Or is it the responsibility of the credit card company to contact the restaurant because there's no way that a cheesecake costs $500?

Surely this happens and surely there are procedures for how this is handled and the responsibility has to fall on somebody. How this is actually handled when transacting business?

Bob Baerker
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leeand00
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    Are you asking about step 1? If so, why do you think the CC company would catch it? they don’t know if it was one persons eating a piece of cake or a party of 10 at a celebration dinner. – Damila Jan 28 '20 at 02:16
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    This is also not a problem in most of Latin America. You authenticate your payment using a pin on a mobile terminal at your table or at the cashier, and you see exactly how much money you're going to pay. – T. Sar Jan 28 '20 at 11:09
  • I doubt the banks/credit card companies know exactly for what you paid. They just see restaurant X, amount P, not the whole bill. – Quora Feans Jan 28 '20 at 12:23
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    This is one of the reasons that everywhere non-US (maybe Canada too) all transactions (including a possible tip transaction) need to be verified with a PIN code or similar. – rubenvb Jan 28 '20 at 14:30
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    I have seen this issue several times in the USA, though it's usually not so far way over that you would necessarily notice if not paying attention. – WBT Jan 28 '20 at 14:54
  • Assuming you signed the receipt with a number in the tip line (never leave it blank), then some employee took the receipt away and modified it afterwards. What do you mean by "Whose responsibility": how to dispute/reverse the overcharge? (you, by contacting your bank)/ how to complain to the restaurant? (call the manager) / how to discover which employee it was. Also check Yelp etc. to see if they have a reputation for doing this a lot. You can pick your recourse: but restaurants don't want to get a reputation for fraud or CC chargebacks, so I'd first contact the manager to get resolution. – smci Jan 28 '20 at 16:33
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    How can this happen? Surely you approve a particular amount, which will be confirmed on your copy of the receipt. Then how could the amount charged be higher? – gerrit Jan 28 '20 at 17:46
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    @Rsf I'm unclear on what the purpose of your comment is. Clearly, this question is not about Europe. Let's stay on-topic. – user91988 Jan 28 '20 at 18:56
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    Although it is not the responsibility of the credit card company, I actually have gotten a courtesy "did you mean to do that?" email from my creditcard provider after tipping more than the cost of my bill (intentionally, I got some stuff free and added the cost of the stuff to the tip). So it seems they can see the bill vs tip amounts, at least for some cards and/or some point of sale machines. – Meg Jan 28 '20 at 21:43
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    @Meg I believe the restaurant has to first authorize it for the amount without the tip, then they add the tip later. I've also seen commercials where the bank will verify if you meant to give a large tip, so it does seem they can see that. – Kat Jan 28 '20 at 22:44
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    @ApologizeandreinstateMonica, because any time an American brings up a question about paying with a credit card everyone has to mention how chip+pin is the only right way to handle a transaction. It's the Metric/Imperial argument of the personal finance world. – JPhi1618 Jan 29 '20 at 17:25
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    @JPhi1618 Yeah, I know. What they don't realize is that Americans don't care, or even need that kind of protection >__> – user91988 Jan 29 '20 at 17:26
  • This happened to me a couple times. I had tipped the waiter 20 bucks and he somehow thought i wrote 40. I called and talked directly to him he said he was sorry and mistakenly thought i wrote forty. He gave me twenty bucks back and a free meal. This happened again at the same restaurant from the same waiter. Me thinks the guy is a scammer but it seems the owner loves him. – JonH Jan 30 '20 at 02:34
  • @Damila why do you think the CC company would catch it? Because their fraud detection algorithms are pretty sensitive. In my experience, they've flagged a couple of big tips that I intended to leave, and one I didn't. – De Novo Jan 30 '20 at 04:37
  • @rubenvb In Canada, as far as I know, you can do it without a PIN on credit cards when you actually swipe your card, on some machines; but with chips and tap cards being so common, it's not very typical. Some cards might even block that now, I know my debit card doesn't work with the stripe. – JMac Jan 30 '20 at 14:00
  • @Apolo Yeah, I know. What they don't realize is that Americans don't care, or even need that kind of protection >__> And that is why questions such as this keep popping up? Because you don't need the protection? Sounds like it wouldn't hurt to prevent situations such as described in this question. – rubenvb Jan 30 '20 at 14:30
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    @rubenvb People ask these questions due to ignorance of how the CC systems works in the US. You simply call your CC company and ask them to remove or cancel a fradulent charge. They always do it. It's as easy as that. OP clearly didn't know this, though. That's why chip and PIN doesn't really do much here. All CCs are insured. – user91988 Jan 30 '20 at 21:17
  • @ApologizeandreinstateMonica Sure, I get that, it works in a similar fashion regardless of any PIN/3DSecure/... (obviously), but the fact that there are additional steps that you need to take (i.e. calling CC company, explaining the situation, waiting for them to verify fraud and cancel the charge) can easily be prevented by implementing some actual form of electronic authentication when charges are made. I find it funny that this seems like such a big point of discussion. Insurance shouldn't even come into play here. That's one step too far in the "secure payment" process. – rubenvb Jan 31 '20 at 08:24
  • @rubenvb What you seem to be missing is how uncommon issues with CCs actually are in the US. You may hear about it a lot on the news, but that's because there are 320+ million Americans. The vast majority of us have never had an issue. In the very rare case that we do, a simple phone call solves it. Not a big deal. Also, Americans have the option of wireless payments if they want truly secure payments. Apple Pay and others are accepted almost everywhere. There is simply no need for chip and PIN in the US. It would be a giant waste of money for all parties involved. The US is huge. – user91988 Jan 31 '20 at 16:29

5 Answers5

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It is always your responsibility to verify that the charges on your account are accurate.

Some credit card companies are proactive in this, looking for anomalous charges and alerting the consumer to verify whether or not the transaction is legitimate. But this cannot be counted on; people occasionally make purchases that are different than what they have done in the past, and the credit card algorithms may or may not flag them as unusual. In your example, sometimes people leave extravagant tips, and we don't know what the threshold is where a credit card company might automatically flag a transaction for review.

If this happened to you, you can choose to either contact the restaurant directly, or you can dispute the charge with your credit card company. If you talk to the manager of the restaurant and are able to show them a receipt, he or she should be able to issue you a refund of the extra charges. If the manager gives you trouble, or you do not want to go back to the restaurant, filing a dispute with your credit card company will initiate an investigation. This may take longer, but is an option if you are unable to work things out with the restaurant directly.

Ben Miller
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    Just a note - if you call the restaurant, make sure they refund everything relevant. Since this is a tip, it's probably not applicable here, but once I didn't notice until we got home that they charged us for an extra plate that nobody ordered. They took off the charge for the plate, but I didn't realize until later, not the tax or the tip on the extra plate (which added up to about another $4) –  Jan 28 '20 at 00:22
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    A different note: It is much more polite to the merchant to contact them first (and your bank will encourage you to do so), as chargebacks are very expensive, and they may be willing to correct any errors immediately. – chrylis -cautiouslyoptimistic- Jan 28 '20 at 10:36
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    As an anecdote: CapitalOne emails me any time I tip more than 40% (none have been fraudulent so far, but the alert is still nice). The instructions on the alert also clearly state to contact the restaurant first, then if that doesn't work to dispute the charge. – Der Kommissar Jan 28 '20 at 14:37
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    How does CapitalOne do that? I've always been under the impression that the restaurant only submits a single charge, and that the division between meal price, tax, and tip was one of internal restaurant bookkeeping. (Or are they getting the first meal+tax charge before you add the tip, then comparing that with the final charge?) – chepner Jan 28 '20 at 16:34
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    @chepner That's what I assume happens. This is why the server runs your card first with just the billed amount, then you add the tip on the payment slip. When they submit the full payment, an anomalous difference can be detected. – Barmar Jan 28 '20 at 16:40
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    @chepner In many cases when you initially give your card, the restaurant will request an authorisation for the amount of the meal + a pre-defined tip percentage. Not sure whether it sends the price of the meal or the total, but either way, the network and/or issuer should be able to trace it back to the right "base" amount. After you have added the tip, they update the charge with the total amount. Also, some systems will send a lot more data (this allows some credit card statement to be a lot more detailed, which is especially useful for business charges, expense reports, etc.). – jcaron Jan 28 '20 at 17:33
  • Yeah, I figured it was something like that after typing the question. I should just delete the comment. – chepner Jan 28 '20 at 17:37
  • @chrylis-onstrike- it's also much more polite for merchants to have controls in place to prevent their employees from stealing from their customers, yet here we are. Agreed the bank will ask you to work it out with the merchant first, though. – Kat Jan 28 '20 at 22:49
  • The main reason these credit card companies are looking for anomalous transactions is to detect fraud, not to protect the cardholder. It just happens that as part of the investigation they often uncover the mistake... – corsiKa Jan 29 '20 at 00:05
  • @Kat Mistakes happen. I once had a cashier accidentally key 00 instead of 0 and not notice; I pointed it out on the receipt, and she immediately fixed it. – chrylis -cautiouslyoptimistic- Jan 29 '20 at 01:07
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    @chepner I can tell you from experience that the card networks have a special field for passing the tip amount in, and the total amount charged must be exactly equal to the authorized amount plus the amount in the tip field, or the merchant can be fined. (Whether or not anyone actually is fined for that is another question I don't have the answer to.) – Bobson Jan 29 '20 at 06:25
  • @Bobson Thanks, I (clearly) didn't know that! – chepner Jan 29 '20 at 12:58
  • From my personal experience, when a restaurant has made this sort of error, they have caught and corrected it in a day or so, before I've had time to call them to bring it up. – azurefrog Jan 29 '20 at 18:58
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    As a delivery driver, I have on occasion recieved very generous tips. Once the tip was almost 100% of the bill. I asked if that was correct and then thanked him for his generosity. When I returned to the store, I let my supervisor know. When closing out a driver's shift, the tips are entered and the system will flag any entries that seem excessive (not sure what percentage triggers the flag). The supervisor then has to enter his code to confirm. So there are generally safeguards in place to prevent this. Changing the amount can be considered theft, fraud, and/or embezzlement. – Michael Richardson Jan 29 '20 at 20:06
  • @corsiKa "to detect fraud", I would say that any merchant who willingly charges more than he's authorized to do, effectively stealing from the customer is commiting fraud. – Emil Bode Jan 30 '20 at 01:49
  • @EmilBode Willingly, sure. Fraud implies intent. A teenager fat fingering the buttons entered into the computer is not fraud, it's a mistake. – corsiKa Jan 30 '20 at 02:05
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The merchant does have a responsibility to not charge more than was authorized, but if they fail to fulfill that responsibility, then it being corrected is dependent on the customer. You use the term "credit card company", which when used by lay people can be ambiguous as to whether it's referring to the issuing bank (the bank the money is coming from) or the network (VISA, MC, etc.) While an issuing bank may have something in place that would flag the transaction as suspicious, it's not their place to tell the cardholder they can't spend $500 for a cheesecake. In addition, the issuing bank is told just the name of the merchant and the amount, it's not provided a list of what was purchased. For all it knows, that $500 was for twenty cheesecakes, or a bottle of wine, etc. The network is even less likely to proactively get involved.

If a merchant charges a credit card in the absence of an authorization, or in excess of an authorization, the cardholder can file a chargeback. However, credit card networks generally require that the cardholder make an attempt to resolve the issue directly with the merchant first. So the customer would have to contact the restaurant, and if the restaurant refuses to credit the account with the disputed amount, then the customer can file a chargeback with the issuing bank.

The issuing bank can then just eat the cost themselves (for small amounts, this can be the most cost efficient choice), or send the chargeback along to the acquiring bank, which is the bank that collects money for the merchant. The acquiring bank can then pass the chargeback along to the merchant, or dispute the chargeback (this is known as re-presentment: they're presenting the transaction again). If the acquiring bank disputes the chargeback, then the network has procedures for resolving the dispute, including arbitration if it gets that far.

In the scenario you describe, the restaurant would almost certainly lose the dispute, as they would not have any documentation for the amount they charged (unless they engaged in some forgery or something). In addition, there currently are three main ways card are read: swipe (running the magnetic strip through a reader), dip (reading the EMV chip), and tap (using the contactless capability). Most restaurant, at least in the US, use swipe (if you look on your receipt, you'll likely see an "S" for swipe). If a merchant uses swipe, and the card has chip capability, then the merchant pretty much automatically loses any dispute (the credit card networks really want the more secure chip used, so they strongly incentivize this).

Credit card networks serve just as facilitators between banks; there's the issuing bank that is in charge of your card, and the acquiring bank that collects money from the issuing bank and disburses to the merchant. In the case of a successful chargeback, the network will instruct the acquiring bank to send the money back to the issuing bank. It's up to the acquiring bank to then get the money back from the merchant; the network isn't involved in that.

Acccumulation
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  • Corporate or government purchase/fleet cards are usually restricted by MCC (often to office supplies or vehicle fuel) and would very often decline cheesecake -- except maybe Office Depot cheesecake, and that's just too frightening to imagine. In US I believe cards on some tax-qualified accounts like HSA FSA 529 are even stricter, although those are technically debit (backed by an asset account) not credit. – dave_thompson_085 Jan 31 '20 at 08:48
  • @dave_thompson_085 I'm not sure what that has to do with my answer, other than my claim that the issuer doesn't know what you buy with the card. MCC is very blunt instrument; it just tells you general category of the merchant, not what was actually purchased. Food at a gas station will probably fall under the gas station's MCC, for instance. There was no mention of corporate cards, so I don't know why you're bringing that up. – Acccumulation Jan 31 '20 at 23:50
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I worked weekends in the office of a busy restaurant in the USA and that did happen once when I was there. The person reviewing sales and credit card payments noticed what seemed a particularly large tip compared to the total sale, studied the signed credit card slip itself and felt there was a discrepancy on the tip line. Like a two in front of a five making a five dollar tip into a twenty-five dollar tip on a twenty dollar sale. She then reached out to the credit card company who contacted the customer. A phone call from the customer confirmed that the tip had been altered, we reversed it, submitted the actual amount customer intended, and the offending employee was fired.

So hopefully the person who submits credit card sales for payment is attentive and proactive and it isn't even finalized in it's fraudulent form. If it does go through, credit card companies seem to have fairly good algorithms used to detect and stop them too. But ultimately it's the credit card user who has to check their statements carefully monthly and promptly request investigation and reversals of theft.

PartlySunny
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  • how did you know there was an offending employee? Is there no other way than an employee doing this on purpose? – user1995 Jan 28 '20 at 18:59
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    The employee admitted as much when questioned. It was clear the receipt had been altered, one of the numbers was written over to make the fraudulent total add up. It is possible to have just been error, the server could have typed into the credit card terminal the wrong tip and grand total but in this case it was obviously faked. The server was also a problem employee so it was questioned sooner because of that I'm sure. – PartlySunny Jan 28 '20 at 19:21
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This happened to my father. At a restaurant in a beach town he bought some T-shirts on the same charge as a meal (at the counter when paying, the server didn't bring them), and tipped on the meal amount only. The management scaled up to an 18% final tip on the total.

It was on my father to notice.

When my father reconciled the statement with the receipt he called the restaurant, livid, and the management eventually processed a refund. I wasn't a party to the call; apparently the manager leaned on some policy in the menu, though in other experience the 18% minimum is present when you sign the slip.

We never went back to that restaurant.

user662852
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0

You did not put a country tag (though I guess you have the US in mind as you mention USD as the currency) so this answer is for France (and more broadly for Europe as the CC protections are the same). This is well regulated in Europe.

Only you(1) can decide whether a payment is correct or not - by looking at your bank account a way or another (automated messages when paying, online banking, ...)

If you see a transaction which is not yours (your 500€ for a cheesecake), you inform the bank of a fraudulent transaction. The bank immediately reverses the payment.

Then comes the time for the bank to investigate. They may find that

  • the payment is indeed fraudulent and they decide whether
    • it is absolutely your fault (clearly sloppy behaviour on your side, such as prining out your CC details and posting them in the city) → they re-reverse the payment and you owe the 500€
    • it is somehow your fault (you were not really serious in your behaviour(2)) → they can make you pay the legal franchise of 100€ (used to be 250€)(3)
  • they payment is correct and you owe 500€, plus maybe a problem about you trying to defraud them

In any case the first step (= complain to the bank) is yours.

(1) banks have alerting systems which may proactively block a payment, when it was done in unusual cases. 500€ for a restaurant would not be one. A car purchase in the Bahamas when you live in France and never travel would probably trigger the block.

(2) this is a complicated part. Normally you there is no time limit when you need to inform the bank that you lost your card (and that payments were done on it). If this is your main card and you use it twice a day, getting back to them after 3 weeks to say that you lost it 3 weeks ago is "sloppy behaviour". Not "sloppy you have to pay everything" but "sloppy you will pay the franchise". Another example would be payment which is not yours: if you earn 10,000€ a month, a payment of 200€ may not be noticeable. The bank will not claim that you should have seen it earlier. If you earn 2000€ and there is a 1000€ payment - you should have seen it as it would impact your everyday life. Again - this is matter for interpretation.

(3) No serious bank would make you pay the franchise. I had this happening three times, in two cases they did not even mention it, in the third one they did, than I asked "and so?" and they replied "nothing, it is just for you to be aware but we will not make you pay it"

WoJ
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