Tip adjustment (also called "tip edit" or "gratuity adjustment") is the process of modifying a card transaction amount after the initial authorization to add a tip. In restaurants, hospitality, and service businesses, it's standard practice to pre-authorize a transaction (for the bill total without tip) and then capture the final amount (including tip after the customer has written it in).
How tip adjustment works: 1. Waiter presents the bill and pre-authorizes the transaction for the subtotal 2. Customer writes in the tip on the paper receipt 3. Staff adjusts (edits) the transaction in the POS/terminal to add the tip amount 4. Nightly batch close captures all transactions at their adjusted (with tip) amounts
Tip adjustment rules and best practices: - **Time limit**: Must be done before the batch closes. Tips added after batch close are a new transaction. - **Amount tolerance**: Card networks allow capturing up to 20% over the authorized amount for gratuity. Beyond 20%, re-authorization may be required. - **Record keeping**: Signed receipts with the tip amount written by the customer are essential chargeback defense. - **Interchange impact**: Tip adjustments that are processed within 24 hours of the original authorization maintain card-present rates. Delays cause interchange downgrades.
Electronic tip (customer enters tip at terminal): Some modern POS systems ask customers to enter their tip amount at the terminal before completing the transaction — eliminating the tip adjustment step and reducing fraud/dispute risk.
Tip adjustment practices directly affect interchange costs and chargeback exposure. Staff must be trained to: 1. Complete tip adjustments before end of shift or batch close 2. Keep all signed receipts with cardholder-written tips 3. Accurately enter the exact tip amount written by the customer 4. Know the tolerance limits for tip adjustments
Disputes over tip amounts are a common chargeback reason in restaurants. The best defense is the original signed receipt with the tip written clearly by the cardholder.
Restaurant tip adjustment flow: - Customer's bill: $82.50 - Pre-authorization: $82.50 (card authorized at order payment time) - Customer writes $18 tip on receipt, signs - Staff adjusts transaction to $100.50 in POS - Batch closes at 11 PM with $100.50 captured - Interchange rate: Card-present restaurant rate (1.80%) applied correctly - If adjustment not made before batch: $82.50 settles → tip becomes separate transaction → potential higher rate
Visa and Mastercard allow merchants to capture up to 20% over the original authorized amount for gratuity in tip-eligible businesses (restaurants, salons, etc.). Capturing the authorized amount + up to 20% for tip will not trigger a new authorization or chargeback.
If the customer claims the tip was different from what's on the receipt, you need the original signed receipt showing the tip amount clearly written by the cardholder. If you can't provide this, you'll likely lose the dispute.
Liberty Bancard provides restaurant-specific POS systems with built-in tip management — including electronic tip capture on the terminal and automated batch close with tip adjustments included. Contact us to see our restaurant payment solutions.
Continue learning: Browse all 60 payment processing terms in our Payment Processing Glossary, or upload your statement for a free analysis of your current processing costs.