Can my employer take the credit card fee out of my tips?
The short answer
Example math
Say the card company charges your employer 3% on card sales (illustrative; the real rate is whatever your employer actually pays). A customer leaves you a $200 tip on a card.
- Fee the employer can take out of that tip: $200 × 0.03 = $6.
- What you get: $200 − $6 = $194.
- Now say the house takes a flat 5% instead: $200 × 0.05 = $10. That’s $4 more than the fee, and DOL guidance says the employer can’t reduce your tip by more than the fee.
Not tax or legal advice. Both percentages are made up for the example.
Check your estimate
Once card fees and tip-outs are settled, estimate the federal deduction on the tips you actually kept and reported.
Open the calculator
Plain English
What DOL guidance allows
Federal wage law, as DOL explains it, lets an employer that pays a card company a percentage on card sales pass that same percentage through on card tips. DOL’s own example: if the card company charges 3%, the employer may pay you 97% of the card tips.
Where the line is
DOL guidance says the employer can’t cut your tips by more than the actual transaction fee, whether or not it counts your tips toward your wage. Going past the fee counts as keeping your tips, which federal wage law bars. The fee also can’t bring your pay below the minimum wage. See What can I do if my employer keeps part of our tips?
This rule comes from guidance
The card-fee rule is in DOL’s Fact Sheet #15, not in the tip regulation itself. DOL says its fact sheets are general information and not official statements of position.
Service charges are a different thing
Federal wage law says a compulsory service charge, like 15% of the bill, isn’t a tip, even if the house passes some of it to staff. It can count as wages instead. So the card-fee rule doesn’t apply to it. For how that plays out on your taxes, see Does an auto-gratuity count as a tip?
Your state may have stricter rules.
Common mistakes
- Accepting a flat percentage that’s higher than what the card company actually charges.
- Assuming the fee can come out of cash tips too. The guidance is about tips charged on cards.
- Treating an auto-gratuity or service charge as a card tip.
- Not checking your pay stub or tip report to see what was taken out.
Official sources
Last verified:
Checked the credit card and service charge sections of DOL Fact Sheet #15, and 29 CFR 531.55.
Still open: The federal tip regulation doesn’t address card fees directly, so this page rests on DOL’s fact sheet.