A restaurant in Brooklyn refuses to accept prepaid cards because it is worried that there won’t be enough money loaded onto the card for tips.
The cards can apparently present a challenge at locations like restaurants and salons, where tips are typically added after the main bill is processed. From a New York Times blog post:
“There is no way to check how much credit is on the card so when it is processed, and accepted, and if a tip is then written in, there may not be enough money left on the card to cover the tip,” Mr. Ricker wrote. “Tips are often entered after the guest has left. Just protecting our service staff.”
However, most restaurants do a preauthorization of the ticket price plus 20% for a tip. It is in settlement where the actual tip is communicated and applied. Given the way that card transactions work, it makes one wonder whether there is something more to it such as interchange. If most card payments at the restaurant are debit cards, than prepaid cards may be seen as a higher cost transaction.
The issue may be, as suggested in one of the comments, that prepaid cards may often be declined for the ticket price plus tip because of smaller dollar loads and no overdrafts and the restaurant owners do not want to wrangle with the customers about split tickets and how they are going to pay.
Click here to read more from the New York Times.