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Ask Farnoosh: Tips, Gratuities, Service Fees — Who Pays What and When?

Staci on Facebook asks: Love watching your tidbits. Just watched one on tipping. One subject not mentioned -- service fee! Where I work, events are charged a service fee that goes directly to the "house" or business; the staff does not receive any gratuity. How should that be addressed since [patrons] think they have already paid a ‘tip’?
 
This is a really good -- and tricky -- question, so I tapped experts in the fields of catering and event planning, as well as etiquette.
 
To your point, patrons should understand the difference between a tip, a gratuity and a service fee or charge, says Lisa Hopkins, president of the National Association for Catering and Events, “all of which are different.” A tip is completely optional, while a gratuity is automatically added (usually for larger parties), and implies that the entire amount goes to the service staff. “A service charge is neither a tip nor gratuity.  It is automatically added, and is retained by the house and any or all of it used for payroll or commissions, depending on the business model the house decides to use,” says Hopkins. “There are many ways to use service charges or fees, and they can vary from business to business.” Hopefully, your company offers a fair and competitive wage, so if customers don’t leave you a tip, you’re still compensated well.
 
Now, should customers leave a tip if they’re already paying a service fee? Hopkins says that if the service charge is in the 20% range, “they should not feel compelled to leave an additional amount for the service staff.” That said, if the staff went above and beyond the call of duty, then a tip would be appropriate. But only the host of the event should provide that tip. “If these are events…where a company or individual is hiring [the staff], it’s not customary that guests open their wallets,” says Anna Post, great-great granddaughter of etiquette expert Emily Post and author of Emily Post's Etiquette, 18th Edition. “Who should tip is the person footing the bill.”
 
David Chedrick on Facebook writes: My wife and I just paid off all of our credit card debt. We went with a consolidation company -- part of the terms was to close all the credit cards. We were wondering how long after paying off credit card debt is it OK to apply for a new one?
 
David: Congrats on becoming debt-free! You can technically apply for a new card whenever you want, but while the consolidation company’s helped you erase your debt, the bigger question is: are you mentally ready to dive back into the credit card world? To avoid replaying your past, spending discipline and dedication to paying off your balance in full each month will be critical. So while there’s no technical penalty for racing back into the credit market, it may be too soon for you, emotionally. That’s something you’ll need to honestly decide for yourself.
 
At this point, though, your credit score is likely in much better shape than before and any positive activity on a credit card will help to build on that positive momentum. “If you’ve successfully completed a debt management plan you'd be surprised how good your scores can be,” says John Ulzheimer, President of Consumer Education at SmartCredit.com. “You're out of credit card debt 100% and most credit card issuers will not report you as being delinquent, as long as you're making the plan payments as required.”
 
Got a question for Farnoosh? You can reach her on Twitter @Farnoosh or email her at farnooshfinfit@yahoo.com.
 
 

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