Editorial Policy

Is the tip jar back with a 21st century twist?

Tina Orem

July 24, 2014

As credit cards become a primary method of payment for many Americans, one item is increasingly being ignored — the tip jar. It's sad, when you think about it. After all, where else can you see a sign that says, “Every time you don't tip, a child gets a mullet”?

The fact of the matter is that when people pay with cash, they tend to tip baristas and other servers associated with those ubiquitous countertop jars. And when they're paying with plastic, not so much. It's not that plastic-payers don't want to tip — it's that it's a huge pain compared to tossing a few coins or dollars in a jar.

That's the problem that DipJar, a New York City startup, is trying to solve. After watching baristas get stiffed one day as festival-goers from a nearby Oktoberfest celebration streamed into a coffee shop and paid for tiny purchases with plastic instead of cash, DipJar founder and CEO Ryder Kessler started the company in 2012.

“We're currently only piloting in New York City,” says Kessler, “but we've had small tests in Boston, Chicago, Nashville and Orlando. We plan to expand nationally at the end of this year.”Click to email me

A DipJar is a small aluminum cylinder with a card reader on the top; it plugs into an outlet and sits on the counter — the company says there's no other wiring necessary. The device runs on a 3G connection, and has a built-in credit card reader that charges cardholders $1 per swipe.

“Our research suggests that people who pay with cash tip with cash, while people who pay with plastic don't tip at all,” the company says on its website. “We want to capture all the tips those people would be leaving if there were an easy way to tip electronically.”

And there are a lot of people paying for small purchases with plastic these days. In 2011, 66 percent of point-of-sale transactions happened with some kind of magnetic stripe card, compared to 27 percent for cash, according to Javelin Strategy & Research. The average debit card transaction in 2012 was $37, down from $38 in 2011, according to data from PULSE Network. And more than 30 percent of transactions were for less than $10 in 2012, says PULSE Network.

To get started with DipJar, the retailer registers the device through the DipJar website and relays who is working at the store and the location. Managers review the jar's disbursement schedules, which show the hours employees worked and the tips they earned, before DipJar sends out its biweekly payments to employees. The DipJar tips appear on a credit card bill as a charge to DipJar Inc., according to the company's website.

Of course, DipJar isn't the only way to leave a tip when you're paying with plastic. There's still the relatively old-fashioned practice of adding a tip to the paper receipt you sign when you use a card (though increasingly those are going away for transactions below certain amounts). And there are competitors such as ZipTip, which is a smartphone app that lets users transmit tips via PayPal. Square, which is an iPad-based checkout system, also lets users leave tips fairly easily.

The difference with DipJar is that when customers dip their credit or debit cards, the device transmits the card data but does not store it “beyond the time it takes to transmit,” according to the company's website. DipJar also issues alerts on suspicious repeated dipping. The downside? Customers don't receive any kind of receipt.

Retailers pay a “small leasing cost” for DipJar, plus 8 percent of the tips in the DipJar, plus credit card processing fees. The company says the extra fees support “the DipJar system — connectivity, counting and calculating of employee earnings, and disbursement of earned funds.”

That all might sound expensive and cumbersome until you consider that in this day and age, adding a DipJar could increase the amount of tips a store brings in. And employees could still attach that sign that says “Every $1 kills a Twilight fan.”