What Is a Split Payment?

Split payment is a multi-payment method that either involves multiple payment cards owned by the user alone, or multiple payment cards of different parties involved in the transaction. A split payment can be a means by which payment for a single order of goods or services is made using more than one payment method.

A person using two different credit cards to pay for an item—or a table of restaurant guests splitting the bill three ways—are both common examples of split payments.

Key Takeaways

  • A split payment involves using multiple payment sources to settle the whole cost of a single transaction.
  • Split payments allow individuals to use multiple payment methods to complete an order, or allow several individuals to jointly contribute part of the order total.
  • Financial technology services and apps have helped make split payments easier and less cumbersome than they were in the past.

Understanding Split Payments

Technologically advanced products are rapidly shifting the commercial landscape from a physical one to a digital engagement sphere. In the financial industry, traditional services and products that could only be obtained in a physical location and by conversing with a human financial professional can now be gotten online thereby foregoing costs of transportation and minimizing valuable time expended meeting with a human.

Fintech, financial technology, has disrupted the norm of storing and transferring value, making paying for services and goods possible for everyone in real time and at minimal cost. Innovative payment mechanisms, such as digital split payments, are being implemented for consumers that have a need to split payments across multiple payment forms.

Split Payments in Use

Split payments are already used in traditional brick-and-mortar facilities. A consumer can go to a store and purchase groceries worth $100. They have the option to use either cash, credit card, debit card, or a mixture of all three to pay for the groceries. They can split her payment by debiting $60 to her credit card and $40 to her debit card. They can also choose to use a mix of all three payment methods to conclude the pending transaction.

With a digital transaction however, the payment technique is a little bit trickier. Although e-commerce platforms accept a growing array of payment forms including gift cards and closed-loop reward cards, only very few accept split payments involving multiple credit or debit cards. One of the few is Crate and Barrel’s online retail site which specializes in furniture and home accessories. The online site’s checkout page includes three ways the customer can pay for his basket of goods: Pay with Gift Card, Redeem Rewards, or Pay with Credit/Debit Card. The latter option also has an optional feature to pay with two credit cards.

While this is a convenient way of shopping, most online retailers don’t have the option to pay for an order with multiple cards but are finding new ways to split payments on platforms that don’t have the feature. For example, to make a split payment on an order of $100 from Amazon, a customer with only a $60 spending limit on his credit card can purchase a $40 Amazon Gift Card using his debit card. At checkout, they can then proceed to use both their credit card and gift card for the purchase amount of $60 and $40, respectively, to finalize the transaction.

Split Payment Users and Tools

Another use of split payments is for splitting a payment across multiple cards owned by different parties. This feature can normally be seen in a restaurant setting or a ride-share service program. For example, split payment apps enable a group of people dining at a restaurant to receive one bill through the app. Each member of the group can then pay their portion of the bill with their individual credit cards using the app installed on their mobile devices. Another company that implements split payment is the ride-sharing company, Lyft. Two Lyft users on the same ride can split the bill using the Lyft app on their mobile devices, as long as the ride is still active and they haven’t been dropped off at their final destination. Another popular financial and payments app, Venmo, allows individuals to easy calculate and split bills for restaurants or other shared purchases.

Split payment is a convenient mechanism for customers that don’t want to go above their credit card limit or customers that have a daily spending limit on their debit cards. Either way, if one order has a dollar amount that is greater than each of the imposed limits on both cards, the ability to split the payments would mean that the customer can acquire the goods without going over his limits.