Split Payment: Definition, Benefits, and Real-World Examples

What Is a Split Payment?

The split payment method allows individuals to pay for a single transaction using more than one payment source. Whether you're at a restaurant with friends or using multiple gift cards for an online purchase, split payments help share costs or manage budget limitations.

Learn the benefits of split payments, including how they allow you to stay within spending limits and facilitate shared expenses. We'll explain how they work and give you examples from digital and physical retail environments, as well as tools that make them easier to manage.

How Split Payments Work

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 acquired 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 a minimal cost. Innovative mechanisms, such as digital split payments, are being implemented for consumers that have a need to split payments across multiple forms.

Real-World Examples of Split Payments

Split payments are already used in traditional brick-and-mortar facilities. A consumer can go to a store and purchase groceries worth $100, paying with either cash, credit cards, debit cards, or a mixture of all three to conclude the transaction.

With a digital transaction, 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, 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 a basket of goods: a gift card, redeem rewards, or a credit/debit card. The latter option also has an optional feature to pay with two credit cards.

Most online retailers don’t have the option to pay for an order with multiple cards but are finding new ways to split payments. For example, to make a split payment on an order of $100 from Amazon, a customer with a $60 spending limit on a credit card can purchase a $40 Amazon Gift Card using a debit card. At checkout, the customer 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.

Who Uses Split Payments and the Technology Behind Them

Another use of split payments is to split 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.

Popular financial and payments app Venmo also allows individuals to easily calculate and split bills for restaurants or other shared purchases.

Advantages of Using Split Payments

Split payment is a convenient mechanism to share costs and for customers that don’t want to go above their credit card limit, or who have a daily spending limit on their debit cards.

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 the limits.