First, it is so easy and relatively inexpensive in this day and age to accept credit cards. IMO a restaurant that doesn't accept credit cards is really saying to me "We can't be bothered to provide you that convenience." Especially ones that doesn't make it very obvious with either a sign on the door or in big letters on the menu. In today's cashless world, that just invites these types of confrontations.

As far as not tipping the waiter, let me first add that I did wait tables for several years in college and there are some circumstances where I would not tip the waiter over something like this. I once had a replacement credit card declined at a restaurant. I had activated it but it was the first time I used it since doing so. The waiter came to the table, slapped it down and said -- loudly -- "this card was declined." I would never treat a customer that way. Anytime I had a card come back declined, I would always suggest that it was a problem with our computer or processor, and did they want to perhaps try another card or form of payment? Or would you like to use the phone to call your credit card company?

In the same vein, if I presented a credit card at a restaurant and didn't realize they only took cash, I would expect the waiter to handle it with aplomb and let me save face. Even though it really is my mistake. Because as soon as you tell your customer that they are "stupid" either with your words or your attitude, its all over. As a waiter, I very, very rarely made less then 20% every time -- because I let the customer "win" even when they were losing.

Waiting tables was probably as important to my business education as my years in college.