How can we get money back from what we buy ? (1-10%) can’t we abuse it if someone we know has a shop ?
In: Economics
Your shop owner friend who would have a merchant account probably pays more in transaction fees than you get in cash back, so it would cost him money to charge a purchase and give you the revenue.
Cashback rewards are pretty simple:
You’re getting paid out of the interest fees that other people are paying when they’re not paying their balances on time, which happens a lot more than the reverse.
Could you abuse it the way you describe? Sure, maybe, but then the shop owner might start losing money.
It is an incentive – a bonus – that the credit card offers to encourage people to buy with their credit card. The hope is that the credit card company makes more money from the transaction fees (that the merchant pays) and from interest on accounts that aren’t paid in full regularly than they pay for cashback rewards.
> can’t we abuse it if someone we know has a shop
I don’t know how that would work, can you please explain?
Every month, the credit card company will reduce your bill by the cash back amount once you’ve paid the bill. If you return merchandise, the amount is credited to your card (it charges a negative amount) so you will receive negative cash back.
Abuse of credit cards benefits has happened before, though. One of the most notable examples was back in the 2000’s when the US Mint issued a series of dollar coins with the faces of all the presidents. They could be bought online at face value and with free shipping. So people bought tons of them, then deposited the coins into their checking accounts and paid off the credit card bill, which accumulated reward points from the cc company. It cost the US Treasury so much in merchant fees (the fee Visa, MasterCard, etc charges a seller per purchase) that they stopped the program entirely.
Credit card companies charge merchants a small fee for every credit card transaction they make. Part of that plus the money they make in interest goes towards rewards and points.
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