I don’t even know where to start with this: I don’t understand it at all.
It’s obviously not free money.
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Let’s say you spent $100 on your credit card.
Most rewards average 1.5%. You earned $1.50 in cash back whenever you want to redeem it.
The credit card company charged the merchant 3% since they are using their services (accepting their credit cards). They get $3 from the merchant and this allows them to give you $1.50 from earlier.
The other part and most important part is the interest on the credit card. Let’s say it’s 20% APR. Divide that by 12 then multiple that by the balance. If you don’t pay the balance of the card before it starts to accrue interest the $100 becomes $101.66 eating your rewards you thought you gained.
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