How do credit card companies afford to “give cash back”? Like how does the process work?
In:
They make money when you leave debt on the card past the interest free period and they charge you interest. So it’s in their interest to encourage you to spend on the card _just outside your affordability_ but not so far outside that you end up being bankrupt and walk away from the debt entirely (worst case scenario for them). Their basic aim is for you to carry debt on the card that you can afford interest payments on, but can’t quite afford to fully pay off. So “cashback” is effectively them giving back some of the profits they’ve received from charging people interest, but done in such a way so as to maximise more spending.
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