I’m researching to open my first proper card and still confused about how cash back works.
Say you buy a burger and get 2% cash back. Does it apply a 2% discount to the burger? Or do I earn 2% of the burger’s price?
Where does the money for the cash back come from? Does the cash back affect credit score?
In: Economics
In my experience you usually get a better return by opting for points because the cash back rate is usually so low.
For instance, my card has points and cash back. If I want to buy a $100 plane ticket, I’d have to spend about $10,000 on the card to buy that with cash back, but only about $5,000 to buy it with points.
Some cards have different incentives. Mine gives extra points for food purchases. Others will give extra points for travel purchases. Some will have higher cash back payouts. It’s usually best to shop around some to find a card that has the right mix of rewards and interest rate for you.
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