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
It’s a ridiculous rent seeking game that should be made illegal. Credit card processing companies charge merchants fees on ever purchase, part of theat fee fund cash back, milage, or other reward systems. The issue is merchants have fixed costs so in order to make the same margin they would on a cash sale they need to increase their protein resulting in more expensive goods for everyone. I would argue it would be better for card processors to simply convert thie costs and charge overall lower fees, it is far more advantageous for consumers to just pay 1.5% less than tp get that in cash back. Unfortunately, our government is to busy doing nothing but blaming one another to actually fix society for anyone with a net worth below 8 or 9 figures.
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