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
There are transaction fees seller pays. So for example you pay with a card, seller gets 95%, bank gets 5%, then gives you 2% and keeps 3%.
Cashback incentivizes you using the card more, so the bank gets more transaction fees. And while it seems like a loss for the seller, he’ll just raise the price a bit to make up, and don’t have to deal with masses of cash he’d have to deposit at the bank/keep in safe/risk robbery.
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