So when you go to purchase something, sometimes Honey gives you an offer to buy a gift card and save some money on that transaction. Can someone explain to me how that works? If possible, how does Honey make money off of that transaction (is it like a referral kickback?) Any insight would be good to know. Genuinely curious.
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Companies make a *lot* of money from gift cards. They have the money from the purchasers, and they invest that money in the market (or pay off loans with interest) to make even more money. And sometimes, people never actually redeem the gift cards (or don’t use them for a long time, which means investing that money longer). And even when they do use the cards, they often spend more money at the store than the value of the card, so the company makes more profit in sales–it’s like free advertising. So, sometimes, it actually makes financial sense for a company to offer, for example, a $50 gift card for only $45. Averaged out over everyone who buys the cards, in the long run, the company will ultimately make back that $5 loss easily.
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